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Edited Transcript of COUP earnings conference call or presentation 3-Sep-19 9:00pm GMT

Q2 2020 Coupa Software Inc Earnings Call

SAN MATEO Oct 7, 2019 (Thomson StreetEvents) -- Edited Transcript of Coupa Software Inc earnings conference call or presentation Tuesday, September 3, 2019 at 9:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Nicole Noutsios

Coupa Software Incorporated - IR Officer

* Robert Bernshteyn

Coupa Software Incorporated - Chairman of the Board & CEO

* Todd R. Ford

Coupa Software Incorporated - CFO

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Conference Call Participants

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* Aleksandr J. Zukin

RBC Capital Markets, LLC, Research Division - Analyst

* Bradley Hartwell Sills

BofA Merrill Lynch, Research Division - VP

* Brent Alan Bracelin

KeyBanc Capital Markets Inc., Research Division - Senior Research Analyst

* Brian Christopher Peterson

Raymond James & Associates, Inc., Research Division - Senior Research Associate

* Christopher David Merwin

Goldman Sachs Group Inc., Research Division - Research Analyst

* Joseph Dean Foresi

Cantor Fitzgerald & Co., Research Division - Analyst

* Koji Ikeda

Oppenheimer & Co. Inc., Research Division - Director & Senior Analyst

* Matthew James Coss

JP Morgan Chase & Co, Research Division - Analyst

* Michael James Turrin

Deutsche Bank AG, Research Division - Research Analyst

* Raimo Lenschow

Barclays Bank PLC, Research Division - MD & Analyst

* Ryan Michael MacDonald

Needham & Company, LLC, Research Division - Senior Analyst

* Stan Zlotsky

Morgan Stanley, Research Division - VP

* Steven Richard Koenig

Wedbush Securities Inc., Research Division - MD

* Terrell Frederick Tillman

SunTrust Robinson Humphrey, Inc., Research Division - Research Analyst

* Terrence Kiwala

First Analysis Corporation - VP of Enterprise Productivity Software

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Presentation

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Operator [1]

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Good day, ladies and gentlemen, and welcome to the Coupa Software Second Quarter Fiscal Year 2020 Earnings Release Conference Call. (Operator Instructions) As a reminder, this call is being recorded. I would now like to introduce your host for today's conference call, Ms. Nicole Noutsios, Investor Relations. Ms. Noutsios, you may begin your conference.

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Nicole Noutsios, Coupa Software Incorporated - IR Officer [2]

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Good afternoon, and welcome to Coupa Software's second quarter conference call. Joining me today are Rob Bernshteyn, Coupa's CEO; and Todd Ford, Coupa's CFO.

Our remarks today include forward-looking statements about guidance and future results of operations, strategies, market size, products, competitive position and potential growth opportunities. Our actual results may be materially different.

Forward-looking statements involve risks and uncertainties and assumptions that are described in our most recently filed 10-Q. These forward-looking statements are based on our beliefs and assumptions today, and we disclaim any obligation to update any forward-looking statements. If this call is replayed after today, the information presented may not contain current or accurate information.

We also present both GAAP and non-GAAP financial measures. A reconciliation of certain of these measures is included in today's earnings release, which you can find on our Investor Relations website. A replay of this call will also be available. And if you prefer to access a replay via phone, you can find that information in the earnings release.

Other -- unless otherwise stated, growth comparisons are against the same period of the prior year.

With that, I'll turn the call over to Rob.

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Robert Bernshteyn, Coupa Software Incorporated - Chairman of the Board & CEO [3]

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Hello, everyone, and thank you for joining us today on what is our 12th earnings call as a public company. On behalf of my Coupa colleagues and myself, I'm excited to share our strong business and financial results for the second quarter. I believe that they are further evidence that our leadership standing in Business Spend Management is here, a position that we're excited to strengthen as well as advance as we continue executing on our vision.

Financial highlights from Q2 include $95 million of total revenues, representing a trailing 12-month growth rate of 46%. And also once again, we were profitable on a non-GAAP basis. Todd will, of course, cover other financial results later in the call.

