Coupa Software (COUP) Loss Narrows In Q1, Revenues Beat

Coupa Software Inc. (NASDAQ:COUP) reported first-quarter fiscal 2018 non-GAAP loss (excluding stock-based compensation) of 9 cents per share much narrower than a loss of $1.76 reported in the year-ago quarter. Including stock-based compensation, loss was 19 cents per share much narrower than the Zacks Consensus Estimate of a loss of 26 cents.

Revenues surged 41% from the year-ago quarter to $41.1 million, driven by 40.6% and 43.6% growth in subscription services and professional services & other revenues to $35.7 million and $5.5 million, respectively. Further, the revenue figure was better than the Zacks Consensus Estimate of $38 million.

The top-line growth was primarily driven by expanding customer base. Improving adoption of Coupa’s platform is driving subscription services revenues as well as gross margin.

During the quarter, Coupa announced the acquisition of Trade Extensions, a strategic sourcing company based in Uppsala, Sweden. The company also launched Coupa Release 18, which is the second major cloud platform release in this calendar year.

Share price increased 2.4% in after-hour trading following the results. Notably, the stock has return 45.5% on a year-to-date basis, faring better than the Zacks categorized Internet Software industry’s gain of 20.5%.

Expanding Customer Base Drives Top-line Growth

Coupa Software provides a unified, cloud-based spend management platform that connects more than 460 organizations with above 2 million suppliers globally. The company’s platform helps enterprises keep a tab of daily expenditures.

Coupa’s customer base continued to expand in the quarter. The company won orders from Scotiabank, Canada’s international bank, Pearson (LON:PSON), Eurofins International Support Services, JD Sports Fashion, Emirates Flight Catering, Ringier, Sitecore USA, Workfront, Alector, Crossover Health Management Services, South Metro Fire Rescue, Hensoldt Sensors, and Lagunitas Brewing.

The recently launched R18 provides customers more than 50 updates to existing platform applications, all designed to increase the breadth and depth of optimizing spend management processes. Moreover, during the quarter, Coupa launched Open Buy with Amazon (NASDAQ:AMZN) Business.

The company also received certifications from Oracle’s (NYSE:ORCL) NetSuite and SAP SE (NYSE:SAP) in the quarter.

Billings increased 40% from the year-ago quarter to $166.9 million. Total deferred revenue at quarter end was $88.6 million, up 31.3% from year-ago quarter.

Margin Details

Gross margin (including stock-based compensation) expanded 880 basis points (bps) from the year-ago quarter to 68.4%, driven by higher professional services revenue, scaling of the company’s operations team, maturity of the spend management platform and better terms from its Web hosting provider.

As percentage of revenues, both Research & Development (R&D) and Sales & Marketing (S&M) expenses decreased 460 bps and 400 bps, respectively in the quarter. However, General & administrative (G&A) expense increased 80 bps.

As a result, operating loss narrowed to $9.9 million as compared with a loss of almost $11.8 million in the year-ago quarter.

Guidance

For second-quarter fiscal 2018, revenues are anticipated to be in the range of $41.3–$41.8 million. Subscription revenues are forecasted to be between $37.5 million and $38 million, while Professional services revenues are anticipated to be approximately $3.8 million.

Management stated that lower professional services revenue, recent investments in support organization and the addition of headcount from recent acquisitions will hurt gross margin the second-quarter. Management projects non-GAAP gross margins to be between 67% and 69%.

Non-GAAP loss from operations is anticipated to be in the range of $9–$10 million. Net loss is anticipated to be in the range of 18–20 cents.

For fiscal 2018, total revenues are expected to be between $172 and $175 million. Non-GAAP loss from operations is anticipated to be between $25 million and $27 million. Non-GAAP net loss is expected to be in the range of 49–53 cents per share.

Management expects operating cash flow neutral to slightly positive for fiscal year 2018 and sustainable positive free cash flow beginning fourth-quarter 2018.

Zacks Rank

Coupa carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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