Coupa Software (COUP) Stock Up On Lower Y/Y Loss In Q3

Coupa Software Inc.’s (NASDAQ:COUP) share price surged more than 10% after hours, following impressive third-quarter fiscal 2017 results. Loss (including stock-based compensation) of 35 cents per share was much narrower than loss of $1.85 reported in the year-ago quarter, driven by strong top-line growth.

Excluding stock-based compensation, non-GAAP loss was 22 cents per share much narrower than a loss of $1.54 reported in the year-ago quarter.

This was Coupa Software’s first quarterly earnings release, after its Initial Public Offering (IPO) on Oct 6, when it sold 7.4 million shares at a price of $18.00 per share.

Notably, although the stock soared 85% on debut, the share price has significantly declined in the last couple of months. Since Oct 6, the stock is down 21.81% as compared with the Zacks Internet Software industry decline of 9.42%.

Quarter Details

Coupa Software provides a unified, cloud-based spend management platform that connects more than 460 organizations with above 2 million suppliers globally. Per the S1 filing, the platform “unites the three core aspects of spend management — procurement, invoicing and expense management — and has the ability to manage both direct and indirect spend”.

Coupa Software’s platform helps enterprises keep a tab of daily expenditures. Per Techcrunch, the company claims to have saved almost $8 billion for its customers, which includes the likes of Molina Healthcare (NYSE:MOH) and Staples.

Revenues surged 55.4% from the year-ago quarter to almost $35.4 million, driven by 48.4% and 127.2% growth in subscription services & professional services and other revenues to $30.8 million and $4.6 million, respectively.

Coupa’s customer base continued to expand in the quarter. The company won orders from FedEx (NYSE:FDX), Toyota of Puerto Rico, Nasdaq, CityFibre Holdings, Jive Communications and DBS Bank. The company’s penetration rate improved in Latin America as it won an order in Mexico.

Coupa along with its partners won orders from Anheuser-Busch InBev (NYSE:BUD) , Lear Corporation, Frontier Airlines, Huntington Bank and Cooper Standard. Most recently, DiDi Chuxing, the largest ride-sharing company in China became a customer of the company.

In October, the company launched Coupa Release 16, the third major release of the year. R16 delivers enhancements across the company’s unified cloud platform, including new analytics capabilities and allows management at all levels to instantly see and control business spending.

Billings increased 28% from the year-ago quarter to $36.3 million. Total deferred revenue at quarter end was $73 million, up 39% from year-ago quarter.

Gross margin expanded 440 basis points (bps) from the year-ago quarter to 68.5%, driven by favorable mix and cost improvement resulting from scaling of operations.

As percentage of revenues, Research & Development (R&D) decreased 590 bps in the quarter, while General & administrative (G&A) increased 90 bps. However, Sales & Marketing (S&M) declined from 62.7% to 46% in the reported quarter.

As a result, operating loss narrowed to $5.3 million as compared with a loss of almost $9 million in the year-ago quarter.

Guidance

For fourth-quarter fiscal 2017, revenues are anticipated to be in the range of $35.5–$36 million. Subscription revenues are expected to be between $31.8 and $32.3 million, while Professional services revenues are anticipated to be approximately $3.7 million.

Non-GAAP loss from operations is anticipated to be in the range of $7.4 to $8.4 million. Net loss is anticipated to be in the range of 16–19 cents.

For fiscal 2017, total revenues are expected to be between $131.3 and $131.8 million. Non-GAAP loss from operations is expected to be between $29.9 and $30.9 million. Non-GAAP net loss is expected to be between $1.67 and $1.73 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.

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