Now from a business perspective, there were a host of exciting new developments this quarter. Above all else, let me say that we have now seen a clear, meaningful advancement in the development and cultivation of our Coupa Community. This was most evidenced at our Inspire conference in Las Vegas in late June, our premier Business Spend Management industry event.

This year, Inspire was awash with a palpable new dynamic. The inspiration about our BSM vision that our colleagues and I have been advancing and asserting for many years was clearly reflected back onto us by our customers, partners and even prospective customers. As we progress to the back half of the year and beyond, the marked step-change in vibrancy felt across the developing Coupa Community has inspired my colleagues and me like never before.

Now in the spirit of focusing on results, let's talk about customer go-lives. As many of you well know, at Coupa, we deliver Value as a Service to our customers, offering a time-to-value proposition that simply can't be matched in our industry. We do this by combining the best practices and core competencies we've honed over the past 10-plus years with the technical depth and global reach of the broader BSM community.

This community now includes nearly 3,000 trained consultants within our global systems integrator partner ecosystem. This has been and continues to be a winning formula for us and our partners alike. In the first half of this fiscal year, more than 90 customers in our community have gone live with Coupa BSM. Here are a few examples from Q2 that I've selected to showcase our ability to support international and mid-market customers, along with subsidiary deployments that often grow into large global partnerships.

From an international perspective, let me highlight Axiata Group, one of Asia's leading telecommunications groups. With Coupa, Axiata is automating and standardizing processes with the goal of capturing 100% of their indirect spend under management through the Coupa platform.

From a mid-market perspective, let me highlight a few examples. Cvent, a leading meeting events and hospitality provider with more than 4,000 employees, 27,000 customers and 300,000 users worldwide went live with Coupa BSM to create tighter controls and greater visibility in spend across its U.S. operations. Cvent is looking forward to increased PO-back spend and reduced manual steps in their AP workflows.

Peloton Interactive is using technology and design to connect the world through fitness, empowering people to be the best versions of themselves. Peloton went live with Coupa BSM in North America in less than 6 months. As part of a larger technology transformation, Peloton is using Coupa to standardize its purchasing processes and gain an on-demand visibility into their spend.

Next is the international rollout of Coupa beginning with the U.K. Shopify complete commerce platform that lets you start, grow and manage your business recently went live with Coupa BSM in its Canadian and U.S. operations in a rapid 4-month deployment. Shopify chose Coupa to optimize spend management and implement spend controls, ensuring better reporting and analytics against negotiated contracts with preferred vendors. Shopify is also looking to increase efficiency by automating manual inventory management processes.

Lastly, as an example of starting a new relationship with a division or subsidiary, let me highlight Coors Distributing Company, a beverage subsidiary of Molson-Coors. They went live with Coupa, modernizing their processes for greater visibility into budgets and spend. Coupa is providing them with a highly user-centric experience, a wonderful real-world example of our vision area of user-centricity with the letter U in Coupa.

The accelerated component of our vision, as captured by the letter A in Coupa, helps us get customers live quickly so they can start tackling inefficiencies and unaddressed opportunities and begin to drive a meaningful, measurable return on investment. We look forward to continue -- to the continued creation of increased profitability and long-term prosperity working alongside these customers and our entire global BSM community in the weeks, months and years to come.

Now let's move on to new customers. During the quarter, we added many fantastic organizations across numerous geographies and industries whose leaders are tightly aligned with our success-oriented Value as a Service approach to BSM. New customers we welcomed to our community included 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, Volkswagen Group Australia, Waste Management, Inc., Wawa and many others. We look forward to partnering with these and all our new customers to drive success and unlock massive value.

Now let's move on to some other business updates. The richness of content and frequency of interaction within our Coupa Community is becoming more comprehensive and expansive every day. The mix in our community is also becoming more global. Along with offices in North America, including our headquarters here in California, we now have more than a dozen offices in Europe including London, Frankfurt, Dublin and Basel; 5 offices in the Asia Pacific region including Tokyo, Pune, Hyderabad and Singapore; and several offices in Latin America including Mexico and Brazil.

