Coupa Software (COUP) Beats on Earnings and Revenues in Q3

Coupa Software Incorporated COUP delivered third-quarter fiscal 2020 non-GAAP earnings of 20 cents per share that surpassed the Zacks Consensus Estimate by 185.71%. Further, the bottom line soared 150% from the year-ago quarter’s figure.

Revenues surged 51% from the year-ago quarter’s level to $101.8 million and outpaced the Zacks Consensus Estimate by 5.47%.

Subscription revenues (88.6% of total revenues) increased 49% year over year to $90.2 million. Meanwhile, Professional services & other revenues (11.4%) soared 68.3% year over year to $11.6 million.

The top line was primarily driven by robust adoption of the company’s Business Spend Management (BSM) offerings.

Markedly, Quarterly Calculated Billings came in at $107.7 million, improving 57% year over year. Moreover, the company noted that “Cumulative Spend Under Management” outpaced $1.5 trillion.

Notably, the stock has returned 137% year to date, substantially outperforming the industry’s rally of 19.6%.

Expanding Clientele & Product Enhancements Noteworthy

Coupa Software’s customer base continued to expand in the reported quarter. Notable new deal wins in the quarter are Immunomedics, Cloudflare, Maersk Drilling, Deloitte Services, SambaNova Systems, Affinity Education, Relay Therapeutics among others.

Management is optimistic about the ongoing implementation of Coupa BSM by companies like Diagnosticos da America or DASA, Finnair, Genesis Energy, Multibank, Novo Nordisk, Randstad US Toyota Motor Corporation Australia among others.

Moreover, Coupa Pay has been gaining traction. Momentum in solutions such as Accelerate, Invoice payments and Virtual Cards for Pos is fueling management’s optimism. It has extended these solutions to partners like Citibank, Transfermate, Stripe and PayPal PYPL. Notably, American Express is the latest virtual card partner for the company’s BSM platform.

At Inspire'19 EMEA event in London, the company announced new capabilities for Coupa Supplier Insights and Coupa Source Together. Moreover, the company strengthened Coupa Pay solution with support for Expense Payments.

The company also rolled out Coupa CLM Advanced on synergies from integration of Coupa BSM platform with Exari's technology.

We believe that innovation and product enhancements will enable Coupa Software to strengthen its position in the BSM market amid ongoing digital transformation.

Margin Details

Non-GAAP gross margin contracted 120 basis points (bps) from the year-ago quarter’s level to 72.1%.

Non-GAAP operating income soared 100.4% year over year to $11.6 million. Non-GAAP operating margin expanded 280 bps to 11.3% on a year-over-year basis.

Coupa Software Price, Consensus and EPS Surprise

 

COUPA SOFTWARE Price, Consensus and EPS Surprise

Coupa Software price-consensus-eps-surprise-chart | COUPA SOFTWARE Quote

 

Balance Sheet & Cash Flow

As on Oct 31, 2019, Coupa Software had cash and cash equivalents of $587 million compared with $613.9 million in the last reported quarter.

Cash flow from operations came in at $25.8 million compared with $1.3 million in the last reported quarter. Free cash flow amounted to $22.1 million during the fiscal third quarter compared with negative free cash flow of $2.3 million in the last reported quarter.

Guidance

For fourth-quarter fiscal 2020, revenues are anticipated in the range of $101.5-$102.5 million. The Zacks Consensus Estimate for revenues is currently pegged at $99.96 million. Subscription revenues are expected between $91.5 million and $92.5 million, while professional services revenues are anticipated to be approximately $10 million.

Non-GAAP income from operations is estimated in the range of $3.0-$4.5 million. Non-GAAP net income is projected in the band of 3-6 cents per share. The Zacks Consensus Estimate for earnings is currently pegged at a loss of 1 cent.

For fiscal 2020, Coupa Software raised outlook. The company now anticipates total revenues between $379.8 million and $380.8 million compared with the previous expectation of $369 million and $372 million). The Zacks Consensus Estimate for revenues is currently pegged at $376.8 million.

Non-GAAP income from operations is now anticipated in the range of $21.6-$23.1 million compared with the previous range of $10-$13 million. Non-GAAP net income is expected in the band of 34-37 cents per share (previously 11-16 cents per share). The Zacks Consensus Estimate for earnings is currently pegged at 16 cents per share.

Zacks Rank & Key Picks

Coupa currently carries a Zacks Rank #3 (Hold).

Fortinet FTNT and Marchex MCHX are a few other top-ranked stocks in the broader computer and technology sector. Both the stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term earnings growth rate for Fortinet and Marchex is pegged at 14% and 15%, respectively.

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