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Coupa (NASDAQ:COUP) Q2: Beats On Revenue, Stock Soars


Petr Huřťák /
2022/09/06 4:08 pm EDT
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Spend management software maker Coupa Software (COUP) reported Q2 FY2023 results beating Wall St's expectations, with revenue up 17.7% year on year to $211.1 million. Guidance for the full year also exceeded estimates, however the guidance for the next quarter was less impressive, coming in at $212.5 million, 0.75% below analyst estimates. Coupa made a GAAP loss of $70.5 million, improving on its loss of $86.7 million, in the same quarter last year.

Is now the time to buy Coupa? Access our full analysis of the earnings results here, it's free.

Coupa (COUP) Q2 FY2023 Highlights:

  • Revenue: $211.1 million vs analyst estimates of $203.9 million (3.48% beat)
  • EPS (non-GAAP): $0.20 vs analyst estimates of $0.09 ($0.11 beat)
  • Revenue guidance for Q3 2023 is $212.5 million at the midpoint, below analyst estimates of $214.1 million
  • The company reconfirmed revenue guidance for the full year, at $841 million at the midpoint
  • Free cash flow of $24.9 million, down 45.2% from previous quarter
  • Gross Margin (GAAP): 60.5%, up from 55.8% same quarter last year

"We're proud of our results this quarter. We delivered record revenues, strong growth in our subscription calculated billings, and we continue to deliver strong cash flows and profitability on a Non-GAAP basis," said Rob Bernshteyn, chairman and chief executive officer at Coupa.

Founded in 2006 by former Oracle executives, Coupa Software (COUP) is a software as a service platform that helps enterprises manage their spending across procurement, billing and business expenses and get a better visibility into how the money is spent.

The adoption of financial technology software is propelled by an ongoing drive to reduce costs. The combination of rising transactions volumes and global supply chain complexity is driving demand for cloud based spend management platforms able to integrate the two.

Sales Growth

As you can see below, Coupa's revenue growth has been strong over the last year, growing from quarterly revenue of $179.2 million, to $211.1 million.

Coupa Total Revenue

This quarter, Coupa's quarterly revenue was once again up 17.7% year on year. We can see that the company increased revenue by $14.7 million quarter on quarter. That's a solid improvement on the $3.07 million increase in Q1 2023, so shareholders should appreciate the acceleration of growth.

Guidance for the next quarter indicates Coupa is expecting revenue to grow 14.3% year on year to $212.5 million, slowing down from the 39.7% year-over-year increase in revenue the company had recorded in the same quarter last year. Ahead of the earnings results the analysts covering the company were estimating sales to grow 16.9% over the next twelve months.

In volatile times like these we look for robust businesses with strong pricing power. Unknown to most investors, this company is one of the highest-quality software companies in the world, and their software products have been the default standard in critical industries for decades. The result is an impressive business that is up an incredible 18,152% since the IPO. You can find it on our platform for free.

Profitability

What makes the software as a service business so attractive is that once the software is developed, it typically shouldn't cost much to provide it as an ongoing service to customers. Coupa's gross profit margin, an important metric measuring how much money there is left after paying for servers, licenses, technical support and other necessary running expenses was at 60.5% in Q2.

Coupa Gross Margin (GAAP)

That means that for every $1 in revenue the company had $0.60 left to spend on developing new products, marketing & sales and the general administrative overhead. While it improved significantly from the previous quarter this would still be considered a low gross margin for a SaaS company and we would like to see the improvements continue.

Key Takeaways from Coupa's Q2 Results

With a market capitalization of $4.3 billion Coupa is among smaller companies, but its more than $809.3 million in cash and positive free cash flow over the last twelve months put it in a very strong position to invest in growth.

It was good to see Coupa improve their gross margin this quarter. And we were also excited to see that it outperformed analysts' revenue expectations. Zooming out, we think this was a good quarter, showing the company is staying on target. The company is up 8.48% on the results and currently trades at $60.63 per share.

Should you invest in Coupa right now? It is important that you take into account its valuation and business qualities, as well as what happened in the latest quarter. We look at that in our actionable report which you can read here, it's free.

One way to find opportunities in the market is to watch for generational shifts in the economy. Almost every company is slowly finding itself becoming a technology company and facing cybersecurity risks and as a result, the demand for cloud-native cybersecurity is skyrocketing. This company is leading a massive technological shift in the industry and with revenue growth of 70% year on year and best-in-class SaaS metrics it should definitely be on your radar.

The author has no position in any of the stocks mentioned.