For the second consecutive year, we will be holding our APAC symposium in September in Sydney, and our Tokyo symposium in November. We're also adding several events in São Paulo for the back half of the year. Now of course we're also looking forward to our annual Coupa European Inspire event, taking place on November 5 through the 7 in London. These events are driven by strong community participation and the continued commitment to Business Spend Management and Coupa that we're seeing in these regions.

The permutation of Coupa across the global enterprise software ecosystem is propelled by our rapid pace of innovation in our applications, in our platform and in our community. As one point of validation, in Q2, Coupa was named as the leader in the Gartner 2019 Magic Quadrant for Procure-to-Pay Suites for the fourth consecutive time. For the first time, Coupa was proudly ranked highest on both axes: completeness of vision and ability to execute.

The report cited strong innovation, deep market understanding and high-quality customer experiences as just some of the reasons for Coupa's standing. Industry recognition such as this only serves to amplify our excitement as we continue setting the standard for cutting-edge technological innovations.

Now speaking of innovation, let me touch on Coupa Community Intelligence. Community Intelligence leverages the collective wisdom of the community and the now more than 1.3 trillion of cumulative spend under management to prescribe ways for companies to optimize their spend management outcome.

One example of Community Intelligence in action is with The Andersons, an organization serving the agribusiness industry. The Andersons' spend occurs at various corporate sites and field locations, and Chad McDonald, Director of Procurement, is tasked with the difficult job of finding ways to optimize spend for savings and efficiency.

Now in the past, Chad knew that undue supplier proliferation was limiting his savings opportunity, but it was hard to pinpoint these opportunities clearly and make the case for company-wide sourcing. With Coupa Community Intelligence, Chad can now see his company's commodity spend profile and follow prescriptions to consolidate suppliers. For example, he found that he had 3x as many safety equipment suppliers as other companies in his industry.

Using these insights, Chad is now having meaningful conversations with business units and safety professionals to consolidate spend to preferred suppliers with negotiated discounts and quality control, an initiative which is expected to help them save up to 10% on this category alone.

With examples like this, it's clear that Community Intelligence and prescriptive insights as captured by the letter P in Coupa are offering massive value to customers and creating meaningful barriers to entry for any future or currently claimed participants in our space.

Now also on the topic of innovation, we continue to be very excited about the ongoing rollout of Coupa Pay. Coupa Inspire was the perfect venue for showcasing our latest Coupa Pay capability. We received tremendous early interest in the launch of our newest pay module, invoice payment. We also continue to see strong interest in our other available solutions, Accelerate and virtual cards for POs. We announced a number of key partnerships with Citibank, Transfermate, Stripe and PayPal as we continue our focus on being a truly open platform as represented by the letter O in Coupa.

Unlike other payment solutions in the market, Coupa Pay has the distinct advantage of sitting on top of the supplier master record and the supplier invoice transaction in the Coupa AP Automation cycle, some of our strongest areas of expertise. The alternative, which is operating on the back-end of numerous ERP instances, is clearly less effective, less efficient and certainly more costly. We've heard many nasty horror stories about this process from our customers. Though still in the early stages of execution for Coupa Pay, our vision is clear, and we'll continue to keep you posted on progress.

I'm also excited to announce the release of the Q3 Coupa Business Spend Index today. This is our second quarterly release after the inaugural BSI report last quarter. The Coupa BSI analyzes hundreds of billions of dollars in aggregated and anonymized spend behavior to serve as a leading indicator of economic growth based on current business spending decisions. As companies across industries seek economic indicators that they can trust and make smart decisions, our goal with the BSI is to provide a powerful tool that utilizes the collective wisdom of the BSM community to help companies of all sizes spend smarter.

Now before we go into the results of the Q3 BSI, let me make it clear that what we're seeing in the BSI data is not indicative of the trends we're seeing in Coupa's business. With that said, let me share some of our findings. The Q3 Coupa BSI indicates that businesses globally may be growing more cautious about the economy through at least the end of 2019. At an industry level, retail is performing well above trend, but retailers' confidence in economic growth may be slowing from where it has been in recent quarters. Similarly, financial services companies appear to be growing less confident in the economy for the next 6 months.

