Coupa’s Q3 Results: Revenue & Customer Growth, Cash and Professional Services

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Coupa’s Q3 2017 financial results came out earlier this month. There are numerous sell-side and buy-side analysts who have taken a finer-toothed comb to the cloud vendor’s results, but here are a few of the highlights – and some quick Spend Matters commentary on them – targeting the topics of revenue/customer growth, cash and professional services (with more to follow from our team later in the week) from an industry analyst perspective versus a financial one.

“Total revenues were $35.4 million, an increase of 55% from the same period last year. Subscription services revenues were $30.8 million, an increase of 48% from the same period last year.”

Commentary: Our recent experience suggests that the market became slightly more competitive in North America for core P2P in the second half of 2017 than in the first half of 2017. We expect more entrants in 2017 from Europe and increased sales and marketing efforts from other North American providers. SAP Ariba is also coming up even more consistently than in the recent past. Nevertheless, Coupa remains a “must” shortlist candidate for procurement organizations to consider, at least in the early stages of a process (final “fit” will depend on requirements). As to the quarter’s performance in terms of revenue and customer wins, it is clear Coupa is still driving strong new customer acquisitions on both a global and a cross-industry basis.

“Loss from Operations: GAAP loss from operations was $5.5 million compared to a GAAP loss from operations of $9.4 million in the same period last year. Non-GAAP loss from operations was $2.9 million compared to a non-GAAP loss from operations of $7.4 million in the same period last year … Cash Flow: Cash flow from operating activities was a use of $10.5 million for the nine months ending October 31, 2016.”

Commentary: Coupa is continuing to take a (historic) lead from Salesforce.com and many other high-growth cloud vendors as a model in emphasizing cloud/SaaS growth over profitability. We do not hear any alarm bells here, given that curtailing growth to generate cash is something that we believe Coupa could do if the capital markets would reward that strategy more favorably over the current one. Based on balancing continued current investment and growth expectations and market demand, we would wager that Coupa will be in the black later in 2017 if current trends continue without disruption (and without factoring in additional revenue streams that we believe might start to come online in the next calendar year).

Looking ahead to Q4, “professional services revenues are expected to be approximately $3.7 million, compared to $4.6 million actual in the third quarter.”

Commentary: Professional services is not a good business for Coupa or other similar SaaS companies. It is increasingly clear Coupa has continued to build and foster a strong partner ecosystem for implementations in 2017, which is helping to reduce the share of services revenue overall. Spend Matters believes that Coupa’s combined partner ecosystem (large consultancies, regional/small systems integrators and technology partners) continues to set the standard in the sector.

In other highlights for the quarter (and earnings call), Coupa’s latest reported metrics are now:

  • $300 billion in spend under management
  • $10B in reported savings to date
  • More than 100 countries supported
  • 20 languages supported
  • More than 460 customers (1.5 million users)
  • More than 2 million suppliers

Stay tuned for further commentary on Coupa’s performance in the coming days, and look for our deep-dive “Vendor Snapshot” on Coupa for Spend Matters PRO subscribers in the coming weeks.

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