Coupa Q3 Report

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Not sure if I am the only one left around these parts who is still holding Coupa, but they reported their Q3 results today. Here is a copy to the press release → https://investors.coupa.com/news-releases/news-release-detai…

Third Quarter Results:

Total revenues were $133.0 million, an increase of 31% compared to the same period last year. Subscription revenues were $118.1 million, an increase of 31% compared to the same period last year.

Non-GAAP operating income was $14.3 million, compared to a non-GAAP operating income of $11.6 million for the same period last year.

Non-GAAP net income was $13.0 million, compared to a non-GAAP net income of $14.2 million for the same period last year. Non-GAAP net income per diluted share was $0.18, compared to non-GAAP net income per diluted share of $0.20 for the same period last year.

Operating cash flows and adjusted free cash flows were positive $19.0 million and $17.3 million, respectively.

Business Outlook:

The following forward-looking statements reflect Coupa’s expectations as of December 7, 2020, and include the expected impact from the LLamasoft acquisition.

Fourth quarter of fiscal 2021:

Total revenues are expected to be $145.0 to $146.0 million.

Non-GAAP loss from operations is expected to be $6.0 to $8.0 million.

Non-GAAP net loss per basic and diluted share is expected to be $0.11 to $0.13 per share.

Full year fiscal 2021:

Total revenues are expected to be $523.0 to $524.0 million.

Non-GAAP income from operations is expected to be $34.0 to $36.0 million.

Non-GAAP net income per diluted share is expected to be $0.47 to $0.49 per share.

Sadly, growth stayed down at 31% YoY which is a far cry from the 50% grower it was just a year ago. Clearly COVID has acted as a headwind for this company. However, I think the reason the market is sending the stock up a few percent after hours is thanks to the Q4 guidance. $146M in revenue is good for 31% growth, assuming their typical beat of 7% would give them 40% growth YoY and 18% growth QoQ. Admittingly, I am unsure how much of this is thanks to the LLamasoft acquisition but I would bet this is the reason for the increased guidance (last quarter they guided for 22% growth YoY). I am hopeful post COVID this company can return back to its former glory of 50% growth. It appears like it might be on its way, time will tell.

Rex

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Only a 1.8% position remaining here, but COUPA is an old and long time favorite bought back in 2019 and I still drive by their headquarters on 101 & 92 everyday and see the sign. Regardless, it is certainly hard to compare COUP to the “BIG 3” last week, with “only” 31% revenue growth, 33% Billings growth, and FCF of $17m. Not too shabby compared to other Nasdaq stocks, but we are a spoiled group and I am personally disappointed that growth is continuing to decelerate and they don’t seem yet to have a backstop for it, though admittedly they did increase their guidance for next quarter. Worse, the professional services portion of the revenue next quarter is forecasted to be significantly higher as a percentage of total revenues; and subscription revenues guidance is another decrease in growth down to around 18.7% growth($125.5 subscription forecast vs $105.7 q/q)…not good trends even though I love the concept that COUP brings to supply chain efficiencies and savings across all its customers. The dip may be a result of Covid in part, but I will likely bid adieu to my remaining small position tomorrow morning. While COUP is trading close to its all time high and will likely push to a new highs tomorrow, the appreciation has been considerably less than my other much larger SaaS positions and the trend is not promising or seemingly turning around.

Yet again, I’m faced with where to put the funds from this sale without creating all 20%+ positions in the the big 3 (which is for me CRWD, NET and DOCU, in that order), which are already pushing the limits.

FWIW, COUP did beat their guidance and raise the outlook, but the writing is on the wall… and the juxtaposition between their actual and projected growth compared to their conservative and managed guidance just tells me they managed the analysts well…I’d rather see them growing the company faster; though they did announce they are replacing the CRO in February (old one retiring and staying on the board for a year), so maybe the street is reflecting that as a positive in AH. Time to move on…and I admit selling an old favorite has always been my Achilles heel…I will continue to watch them and monitor the company for re-acceleration, but from afar, in my car, as I drive past their headquarters.

Cheers!

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“I think the reason the market is sending the stock up a few percent after hours is thanks to the Q4 guidance. $146M in revenue is good for 31% growth, assuming their typical beat of 7% would give them 40% growth YoY and 18% growth QoQ.”

Rex:

Thanks for the recap and thoughts…regarding the above sentence: I could be wrong, but my calculations of next quarter guidance on growth compares $146 guidance to prior years $119.2, or only 22.5% growth for “total” revenue, including professional services. (Comparing only the subscription revenues guidance, it is even lower growth of only 18.7% for the quarter). Either way the deceleration seems to be continuing even if they do beat their guidance by the customary 7%). Apologies if my spreadsheet formulas are off here, but it seems to me COUPs growth is continuing to slow down next quarter? Please correct me if I’m off, as I’d love to be wrong on this one! ;). Thanks again for taking the time to post. We may be the only two still in this company! ;). Ha!

Cheers!

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You are comparing with Q1 2021, not Q4 2020…

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COUP Revenue Growth

   		                         Q/Q	  Q/Q
			                Total	 Subscr
			                Rev Gr	 Rev Gr
Actual	  Q4 2020	1/31/2020	59.12%	 56.52%
Actual	  Q1 2021	4/30/2020	46.54%	 44.92%
Actual	  Q2 2021	7/31/2020	32.35%	 33.66%
Actual	  Q3 2021	10/31/2020	30.63%	 30.94%
Guidance  Q4 2021	1/31/2021	22.48%	 18.73%

Not the trend I wanted to see...
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Ooooomph…not to hit this nail with a sledgehammer too hard [and sorry for the multiple posts], but I’m just now reading through the actual call, which does not give me any consolation whatsoever and further drives home the point of deceleration in growth. Following are two quotes from the CFO:

  1. “With that as the backdrop, we expect total revenue for the fourth quarter to be $145 million to $146 million. This includes an expected contribution of approximately $13 million from LLamasoft.”

