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Coupa (COUP) Earnings and Revenues Beat Estimates in Q2

Zacks Equity Research

Coupa Software Inc. COUP delivered second-quarter fiscal 2020 non-GAAP earnings of 7 cents per share against the Zacks Consensus Estimate of a loss of 10 cents. Further, the bottom line was better than the year-ago figure of 5 cents per share.

Revenues improved 54% from the year-ago quarter to $95.1 million, driven by growth of 51% in subscription services, which totaled $83.5 million. Professional services & other revenues also soared 85.7% to $11.7 million.

Further, the figure surpassed the Zacks Consensus Estimate of $86 million.

The top line was primarily driven by expanding customer base. Further, rising adoption of Coupa’s platform is bolstering subscription services revenues. Billing during the quarter came in at $95.1 million, improving 57% year over year.

Notably, the stock has returned 74.8% in the past year, substantially outperforming the industry’s rally of 5%.

Customer Base Expands

Coupa provides a unified, cloud-based spend management platform that helps enterprises keep a tab on daily expenditures. The company’s customer base continued to expand in the reported quarter. In the first half of this fiscal year, more than 90 customers went live on Coupa platform.

Notable customer wins in the quarter include Affirmed Networks, Auckland Savings Bank, Carousell, Commonwealth Bank of Australia, Las Vegas Valley Water District, Suntory, Rakuten, Redfin, Sainsbury's Supermarkets, Tullow Oil, University of St. Augustine, and Volkswagen Group Australia.

The company also announced collaboration with PayPal (PYPL), which will enable Coupa Pay users access their PayPal account that in turn will enhance customer experience. The latest integration provides Coupa Pay users with more flexibility when paying PayPal-enabled suppliers, thereby ensuring hassle-free and secure online payment experience for buyers and suppliers.

Operating Details

Non-GAAP gross margin contracted 190 basis points from the year-ago quarter to 72.7%.

Non-GAAP operating income came in at $4.8 million compared with $4 million reported in the year-ago quarter. Non-GAAP operating margin came in at 5.1% compared with 6.5% a year ago.

Balance Sheet

As on Jul 31, 2019, Coupa had cash and cash equivalents of $613.9 million, up from $346.4 million in the previous quarter.

Cash flow from operations came in at $1.3 million during the quarter. Free cash flow was ($2.3) million during the fiscal second quarter.

Guidance

For third-quarter fiscal 2020, revenues are anticipated between $95.5 million and $96.5 million. The Zacks Consensus Estimate for revenues is currently pegged at $87.2 million. Subscription revenues are expected between $86 million and $87 million, while professional services revenues are anticipated to be approximately $9.5 million.

Non-GAAP income from operations is estimated to be in the range of $3.5-$5.5 million. Non-GAAP net income is projected to be 5-8 cents per share. The Zacks Consensus Estimate for earnings is currently pegged at 6 cents per share.

For fiscal 2020, Coupa updated outlook. The company now anticipates total revenues between $369 million and $372 million (previously $342 million and $344 million). The Zacks Consensus Estimate for revenues is currently pegged at $346.2 million.

Non-GAAP income from operations is now anticipated in the $10-$13 million range (previously $7-$9 million). Non-GAAP net income is expected to be 11-16 cents per share (previously 7-10 cents per share). The Zacks Consensus Estimate for earnings is currently pegged at 9 cents per share.

Zacks Rank & Key Picks

Coupa currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the broader technology sector are Alibaba Group Holding Limited BABA, Keysight Technologies Inc. KEYS and Anixter International AXE. Both the stocks flaunt a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term earnings growth rate for Alibaba, Keysight and Anixter is currently pegged at 28%, 10% and 8%, respectively.

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