Alternatively, manufacturing sentiment seems to be increasing though still below trend. One hypothesis for this particular trend may be that manufacturers are looking to domestic options due to global trade tensions. Detailed Q3 BSI findings are now available on spendindex.com.

Now let's talk a bit about our culture. With our market leadership position, we believe our future success is only limited by our ability to execute. This quarter, we were proud to be recognized as a great place to work for the third consecutive year based on survey results, which evaluated our organizational resilience, commitment to personal and professional growth, product innovation, leadership effectiveness and, of course, our core values.

In fact, our 3 core values of ensuring customer success, focusing on results and striving for excellence are foundational to our success. As such, each quarter, we recognize the most valuable player colleagues who truly embody the spirit of each of our values. The winners are nominated by their peers for their unique contributions to our company, our customers and our broader community.

This quarter, [Perry Alm] was recognized for ensuring customer success. [Perry] consistently shows professionalism and persistence, enabling customers to achieve long-term success. For a customer, he's not looking just to see you smile and enjoy yourself with near-term satisfaction. Success is the objective.

Nick Myers, who joined Coupa through our DCR Workforce acquisition, won the award for focusing on results. As a product manager specializing in our Coupa Contingent Workforce solution, Nick has quickly proven his dedication to industry innovation and has been able to prioritize a very complex set of requirements to maximize customer results.

Last but not least, Robin Turner of Coupa Finance received the award for striving for excellence. Day in and day out, Robin fully commits to making herself, her team and every Coupa colleague a better professional. She is always willing to take extra time to explain and teach as well as listen and learn. Huge congratulations to Perry, Nick and Robin, and thank you for inspiring all of us.

Before finishing up, let me briefly touch on something I'm very excited about, our growing patent portfolio. As a company, we continue to execute on our vision of delivering a comprehensive platform that drives repeatable and measurable value. And like the letter C in Coupa, our patent program is also comprehensive, capturing functional inventions across our entire platform.

This quarter, we proudly earned our 16th, 17th and 18th U.S. patents. Our 16th U.S. patent enables customers in our community to propose more accurate translations of terms used in localized versions of our solution. Our 17th new patent involves the use of machine learning to automatically decipher the contents of invoices and other transactional documents. And our 18th new patent is focused on automatically recognizing the geographic locale of a document based on language cues within the document itself.

With more than 75 additional patents pending in the pipeline, we're continuing to set the innovation agenda for our industry while also protecting our intellectual property for years to come.

As I wrap up, let me say that as we look to the back half of the year and with our 43rd quarter of execution well underway, we remain steadfast in our vision and focused on consistent strong execution. We believe that the Value as a Service we are delivering to our customers through our applications, our platform and our community is unlike anything that's been done before in enterprise software. We could not be more excited about our opportunity to continue leading in the space.

Let me now hand it over to our Chief Financial Officer, Todd Ford, who will review our Q2 financial results in detail and provide our outlook for the third quarter and full fiscal year. Todd?

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Todd R. Ford, Coupa Software Incorporated - CFO [4]

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Thanks, Rob, and good afternoon, everyone. The second quarter was a well-executed quarter for us. Throughout the organization, we fired on all cylinders, achieving excellent financial results across the board.

Total revenues for Q2 grew 54% year-over-year to $95 million. Subscription revenues for Q2 were $83 million, up 51% compared to Q2 of last year. Professional services and other revenues were $11.7 million, which was an uncharacteristically large quarter for us.

On professional services, while the vast majority of our implementations remain partner-led, in the quarter, we took a few strategic customer implementations directly, for example, in the federal sector.

For the trailing 12 months, calculated billings were $379 million, up from $252 million in the previous trailing 12-month period, representing a 50% year-over-year increase. Our strong billings performance was driven by outstanding execution across the sales organization as well as the benefit from the Exari acquisition, which I will cover in a moment.

