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Why Is HubSpot (HUBS) Up 1.9% Since Last Earnings Report?

A month has gone by since the last earnings report for HubSpot (HUBS). Shares have added about 1.9% in that time frame, underperforming the S&P 500.

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

HubSpot Q1 Earnings Beat Estimates on Solid Revenues

HubSpot reported impressive first-quarter 2024 results, with the bottom and the top line beating the respective Zacks Consensus Estimate. The company reported a top-line expansion year over year, backed by growing user engagement across all segments. Integration of advanced AI tools across its product suites and customer platform is driving growth.

Net Income

On a GAAP basis, the company recorded a net income of $5.9 million or 12 cents per share against a loss of $36.6 million or a loss of 74 cents per share in the year-ago quarter. The improvement is primarily attributable to solid net sales growth.

Non-GAAP net income was $89.1 million or $1.68 per share, up from $63 million or $1.22 per share in the prior-year quarter. The bottom line beat the Zacks Consensus Estimate by 19 cents.

Revenues

Quarterly revenues improved to $617.4 million from $501.6 million reported in the year-ago quarter. The top line beat the Zacks Consensus Estimate of $596 million. HubSpot is witnessing steady multi-hub adoption from enterprise customers in the premium market. Demand for sales hub remains strong. Healthy net customer adds in the starter edition and pricing optimization drove net sales in the lower tier of the market spectrum.

The company has integrated HubSpot AI across the entire platform, enabling users to leverage AI features at no additional cost. AI native tools such as GPT-powered chatbots, real-time recommendations and call summaries are gaining popularity. Clients are leveraging this advanced feature for multiple use cases, such as crafting marketing emails, blogs, personalized content generation and more.

HubSpot added over 11,700 net new customers during the quarter, which increased the total customer count to 216,840, up 22% year over year. The customer count surpassed the consensus estimate of 214,877.

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Subscription revenues rose to $603.8 million, up 23% year over year. The figure surpassed the Zacks Consensus Estimate of $585 million. Average subscription revenues per customer rose 1% year over year to $11,447, driven by multi-hub adoption by enterprise and professional customers.

Professional services and other revenues totaled $13.6 million, up from $11.9 million in the year-ago quarter. The top line marginally beat consensus estimate of $12.22 million.

Other Details

Gross profit in the quarter was $522.3 million, up from $421.3 million in the year-ago quarter. Operating loss, on a GAAP basis, was $23.2 million compared with an operating loss of $43 million in the year-ago quarter. Non-GAAP operating income improved to $92.6 million from $69.4 million, with respective margins of 15% and 13.8%.

Cash Flow & Liquidity

In the first quarter of 2024, the company generated $127.1 million in cash from operating activities compared with $81.1 million cash generated in the year-ago quarter. As of Mar 31, 2024, HubSpot had $447.8 million in cash and cash equivalents, with $456.7 million in convertible senior notes.

Outlook

For second-quarter 2024, HubSpot forecasts revenues in the range of $617 million to $619 million. The company expects non-GAAP net income per share to be in the band of $1.62 to $1.64. The anticipated range for non-GAAP operating income is $92-$93 million. Foreign exchange rates are expected to have a negative impact on second-quarter revenue growth.

For 2024, management estimates revenues between $2.55 billion and $2.56 billion. Non-GAAP operating income is expected to be in the range of $426-$430 million. Non-GAAP net income per share is likely to be in the range of $7.30-$7.38.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in estimates review.

The consensus estimate has shifted -16.79% due to these changes.

VGM Scores

At this time, HubSpot has a great Growth Score of A, a grade with the same score on the momentum front. However, the stock was allocated a grade of F on the value side, putting it in the lowest 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

Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, HubSpot has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

Performance of an Industry Player

HubSpot is part of the Zacks Internet - Software industry. Over the past month, Aspen Technology (AZPN), a stock from the same industry, has gained 0.3%. The company reported its results for the quarter ended March 2024 more than a month ago.

Aspen Technology reported revenues of $278.11 million in the last reported quarter, representing a year-over-year change of +21%. EPS of $1.70 for the same period compares with $1.06 a year ago.

For the current quarter, Aspen Technology is expected to post earnings of $2.08 per share, indicating a change of -2.4% from the year-ago quarter. The Zacks Consensus Estimate has changed -17% over the last 30 days.

The overall direction and magnitude of estimate revisions translate into a Zacks Rank #4 (Sell) for Aspen Technology. Also, the stock has a VGM Score of D.

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