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Coupa (COUP) Earnings and Revenues Beat Estimates in Q3

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Coupa Software Inc. COUP reported third-quarter fiscal 2019 non-GAAP earnings of 8 cents per share, in contrast with the Zacks Consensus Estimate of a loss of 3 cents. Notably, the company reported a loss of 5 cents in the year-ago quarter.

Revenues surged 42% from the year-ago quarter to $67.5 million, driven by growth of 42% in subscription services, which totaled $60.6 million. However, professional services & other revenues increased 51.7% to $6.9 million.

Further, the figure surpassed the Zacks Consensus Estimate of $63 million.

The top line was primarily driven by expanding customer base. Further, rising adoption of Coupa’s platform is driving subscription services revenues and gross margin.

The company’s shares went up 6.8% on Dec 3, following the results. Notably, the stock has returned 120.4% year to date, substantially outperforming the 6.5% rally of its industry.

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. The company’s platform enables customers save any amount between a penny and a dime.

Notable customer wins in the quarter include United Airlines, Finnair, ISS Group, Golden State Warriors, Coors Distribution Company, Darden Restaurants, Cvent, AAA Club Alliance, Lime Bike, Axiata Group, Genesis Energy, SkillSoft, Consolis, KPMG Canada, POWDR, Informa Exhibitions and Santos Limited, among others.

Operating Details

Non-GAAP gross margin expanded 70 basis points (bps) from the year-ago quarter to 73.3%, driven by higher subscription revenues.

Non-GAAP operating income came in at $5.8 million against a loss of $2.4 million in the year-ago quarter. Non-GAAP operating margin during the reported quarter came in at 8.5%.

Balance Sheet

As on Oct 31, 2018, Coupa had cash and cash equivalents of $227.6 million, down from $282.1 million in the previous quarter.

Cash flow from operations came in at $27.9 million during the nine months ended Oct 31, 2018. Free cash flow was $2.6 million during the third quarter.

Guidance

For fourth-quarter fiscal 2019, revenues are anticipated between $67.8 and $68.3 million. The Zacks Consensus Estimate for revenues is currently pegged at $63.9 million. Subscription revenues are forecast between $62 million and $62.5 million, while professional services revenues are anticipated at approximately $5.8 million.

Moreover, non-GAAP income from operations is anticipated to be at a break-even. Non-GAAP net income is also anticipated to be at a break-even.

For fiscal 2019, total revenues are now expected between $253 million and $253.5 million. The Zacks Consensus Estimate for revenues is currently pegged at $244.6 million.

Non-GAAP income from operations is now anticipated between $9.5 million and $10.5 million.  Non-GAAP net income is expected in the range of 11-13 cents per share.

Zacks Rank & Key Picks

Coupa carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the broader technology sector are Upland Software UPLD, Tesla, Inc. TSLA and Twitter, Inc. TWTR, each flaunting 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 Upland Software, Tesla and Twitter is currently pegged at 20%, 35% and 22.1%, respectively.

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