Coupa (COUP)

During this last week I took a 4.6% position in Coupa. You’ll remember that it had been one of the four little second-tier Saas companies that I had taken trial positions in but sold out of in March. My reason for selling was that they were all growing at 30% to 40% and had net retention rates of just 110% to 120% and I could do better elsewhere.

I had lost sight of Coupa until recently when one of the portfolio summaries that others have joined me in posting alerted me. When I sold in early March, the percentage revenue increases for the past two years had looked like this:

**2017: 	44%		41%		43% 		34%**
**2018:	41%		37%		38%		42%**
**2019:	39%**

**It looked very unexciting. But since then the two quarters that have reported gave a different picture:**

**2017: 	44%		41%		43% 		34%**
**2018:	41%		37%		38%		42%**
**2019:	39%		44%		54%**

Thus we had 44%, up from 37% yoy, and up from 39% sequentially…

Followed by 54%, up from 38% yoy, and up from 44% sequentially.

Subscription revenue was up 46% and 51%.

Adjusted Op Income for the two quarters was $2.2 million, up from $0.3 million, and $4.8 million up from $4.0 million (all positive numbers).

Adjusted Net Income for the two quarters was $2.1 million, up from a loss of $0.1 million, and $5.3 million up from $3.3 million (last two quarters again were positive numbers).

Adjusted TTM EPS was positive 23 cents

Calculated Billings were up 50% and 57% for the two quarters.

This was a different picture than the one I had been looking at.

For a little background on the company, here’s a little excerpt from one of Bert’s multi-page write-ups, this one from January, and paraphrased and shortened by me. Bolding is mine.

Coupa is a leader in the e-procurement space.

It has continued to exceed its targets for growth, earnings, and free cash flow.

It has built a substantial competitive moat that may not be fully appreciated.

It has grown its TAM prodigiously by expanding into ancillary spaces that enhance the value of e-procurement.

At this point, it seems destined to become the absolute leader in its space, and to achieve the kind of profitability that leaders often deliver in the enterprise software world.

Coupa’s evolution - a story of growth and competitive success
It has been more than 2 years since I took a serious look at Coupa. I looked at it just after its IPO, concluded it was expensive, that I couldn’t see its differentiators, and was worried about the falling trend in percent revenue growth and in bookings. However, in the last year, the shares have doubled, so I thought it’s reasonable to revisit it, and see what has changed, and if there is anything unique or enticing for investors to consider.

I discovered that it has acquired a bunch of companies and now offers a set of solutions which greatly enhance its offering beyond just e-procurement. It now goes far beyond traditional e-procurement functionality, and that explains why, in part, its growth percentage has remained at elevated levels and how it has managed to jump over industry pioneer Ariba (now a part of SAP), in terms of how industry consultants view its positioning.

Over the past couple of years, Coupa has augmented its potential growth and has built a rather substantial competitive moat. Both of these are major factors in my current belief that Coupa, despite what appears to be its generous valuation, is an investment that is likely to produce above-average returns over an extended period.

I confess to being somewhat surprised as to just how well it has built a suite of integrated solutions - all of them related to e-procurement, but I have to credit this successful strategy to the CEO, Rob Bernshteyn.

Should you buy the shares? They have doubled over the past year, and the EV/S ratio is quite high (greater than 10X forward). And the estimates are for slowing growth. I think the estimates are likely to prove quite wrong, and I expect Coupa to continue to sustain hyper-growth both this calendar year and on into the future. It has a well-demarcated path to profitability. It has built a substantial competitive moat. The shares will not be immune to any market downturn. While that kind of contraction seems unlikely, anyone investing in Coupa needs to be prepared for a bumpy ride. But I think investing in Coupa makes sense for technology investors.

Saul again: The price has doubled again since Bert wrote that.
At any rate, as I said, I took a 4.6% position.


A link to the Knowledgebase for this board is at the top of the Announcements panel that is on the right side of every page on this board.

For some additions to the Knowledgebase, bringing it up to date, I’d advise reading several other posts linked to on the panel, especially “How I Pick a Company to Invest In,” and “Why My Investing Criteria Have Changed,” and “Why It Really is Different.”


Hi Saul,

FWIW - I tried to understand COUP a few weeks back and decided to pass.
(actually took a small short position via options, mostly because of valuation but thats OT and not relevant).

Thus we had 44%, up from 37% yoy, and up from 39% sequentially…

Followed by 54%, up from 38% yoy, and up from 44% sequentially.

Subscription revenue was up 46% and 51%.

The trouble here is COUP management is not very forthcoming to share organic growth rate. In the absence of information, my suspicion is that organic growth is actually slowing.

And, with these acquisitions, there is assumption that all these pieces work together and sell together as suite… I am weary of that too being optimistic as we have seen in many cases lately that sales execution of portfolio is not every company’s strength.

All in all, I am skeptical, at-least given the valuation and growth through acquisition, until I find data that can address these concern.

I respect you a lot and so I will probably look through it once more but just wanted to share.



nilvest -

The company addressed the organic component on their most recent call. They stated $1.8M was due to acquisition, which still puts organic growth at an accelerated 51%. Below is a copy of my writeup from last week. I’d be curious to hear what you decide if you take another look at it.

