Coupa Software (NASDAQ:COUP) Delivers Impressive Q2, Stock Soars

Adam Hejl /
2021/09/07 4:06 pm EDT

Spend management software maker Coupa Software (COUP) reported strong growth in the Q2 FY2022 earnings announcement, with revenue up 42.3% year on year to $179.2 million. Coupa Software made a GAAP loss of $86.7 million, down on its loss of $43.1 million, in the same quarter last 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 adoption of financial technology software is propelled by an ongoing drive to reduce costs. The volume of financial transactions happening online is growing at a fast pace and coupled with the complexity of the global supply chain, spend management platforms are likely to continue to witness strong demand in the future.

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.

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 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 7.27% on the results and currently trades at $283 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.