Total deferred revenue at quarter end was $189 million, up from $129 million at the end of Q2 last year, a year-over-year increase of 47%. With respect to Exari, opening deferred revenue from the acquisition was $4.7 million, and revenue recognized during the quarter from the acquired deferred revenue was $1.9 million, resulting in an ending acquired deferred revenue balance of $2.8 million.

Let's now turn to margins and results of operations. Driven by strong revenue performance and leverage in our model, our Q2 non-GAAP gross margin was 72.7%, exceeding our previous expectations of 70% to 71%. This included professional services and other non-GAAP gross margins of 10.7%, which reflects great execution by our professional services organization.

We delivered non-GAAP operating income of $4.8 million as well as non-GAAP net income of $5.3 million or $0.07 per share on 70.9 million diluted shares, all of which were ahead of our previous commitments even with the full quarter impact from Exari.

Cash and investments at quarter end were $808 million, up from $346 million at the end of Q1. This includes $667 million of net proceeds from convertible notes we issued in June, offset by $210 million of net cash used to purchase Exari.

Operating cash flows for Q2 were $1.3 million, and free cash flows were negative $2.3 million. On a trailing 12-month basis, operating cash flows were $34 million or 11% of total revenues, and free cash flows were $23 million or 7% of total revenues after taking into account $11 million in purchases of property and equipment. Cash flows for the quarter were favorable due to strong performance by our collection team, which drove accelerated customer payments and improved linearity.

We expect total revenues for Q3 to be between $95 million and $96.5 million. This includes subscription revenues of between $86 million and $87 million and professional services revenues and other of approximately $9.5 million. For calculated billings on a trailing 12-month basis, we expect to exit Q3 at a growth rate of approximately 45%, and we expect free cash flows for Q3 to be breakeven or slightly positive.

Now let's look at the expense profile for Q3. We expect Q3 non-GAAP gross margin to be approximately 71% and non-GAAP operating income to be between $3.5 million and $5.5 million. This results in a non-GAAP net income per share of between $0.05 and $0.08 on approximately 71.7 million weighted average diluted shares for the quarter.

For the fiscal year ending January 31, 2020, we expect total revenues to be between $369 million to $372 million with non-GAAP gross margin in the range of 71% to 72%. We expect non-GAAP operating income for the year to be between $10 million and $13 million. We further expect non-GAAP net income per diluted share in the range of $0.11 to $0.16, based upon an estimated 70 million weighted average diluted shares for the year.

To conclude, we remain focused on driving results and delivering on the commitments we have made to our stakeholders. Now we're happy to move into Q&A. (Operator Instructions). With that, I'll hand it over to the operator.

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Questions and Answers

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Operator [1]

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(Operator Instructions) Your first question comes from the line of Stan Zlotsky from Morgan Stanley.

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Stan Zlotsky, Morgan Stanley, Research Division - VP [2]

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Congrats on a very strong result. Just wanted to get a better sense for the contribution of Exari in the quarter. Just looking through the filings, at the end of March, Exari had about a little over $20 million of deferred revenue and just want to make sure I have the numbers right. So it sounds like coming into the quarter that after deferred revenue write-downs, that dropped to $4.7 million, and then you finished at $2.8 million of deferred contribution for Exari. And then I have a quick follow-up.

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Todd R. Ford, Coupa Software Incorporated - CFO [3]

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Yes. So Stan, that is correct. The amount that actually came on to our books was $4.7 million, and that takes into account the discount from the haircut to acquire deferred plus also the transition from 605 to 606, which we did in concert with the acquisition. So for the second quarter, the ARR revenue that was recognized from Exari in total was $2.8 million.

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Stan Zlotsky, Morgan Stanley, Research Division - VP [4]

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Got it. Perfect. And then a quick question on macro. We've heard from a number of companies where they're either seeing something -- some unevenness or maybe some hesitancy. What are you guys seeing because you obviously have your Business Spend Index throwing off various signals? But what are you actually seeing when you look at your pipeline as you go into the back half of the year? That's it for me.

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Robert Bernshteyn, Coupa Software Incorporated - Chairman of the Board & CEO [5]

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Sure. Thanks very much, Stan. Now we continue to see a very strong pipeline, real good positive conversations with prospective customers as well as existing customers that are interested in the full Business Spend Management platform that we offer, so quite positive from where we're looking at things.