==> I read this to mean that their calculated guidance of 22% growth against the year prior quarter includes $13m from their acquisition of LLamasoft…so apples to apples without the acquisition, COUP would have only 11.6% q/q total revenue growth?! [albeit against a tough comparison and very good prior year Q4…but still an abysmal slowdown]

  1. “…we expect Q4 subscription revenue of $124.5 million to $125.5 million, which includes approximately $5.5 million from LLamasoft”

==> So only 13.5% q/q subscription growth compared to 57% growth the prior year!!

Frankly, I’m very surprised they are up in after hours by 4% and will have to bid them adieu tomorrow morning. Onward and upward!

Cheers!

Poleeko

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Apologies if my spreadsheet formulas are off here… Please correct me if I’m off, as I’d love to be wrong on this one!

Yes, it looks like your spreadsheet formulas are off. As Rubenslash suggested, you are comparing their Q4 guidance to their Q1 21 revenue. They did $111.5M in revenue in Q4 20 and $119.2M in Q1 21. Here is the breakdown of their revenue for the past couple years. I included next quarter with a 7% beat over the top line -


Quarter  Q1 19	Q2 19	Q3 19	Q4 19	Q1 20	Q2 20	Q3 20	Q4 20	Q1 21	Q2 21	Q3 21	Q4 21
Revenue  $56 	 $62 	 $68 	 $75 	 $81 	 $95 	 $102 	 $112 	 $119 	 $126 	 $133 	 $156 
QoQ % 	  5%	  9%	  9%	  11%	  9%	  17%	  7%	  10%	  7%	  6%	  6%	  18%
YoY %	                          39%	  44%	  54%	  51%	  49%	  47%	  32%	  31%	  40%

As you can see, this table paints a much different picture. This would be the fastest Coupa has grown sequentially in a long time. Of course, this is likely due in large part to the LLamasoft acquisition but the market does not seem to care too much at the moment. I am hoping more information was provided on the CC.

Like you, this is an old favorite for me and a 13 bagger from my original purchase in 2017. It is tough to compare this with the growth of companies like ZM, CRWD, DOCU, NET, etc. but I think it is a terrific company with a very large runway. I will continue holding my shares as I do not believe the thesis has changed and believe we could see them reaccelerate to 40-50% growth next year.

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I also still have a 2% holding in COUP and have watched it languish recently, relative to CRWD, NET, and DDOG. But I now view it as something of a recovery play which will benefit from the re-opening of the economy. If I didn’t sell it by now, I might as well hold and give it the benefit of the doubt. They do seem to manage analyst expectations well so hopefully there is some sandbagging in that guidance. I would not be at all surprised if the revenue growth would be in acceleration again for Q4

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Thank you, Major Fool:

You are correct I had a data entry error in my Q4’20. THANK YOU for catching that and pointing it out. I hate when that happens!

HOWEVER, that doesn’t change the outcome or premise I stated above: they are dropping into the mid-20% growth range.

Quite simply, if we pull out the $13m in LLamasoft revenue that is included in the Q4’21 guidance of $146 ($5.5m in subscription revenue and $7.5m professional services stated by the CFO on the conference call), the guidance of 31% drops to 19.3%. If you add your estimated 7% beat back on top, it still shows 6 consecutive quarters of slowing growth, which means next quarter they slip out of the 30%+ grower range down into the mid 20% grower range.

I sold half my position at the open today around $330 and will sell the remaining position by end of day. Most of my other companies are growing greater than 40% q/q and accelerating…like I said was an old favorite.

Congrats on your 13 bagger! Absolutely no complaints here either. It has been a great run, but sometimes one just has to say goodbye to a great company, at least for awhile until they re-accelerate! :wink:

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if we pull out the $13m in LLamasoft revenue that is included in the Q4’21 guidance

Why would we pull out the revenue? Acquisitions are core to the strategy of Coupa. They continue to add a companies ‘spend’. It has added customers/capabilities. They allocated capital for the company and are integrating it. The expense comes with it. The revenue/customers come with it too.

Now, if you don’t agree with that strategy, that might be a reason to sell the stock. But it wouldn’t surprise me if they bought another company in the next ~90 days. It’s what they do.

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“Why would we pull out the revenue?”

Fair point…I don’t believe there is a right answer except perhaps that you should do BOTH. They have indeed had a lot of acquisitions, and while that strategy is OK for awhile as long as they are accretive, I’d prefer to see them growing their revenues organically and I want to know how they are doing both organically and inorganically.

Quite simply, I do both because it provides me with another perspective and data point; in this case, since I was on the fence with their growth assuming LLamasoft revenue was INCLUDED… its alway worth making an apples to apples comparison, since the prior year Q4 did not have LLamasoft in it.

If you look at my prior post on this string, their q/q Subscription rev growth over the past 6 quarters is slowing even WITH the acquisitions:

48.9%
46.1%
44.9%
33.7%
30.9%
27.2% (this number is only 21% if you pull out the LLamasoft revenue added)

Either way I look at it does not change my decision.

Cheers!

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