COUP – A new purchase. Coupa’s main product is a procurement software which links users with their supply chain to provide complete visibility and control over their business spend. They also offer a broad set of solutions surrounding that core module including invoicing and payments. Those non-core offerings have now grown to >50% of their new subscription revenues, which shows they’ve created some optionality in their product line. They have a large customer list including clients like Peloton and Shopify. Last quarter Coupa had $1.3 trillion worth of cumulative spend pass through its platform. One of its main differentiators is a Community Intelligence function that lets users share ideas and compare aggregate results by industry or calendar across that entire $1.3T. Helping large companies track and manage how they spend their money sounds pretty mission critical to me. COUP was just named a Gartner Leader in the Procure-to-Pay space for the fourth consecutive year while finishing first on both axes, which is pretty nifty if you stop to think about it.

COUP had bounced around my watch list the last few months, and I finally pulled the trigger after what I thought were very strong earnings. They stated last quarter they were reaching a “tipping point in winning a very, very large TAM”. This report appeared to put their money where their mouth is. Revenue growth has accelerated from 39.4% to 44.3% to 54.3% the last three quarters, and I’d anticipate something mid-50’s again next quarter. While ~$1.8M of that revenue was due to a recent acquisition, 51% organic growth accounted for most of the acceleration. Subscriptions have followed a similar path (+45%, +46%, +51%) and now account for 88% of total revenues. Gross margins of 73% aren’t quite as high as some of my other holdings, but COUP has proven itself very efficient by posting positive net and operating margins for five consecutive quarters.

Stepping back a bit, Coupa now shows similar growth to SmartSheet but at a bigger run rate and much further along the path to profitability (which I believe matters in this current market). So even though Coupa’s more expensive from a valuation standpoint, I swapped a portion of my SMAR dollars for COUP when the overall sector slaughter knocked Coupa off its all-time high and drove it back below its pre-earnings price. It’s a small position, but I’m happy to welcome it on board.


one of the portfolio summaries that others have joined me in posting alerted me.

Thanks, Stocknovice, it was you that alerted me.

By the way, most companies have gradually receding rates of growth due to the law of big numbers. It’s nice to see one with accelerating rates of growth.



I tried to understand COUP a few weeks back and decided to pass.
(actually took a small short position via options, mostly because of valuation

Hi nilvest,
I’ve never shorted anything, but I’ve heard “never short because of valuation because the market can keep going longer than you can remain solvent.”

Personally, I think shorting a SaaS company with revenue growth over 50%, which is sharply accelerating, (38% to 54% yoy last quarter), with subscription recurring revenue making up 88% of its revenue, with positive operating income, and positive net income, sounds insane to me, but that’s just me. There must be better shorts around to throw away your money on.



I took a very small position in COUP back in 10/17. I haven’t really followed it much since it was so small. It is now up 319%, so I guess it did ok. It’s now a 1.63% position, so it’s still very small. Now that Saul has announced he has a position in it, I’m sure others on this board will follow it. So, I’ll do like I normally do and just keep reading the various posts on this board to learn more about it and the other companies I have from here.

Fool on,



Coupa is a position in my portfolio as of Spring '18 (+235%). As frequently discussed on this board, it is on of those cloud companies saving other companies money with a mission to help other businesses manage their procurement costs, bringing suppliers together with companies to achieve efficiencies. I like it, especially now, because as Saul as discussed in a few of his recent posts; cloud companies like this that provide great value such as managing procurement costs are not going to be the first to go if and when the feared downturn/recession is upon us.

In addition to procurement, Coupa purchased Deep Relevance a couple years ago that uses deep learning to police the purchasing habits of procurement offices in an effort to detect fraud.…

Coupa is helping business reduce procurement costs and keeping a “big brother” watchful eye on the procurement processes.


What I like about COUP is that when they help a client company procure an item, that item goes into their database to be used system wide. I liken this virtuous cycle (on a smaller scale) to GOOG’s in that the more they are used, the better their system gets. As the apparent leader in this space,their database depth should serve as an increasing moat versus competitors. That they can detect fraud is the cherry on the sundae. What company does not want to optimize it’s procurement process?



Supply chain management is a complex and difficult task for most large manufacturing companies. One of the major problems is knowing the performance of 2nd and 3rd tier suppliers. What that means is having visibility of the status of orders that supply the company with which you have a purchase contract, 3rd tier is taking that one step further up the supply chain. Determining that your supplier has a problem with execution often provides insufficient lead time to take corrective action.

Another thing to be wary of is understanding exactly how Coupa gets paid. If they are dependent on the dollar volume of orders placed revenue will obviously suffer with an economic downturn as orders in general tend to dry up or at least slow down with a recession.

I don’t know the answers to these questions and as I am in China at present doing research is severely hampered. I have no access to a search engine (Google is blocked, Bing is only available in Chinese). I do have a VPN which so far has proved useless. Even access to unblocked sites often time out or produce a DNS error. Fortunately, I have access to TMF with only occasional error returns.

As such, I’ll just toss these observations to the board for anyone who is interested and think they are of sufficient importance to look for the answers.