COUP - Q121
TMF take (Rossolillo): https://www.fool.com/premium/coverage/investing/2020/06/11/c…
CC transcript: https://www.fool.com/earnings/call-transcripts/2020/06/09/co…
CC recap (sjo): https://discussion.fool.com/here-are-my-somewhat-edited-notes-fr…
TMFVicki take: https://discussion.fool.com/4056/q1-fy-2021-update-34536310.aspx…
Revenue 119.2M +47%
- Sub Rev 105.7M +45%
- Pro Svcs 13.5M +60.7%
Billings 102M +36%
Deferred Rev 244M +39%
Gross Margins 64.1% -230bps
Adj Op Inc 14.9M (vs 2.2M) +577% !!
… margin 12.5% (vs 2.7%) +980bps !!
Adj Inc 14.5M (vs 2.1M) +590%
Adj EPS 0.20 (vs 0.03)
CFFO 15.4M (vs 18.8M) -18%
… margin 12.9% (vs 23.1%)
FCF 22.4M (vs 16.1M) +39%
… margin 18.8% (vs 19.8%)
Acquisitions in 2020:
- Yapta for travel spend optimization; renamed as Coupa Travel Saver https://www.coupa.com/newsworthy/press-releases/coupa-acquir…
- ConnXus for supplier diversity and risk mgmt https://spendmatters.com/2020/05/04/coupa-acquires-connxus-a… [no official annoucement?]
- Bellin Group (Germany) for treasury/cash mgmt, providing view over liquidity for forecasting/risk https://www.coupa.com/newsworthy/press-releases/coupa-acquir…
Ethan thread on prior acq in 2019: https://discussion.fool.com/coupa-an-acquisition-machine-3438968…
BroadwayDan on prior 15 acqs: https://discussion.fool.com/coupa39s-15-acquisitions-34468678.as…
warned that Q2-Q3 will be challenging macro env
is extending payment terms for a few companies being impacted
usage of Travel Mgmt module and the new Yapta acq in Jan have ground to a halt
guided to 25% growth in Q2 and 18-19% Q3
$1.8T spend happening on Coupa platform
schedule of 90% of ongoing implementations not affected by pandemic
new custs Clorox, Howard Hughes, Salvation Army, TomTom, UNC, Vroom, Workiva
~100 custs on Coupa Pay after it was free thru April, 1/2 new and 1/2 existing custs
their just-published biz spend index (BSI) showing significant slowdown in enterprise spending
Coupa BSI w/ pretty graphs: https://www.coupa.com/thecoupaBSI/
Coupa BSI Q2 2020 report: https://www.coupa.com/v2/assets/pdf/TheCoupa_BusinessSpendIn…
My stance: Expected performance from Coupa, but dour short-term outlook; they likely don’t have much visibility in this tighter spend environment. Revenue growth is continuing its slow trickle down while billings & deferred revenue are showing signs of revenue growth slowing further. Lots of new lands is encouraging. It’s extremely profitable now that operating leverage is kicking in, however, cash flow is all over the place.
Their extremely conservative guidance is a bit like Alteryx, but … these two companies are night and day in my interest in their underlying technology plays. I have a LOT more interest in Alteryx then I do with Coupa. I think my primary issue with Coupa is their extreme number of bolt-on acquisitions - I knew Coupa liked bolting on other softwares onto their platform, but I had no idea how it would be doing this many of them. I think there is a pretty big risk here than I first accounted for. They are buying up a lot of independent software platforms to simply bolt on, so I worry about the bigger picture of their core platform. They want to be the gorilla in this space that does everything spend-related for a customer, and are buying their way into it. This is potentially a risk.
And we can now see that risk play out first-hand in Yapta. It was bought in Jan, then ran head-long into a new reality of greatly reduced travel spend. Effect is overall minimal, Coupa estimated this impacted $1-2M in rev. But it makes me wonder what their overall vision is for their platform. I feel like they are taking the Middleby approach of bolting on a lot of brands (software apps in this case), as Ethan alluded in his earlier linked thread. How is Coupa integrating all of these side platforms into their core? They have to be spending a lot of resources (time and effort) internally to integrate these acquired platforms. Ultimately, I am now putting more weight on the fact this is a biz operations-related SaaS provider; I’m just not as interested in these types of companies compared to infrastructure related ones (monitoring, cybersecurity, data, networking) or next-gen approaches (analytics, zero-trust, edge networks).
Coupa is a great solid Tier 2 that is sure to be successful and remain a category leader, but I have way more intriguing stories right now in companies with significant tailwinds in both Tier 1 & Tier 2. This pandemic isn’t stopping any time soon. It’s been a nice few months owning Coupa, but I have too many Tier 2 companies growing in that same 40-50% range that have much more future potential, IMHO, by expanding into new directions organically by leveraging their existing platform, instead of bolting on new directions via acquisition. [See Okta, Fastly, Cloudflare, Alteryx… much less those growing >80% like Crowdstrike, Datadog, Zoom.] So I’m going to exit this one fairly soon.
One last thing to note is their BSI index remains a helpful way to view the overall state of the business spend environment. It is showing significant slowdown in enterprise spending across numerous industries. “High Tech” remains strongest as is “Health and Life Sciences”. Nothing earth shattering or new here, but nice to see Coupa confirm what we already know – business spend is drastically constrained right now and that companies are dragging out decisions and looking deeper for clear ROI. It’s those companies that benefit from stay-at-home and have proven ROI that are going to continue to have tailwinds in this environment. We really made some great decisions the past few years as we all fully embraced not only SaaS, but the picks and shovel plays as well as those companies that really have cross-cutting concerns (security, monitoring) that apply to every enterprise out there. We are in a very sweet spot right now, and our YTD returns are showing it.
long COUP but not much longer