HubSpot (HUBS -2.82%) has some key questions to answer for investors in its upcoming fiscal 2021 fourth-quarter earnings report (for the quarter ending Dec. 31). Set for the afternoon of Thursday, Feb. 10, that announcement might clarify whether the enterprise software specialist is still finding ways to expand both its customer base and its average contract size.
Success on both fronts will be necessary if the stock is going to return to its past glory of trouncing the market through most of 2021.
With that bigger picture in mind, let's look at the metrics that might support such a rebound over the coming months.
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International wins
Most investors who follow the stock are looking for solid growth on Thursday. Revenue should rise by over 40%, in fact, which would translate into a 46% revenue increase for the full 2021 fiscal year and mark just a modest slowdown compared to fiscal Q3.
That headline growth number will be heavily influenced by HubSpot's ability to attract more companies to its subscription-based enterprise management platform. Looking beyond the sales figure, watch for signs that the international business is still accelerating. That segment in Q3 expanded to nearly half of all sales compared with 22% of sales back in 2014. Further gains there imply a widening global addressable market for HubSpot.
Margins and engagement
HubSpot in the past year has given shareholders encouraging hints that the business could generate strong profits over time. Non-GAAP (adjusted) operating margin crossed 10% of sales for the first time in Q3 and has been steadily rising on an annual basis. That metric sat at just 2% of sales in 2017, after all, but has improved as the company expanded its portfolio of services. HubSpot might report solid results here, as the business continues moving toward management's long-term goal of 20% operating profitability.
Customer engagement will make the key difference on this path. HubSpot last reported that its clients were renewing at a 110% annual contract rate, indicating increasing value attached to its services. Look for executives to highlight another quarter of an over 100% rate here.
The 2022 outlook
HubSpot's new 2022 guidance will likely determine whether the stock jumps or drops following the report. Heading into the announcement, most investors are expecting management to call for sales of around $1.7 billion in 2022, translating into growth of about 30% year over year.
That would be an impressive expansion rate following this past year's almost 50% surge. But shareholder returns will ultimately depend on whether HubSpot can reach its ambitious long-term targets around profitability and annual sales.
The company took some big strides in that direction through the pandemic, in part thanks to favorable shifts in how small and medium-sized businesses shopped for enterprise software.
CEO Yamini Rangan said back in November that HubSpot is "uniquely suited to meet this moment," and the Q3 results backed up that bold claim. This week's report will show whether the company is still capitalizing on these factors as it works to push annual revenue past the $2 billion mark.
