Coupa Software (NASDAQ:COUP) Delivers Impressive Q3, But Stock Drops 7.5% On Mild Guidance

Adam Hejl /
2021/12/06 4:41 pm EST

Spend management software maker Coupa Software (COUP) reported Q3 FY2022 results beating Wall St's expectations, with revenue up 39.7% year on year to $185.8 million. The company expects that next quarter's revenue would be around $185.5 million, which is the midpoint of the guidance range. That was in roughly line with analyst expectations. Coupa Software made a GAAP loss of $88 million, down on its loss of $60.7 million, in the same quarter last year.

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Coupa Software (COUP) Q3 FY2022 Highlights:

  • Revenue: $185.8 million vs analyst estimates of $177.8 million (4.46% beat)
  • EPS (non-GAAP): $0.31 vs analyst estimates of $0.02 ($0.29 beat)
  • Revenue guidance for Q4 2022 is $185.5 million at the midpoint, above analyst estimates of $184.3 million
  • Free cash flow of $28.2 million, down 23.4% from previous quarter
  • Gross Margin (GAAP): 58.2%, down from 61.8% same quarter last year

"We delivered another strong quarter with record revenue and 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 impressive over the last year, growing from quarterly revenue of $132.9 million, to $185.8 million.

Coupa Software Total Revenue

And unsurprisingly, this was another great quarter for Coupa Software with revenue up 39.7% year on year. But the growth did slow down compared to last quarter, as the revenue increased by just $6.57 million in Q3, compared to $12.3 million in Q2 2022. We'd like to see revenue increase by a greater amount each quarter, but a one-off fluctuation is usually not concerning.

Analysts covering the company are expecting the revenues to grow 17.1% over the next twelve months, although estimates are likely to change post earnings.

There are others doing even better than Coupa Software. Founded by ex-Google engineers, a small company making software for banks has been growing revenue 90% year on year and is already up more than 400% since the IPO in December. You can find it on our platform for free.


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, licenses, technical support and other necessary running expenses was at 58.2% in Q3.

Coupa Software Gross Margin (GAAP)

That means that for every $1 in revenue the company had $0.58 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 Q3 Results

Sporting a market capitalization of $12.6 billion, more than $667.8 million in cash and with positive free cash flow over the last twelve months, we're confident that Coupa Software has the resources it needs to pursue a high growth business strategy.

We were very impressed by the strong improvements in Coupa Software’s gross margin this quarter. And we were also excited to see the really strong revenue growth. On the other hand, guidance for the next quarter was only in line with expectations, suggesting the growth might tamper down a little. Overall, we think this was still a good quarter, that should leave shareholders feeling positive. But the market was probably expecting more as the company is down 7.5% on the results and currently trades at $159.85 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.