A month has gone by since the last earnings report for HubSpot (HUBS Quick QuoteHUBS - Free Report) . Shares have lost about 3.8% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is HubSpot due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

HubSpot Q1 Earnings & Revenues Beat Estimates

HubSpot, Inc.’s first-quarter 2021 non-GAAP earnings of 31 cents per share improved 3.3% on a year-over-year basis and beat the Zacks Consensus Estimate by 6.9%. The bottom line also exceeded management’s guidance of 28-30 cents.

Revenues of $281.4 million surpassed the Zacks Consensus Estimate by 6.59% and increased 37% (up 41% on a constant-currency basis) year over year. The top line was also above the higher end of management’s guidance of $260-$265 million.

The top line was driven by improvement in Subscription revenues. Further, growing customer base, which surged 45% year over year to 113,925, contributed to the results.

Management is optimistic on uptick in its new offering, Operations Hub, since its launch on Apr 21. Notably, Operations Hubs is designed to assist users to combine customer data on a connected CRM platform and automate various time-consuming tasks to enhance customer experiences.

Moreover, the company is expected to benefit from synergies from acquisition of The Hustle, a media company and provider of premium research content. The buyout is aimed at enabling companies with valuable relevant content across a wide range of topics and a more diverse set of media.

Quarter Details

Subscription revenues (96.1% of the total revenues) surged 41% from the year-ago quarter’s levels to $270.3 million. Professional services and other revenues (3.9%) were up 43% year over year to $11.1 million.

Total average subscription revenue per customer was down 1% year over year to $9,886.

Deferred revenues (including current portion) as of Mar 31, 2021, increased 40% year over year to $339.4 million. Meanwhile, calculated billings, defined as revenues plus the change in deferred revenues, amounted to $304 million, surging 47% year over year (up 43% at cc).

International revenues climbed 51% from the year-ago quarter’s levels (up 42% at cc), contributing 45% to total revenues in the reported quarter. Meanwhile, Domestic revenues improved 33% in the first quarter, accounting for the remaining 55% of total revenues.

Margins in Detail

Non-GAAP subscription margin of 84.3% contracted 110 basis points (bps) on a year-over-year basis.

Non-GAAP Research and development (R&D) expenses, as a percentage of revenues, expanded 140 basis points (bps) year over year to 20.1%. Non-GAAP General and administrative (G&A) expenses contracted 60 bps to 9.4% on a year-over-year basis. Meanwhile, non-GAAP Sales and marketing (S&M) expenses contracted 90 bps to 45.1% from the year-ago quarter’s levels.

The company reported non-GAAP operating income of $18.9 million, up 29.7% from the year-ago quarter’s figure. Management had projected non-GAAP operating income to be $17-$19 million for the first quarter.

Non-GAAP operating margin contracted 60 bps on a year-over-year basis to 6.7%.

Balance Sheet & Cash Flow

As of Mar 31, 2021, HubSpot reported cash and cash equivalents and short-term investments of $1.18 billion, up from $1.25 billion as of Dec 31, 2020.

Operating cash flow (excluding repayment of 2022 Convertible Notes attributable to the debt discount worth $9.8 million) during the reported quarter was $72.5 million compared with $23 million in the prior-year quarter.

Free cash flow was $61.2 million compared with the prior-year figure of $7.1 million.

Guidance

For second-quarter 2021, HubSpot forecast revenues in the range of $293 million to $297 million. Management expects non-GAAP operating income in the band of $19-21 million. Moreover, the company anticipates non-GAAP net income per share to be 30-32 cents.

For 2021, the company has raised guidance. The company now anticipates revenues between $1.237 billion and $1.247 billion compared with the prior range of $1.16-$1.17 billion. Management now expects non-GAAP operating income to be $104-$106 million compared with the earlier guided range of $98-$102 million. HubSpot now anticipates non-GAAP net income per share to be $1.61-$1.65 compared with the prior range of $1.51-$1.59.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates flatlined during the past month. The consensus estimate has shifted -5.25% due to these changes.

VGM Scores

Currently, HubSpot has a great Growth Score of A, though it is lagging a bit on the Momentum Score front with a B. However, the stock was allocated a grade of F on the value side, putting it in the fifth quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

HubSpot has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.