Coupa Software (COUP) Up 2.7% Since Last Earnings Report: Can It Continue?

A month has gone by since the last earnings report for Coupa Software (COUP). Shares have added about 2.7% in that time frame, underperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Coupa Software 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 catalysts.

Coupa Software Q4 Earnings & Revenues Top Estimates

Coupa Software reported fourth-quarter fiscal 2021 non-GAAP earnings of 17 cents per share. The Zacks Consensus Estimate was of a loss per share of 11 cents. However, the bottom line deteriorated 19% from the year-ago quarter’s reported figure.

Revenues of $163.5 million outpaced the Zacks Consensus Estimate by 12.3%. Further, the top line improved 47% from the prior-year quarter’s figure.

Subscription revenues (82.5% of total revenues) surged 37% year over year to $134.9 million. Meanwhile, Professional services & other revenues (17.5%) climbed 123.4% year over year to $28.6 million.

The top line benefited from a strong uptake of the company’s Business Spend Management (BSM) and Coupa Pay offerings including Coupa Treasury and Coupa Supply Chain Management. The company is witnessing robust adoption of spend management offerings amid coronavirus-triggered macroeconomic weakness and the work-from-home wave.

Major Highlights

For the fiscal fourth quarter, calculated billings came in at $270 million, up 49% year over year.

Notably, in February 2021, Coupa Software purchased Pana Industries, Inc, which is a well-known corporate travel-booking company.

Management noted that the company was named a “Leader” in six IDC MarketScape reports, namely Procurement, Procure-to-Pay, Spend Analysis, Sourcing, Supplier Relationship Management and Buy-Side Contract.

The company continued to add clients to its customer base in the reported quarter. Some of the notable new deal wins in the quarter include 8x8, AbCellera Biologics, Adverum Biotechnologies, Ball Corporation, Tyson Foods, Heathrow Airport, Bank of New Zealand, Carvana, Checkout, Cloudera, Repare Therapeutics, REVOLUTION Medicines, RSG Group, Sigilon Therapeutics, Stuttgarter Straßenbahnen and SUEZ UK.

Margin Details

Non-GAAP gross margin contracted 290 basis points (bps) from the prior-year quarter’s level to 70.1%. This contraction was mainly due to the LLamasoft acquisition.

Non-GAAP Research and development expenses climbed 51.2% year over year to $29.8 million.

Non-GAAP Sales and marketing expenses surged 50.6% year over year to $51.7 million

Non-GAAP General and administrative expenses increased 56.4% year over year to $21.9 million.

Non-GAAP operating income declined 16% year over year to $11.2 million.

Non-GAAP operating margin contracted 520 bps on a year-over-year basis to 6.8%.

Balance Sheet & Cash Flow

Coupa Software had cash and cash equivalents and marketable securities of $606.32 million as of Jan 31, 2021 compared with $1.354 billion as of Oct 31, 2020. This decrease was due to the payment made toward the LLamasoft acquisition.

For the fiscal fourth quarter, cash flow from operations came in at $20.4 million compared with $19 million in the previous quarter. Adjusted free cash flow totaled $38.1 million compared with $17.3 million reported in the prior quarter.

Fiscal 2021 Numbers

Coupa Software reported revenues of $541.6 million in fiscal 2021, up 39% from fiscal 2020 tally. The Zacks Consensus Estimate was pegged at $523.86 million.

Non-GAAP earnings per share were 77 cents compared with earnings of 52 cents per share reported fiscal 2020.

For the full fiscal, cash flow from operations came in at $78.2 million compared with $68.2 million in the previous fiscal year. Adjusted free cash flow totaled $113.5 million compared with $56.2 million reported in the prior quarter.

Guidance

The revenue guidance for first-quarter fiscal 2022 assumes zero contribution from Coupa Travel Sabre, formerly known as Yapta.

For first-quarter fiscal 2022, revenues are anticipated in the range of $151.5-$152.5 million.

While Subscription revenues are expected between $133.5 million and $134.5 million, professional services revenues are anticipated to be approximately $18 million.

Non-GAAP loss from operations is estimated in the range of $10-$12 million

Non-GAAP net loss is projected in the band of 18-21 cents per share.

For fiscal 2022, Coupa Software projects revenues between $675 million and $678 million.

Non-GAAP loss from operations is anticipated in the range of $7-$10 million.

Non-GAAP loss per share is now expected in the band of 23-27 cents.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates. The consensus estimate has shifted -67.64% due to these changes.

VGM Scores

At this time, Coupa Software has an average Growth Score of C, though it is lagging a bit on the Momentum Score front with a D. Charting a somewhat similar path, the stock was allocated a grade of F on the value side, putting it in the bottom 20% quintile for this investment strategy.

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

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Coupa Software has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.

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