Coupa Software (NASDAQ:COUP) Pops 5% On Q2 Earnings Results As Improved Business Environment Drives Strong Billings

Kayode Omotosho /
2021/09/07 6:28 pm EDT
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Spend management software maker Coupa Software (COUP) reported Q2 FY2022 results beating Wall St's expectations, with revenue up 42.3% year on year to $179.2 million driven by strong organic growth and synergies from Llamasoft acquisition. Coupa Software made a GAAP loss of $86.7 million, down on its loss of $43.1 million, in the same quarter last year and reported billings of $195 million, up 49% year-over-year.

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

Coupa Software (COUP) Q2 FY2022 Highlights:

  • Revenue: $179.2 million vs analyst estimates of $162.9 million (9.98% beat)
  • EPS (non-GAAP): $0.26 vs analyst estimates of -$0.06 ($0.32 beat)
  • Revenue guidance for Q3 2022 is $177.5 million at the midpoint, above analyst estimates of $168.8 million
  • The company lifted revenue guidance for the full year, from $682.5 million to $707 million at the midpoint, a 3.58% increase
  • Free cash flow of $36.9 million, up 23.6% from previous quarter
  • Gross Margin (GAAP): 55.8%, up from 52.2% previous quarter

"We are proud to report another fantastic quarter where we delivered record revenue, strong calculated billings growth, and our third year of consecutive quarterly non-GAAP profitability," 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 strong financial performance in Q2 was driven by steadily improving business environment for spend management software, with sales cycles continuing to move towards normalizing even if they're still a bit longer than they were before the pandemic. Coupa increased the number of 7-figure deals this quarter, and had success with both Coupa Pay and its supply chain design and planning solution.

Sales Growth

As you can see below, Coupa Software's revenue growth has been very strong over the last year, growing from quarterly revenue of $125.9 million, to $179.2 million.

Coupa Software Total Revenue

And unsurprisingly, this was another great quarter for Coupa Software with revenue up an absolutely stunning 42.3% year on year. On top of that, revenue increased $12.3 million quarter on quarter, a very strong improvement on the $3.38 million increase in Q1 2022, and a sign of acceleration of growth.

Analysts covering the company are expecting the revenues to grow 18.6% over the next twelve months, although we would expect them to review their estimates once they get to read these results.

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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 Software's gross profit margin, an important metric measuring how much money there is left after paying for servers, licences, technical support and other necessary running expenses was at 55.8% in Q2.

Coupa Software Gross Margin (GAAP)

That means that for every $1 in revenue the company had $0.55 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. The improvement was driven by strong top line results and cost synergies from the Llamasoft acquisition like hosting coming through.

Key Takeaways from Coupa Software's Q2 Results

With a market capitalization of $19.2 billion, more than $633.5 million in cash and with free cash flow over the last twelve months being positive, the company is in a very strong position to invest in growth.

We were impressed by how strongly Coupa Software outperformed analysts’ revenue and billings expectations this quarter. And we were also glad that the revenue guidance for the next quarter exceeded analysts' expectations. Zooming out, we think this impressive quarter should have shareholders feeling very positive. The company is up 5% on the results and currently trades at $277 per share.

Coupa Software may have had a good quarter, so should you invest 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.

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