Coupa

[Jimb05]

COUP reports tomorrow, so I’ve been reviewing the last couple of quarters. This company has a lot of momentum right now, they are the leader in a huge market, that saves companies money. Revenue is accelerating, cash flow positive, margins and cash flows are improving. Competitive advantage that is increasing as they sign more customers.

From the last earnings call on revenue:

Michael Turrin – Deutsche Bank – Analyst

Hey, there. Great, thanks, good afternoon. You took the revenue guide for the year up significantly more than the beat we saw this quarter. Can we just talk more about what it is you’re seeing misleading to that big step-up for the rest of the year?

Todd Ford – Chief Financial Officer

Yeah, it’s really just execution across the organization. So kind of spoke about in our prepared remarks, the enterprise sales team continues to execute, the mid-market team is executing ,professional services team, International, etc. So it’s part of the execution and results in Q2 flowing through the model. And as Rob mentioned, very strong pipeline heading into the back half of the year.

On their competitive advantage:

Brian Peterson – Raymond James – Analyst

Hi. Thanks gentlemen, and congrats on the strong results. So Rob, wanted to get back to your early comments on the Coupa community that was definitely a theme we picked up at Inspire. At a high level, I’m curious where we should see that fell in terms of the financials, is that something that would – that should really be in kind of new customer ACV, or is that maybe more in the revenue retention metrics? Just curious how you guys think about that. Thank you.

Rob Bernshteyn – Chief Executive Officer

Sure. Thanks for the question, Brian. I think it’s all of the above. First of all, we should be when we are seeing it in the platform, right? So the transactional platform pricing, as I mentioned, new ARR per logo or average ARR per logo has gone up sequentially, virtually every quarter for years now. And that’s happened by segment, because customers are seeing the value of Community Intelligence embedded in the platform. That’s Number 1. Obviously, as we continue to get more and more data and the value of the Community Intelligence insights delivers even more high fidelity prescriptions that should be seen in retention because we become a platform with very strong barriers to entry for anyone that would be interested in entering our space, but we also offer more and more accelerated value to existing customers because of that data.
And thirdly, there are certain modules which we offer that are fundamentally Community Intelligence driven. If you look at a module like Coupa Risk Aware that’s notifying your supplier risk allowing you to bring in third-party data feeds allowing you to calibrate components of supplier risk, we’re building the richest supplier master record in the world we believe and the fidelity of insight about suppliers is going to grow as well. So the answer is absolutely all of the above. And we think we’re really in the early innings of something very, very special here.

There is so much to like with this company right now.

For those that don’t own Coupa right now, why not? Is it because of valuation? Just like other companies better? Am I missing something?

Jim (long COUP)

[mooo]

I had a conversation with Bert this weekend about COUP and DOCU. Because I am interested in both companies.

Coupa is another great company whose shares are mispriced. The company is reporting earnings this Monday-I simply would not like to say, go ahead with Coupa and then the shares lose 5%-8%. I cannot recommend anything that has an EV/S of well above 20X. And Coupa is in that position. I do believe that expectations for this quarter are too low-they were designed that way. If you are asking me which company can grow faster-I think that is a toss-up between COUP and DOCU. I would choose DOCU.

Coupa does have lots of positives. Usually that is the case for things that sell for 20X EV/S. I actually look at another 7-8 variables in doing a valuation. But those other metrics are soft, i.e. they are subjective in nature. You might not be aware, but Coupa has multiple competitors. SAP has about 4 different companies it acquired which all compete in the space. Oracle has a couple. And there are smaller ones as well.

DOCU, has far more of a competitive moat than you might imagine. It really no about e-sign, which is a commodity, but system of agreement, where they have a very differentiated offering that is resonating with users.

I’ll leave you to decide what to make of it.

[JKB2016]

I guess the part I can’t reconcile is the amount of services needed to get COUP going in a company. Three-way match, integration w core systems (i.e., ERP). Seems like a pain in the tail to get going?

[nilvest]

For those that don’t own Coupa right now, why not? Is it because of valuation? Just like other companies better? Am I missing something?

Hi Jim - FWIW - I have mentioned this before… I believe in a response to Stocknovice.

I have been skeptical of COUP management as they have been fairly acquisitive and even though each individual acquisition brings in small amount of additional revenue, they make growth look larger than reality…

Now nothing wrong with making tuck in acquisitions… and from outset it does look like they are building an portfolio of integrated products with these acquisitions… and that is a good strategy if they can actually make it cohesive integration of all of these pieces.

What bothers me is that they never talk about any additional revenue brought in with these acquisition… to an average investor, it seems like entire growth is organic, which I am not skeptical of.

So couple with that, such inflated valuation makes me seat on a side line.

I thought of making a detail list and prove my concern right or wrong… but I have not been interested enough in COUP to take a stab at it… I guess its doable and for someone who is highly invested in this stock, it is a must exercise from my perspective.