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Operator [6]

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Your next question comes from the line of Mark Murphy from JPMorgan.

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Matthew James Coss, JP Morgan Chase & Co, Research Division - Analyst [7]

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This is Matt Coss on behalf of Mark Murphy. Rob, as companies move along the arc of their digital transformations, how often does Business Spend Management surface in those conversations? And then as an appendage to that, do you perceive the market is at a point where Coupa, instead of being viewed as sort of a new, less well-known choice, the opposite is now true, where Coupa is now sort of the safer go-to choice?

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Robert Bernshteyn, Coupa Software Incorporated - Chairman of the Board & CEO [8]

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Sure. And thanks very much for the question. First, I would say it absolutely does surface as part of a broader digital transformation agenda. The value proposition is obviously very, very strong and is becoming more and more of a focal point for CFOs, CIOs, and what we're starting to see more and more of is CEOs as well, so that's great.

The second part is that it's in our best interest and it's the right thing for our prospective customers that we surface it even if they're not surfacing it because the value proposition, again, is very strong. We can help drive profitability, compliance and thoughtful growth as well as great efficiencies for just about any company on the planet.

And thirdly, I would say it is still upon us to continue to carefully and thoughtfully develop awareness of Coupa in the world. We have a massive market measured in tens of billions of dollars that we're going after. We penetrated a very small percentage of that market in the Global 2000 and the Fortune 500 and certainly across all mid-market. So with careful, thoughtful awareness development and execution into the market, we think we're on the way to developing and building a very special company.

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Operator [9]

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Your next question comes from the line of Alex Zukin from RBC Capital Markets.

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Aleksandr J. Zukin, RBC Capital Markets, LLC, Research Division - Analyst [10]

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Congrats. I guess maybe just the first one, given that you've now accelerated subscription revenue growth 4 quarters in a row, can you maybe talk about whether -- is this being driven by larger initial lands or accelerating expands within the customer base? And then how should we be thinking about that dollar-based net expansion on both a near and long-term time horizon?

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Robert Bernshteyn, Coupa Software Incorporated - Chairman of the Board & CEO [11]

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Well, thanks very much, Alex, for the question. I would say on the revenue side, there's a couple of very interesting and frankly promising developments. Our mid-market engine is really working. Just to give you a sense for that, in Q2, we closed our largest mid-market deal in company history.

I would say our enterprise business is going quite well also. In fact, in enterprise, we also closed one of our largest deals just in Q2. Now in terms of global expansion, global expansion is something we continue to manage very carefully. We're very sales and marketing efficient as we go into these new markets and we develop our way in.

So it really comes back to this model that we've been working on for 42 quarters now, staying within a tight band of sales and marketing efficiency and continuing to drive top line expansion.

One other framing that you may appreciate, Alex, on it is just thinking about it in terms of price, speed and win/loss, the 3 components of driving revenue. On the price side, our average ARR per logo has gone up sequentially in virtually every quarter since IPO and beyond that. And that's in total as well as by segment.

In terms of speed, our speed of close has stayed relatively steady at 4 to 6 months for mid-market and call it 6 to 12 months for enterprise. And around win/loss, I can tell you qualitatively, I've said this in the past, that our strong sense is that our only competition here is ourselves and our ability to lead this developing market. So as new components come online, we're there to service them. So either way you want to look at it, that's what's happening in our world.

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Todd R. Ford, Coupa Software Incorporated - CFO [12]

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Alex, this is Todd. With respect to renewal rates and dollar-based expansion rates. The gross renewal rate continues to trend at 95%-plus. On the dollar-based expansion, it slightly ticked up, but it's still in the very high end of range that we've historically quoted at 110 to 112. And I think over time, we'll be able to get that closer to 120. And I do view that as a long-term target. Although we've added some resources to go after the installed base, our clear focus is still on landing large new customers.

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Aleksandr J. Zukin, RBC Capital Markets, LLC, Research Division - Analyst [13]

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Got it. And maybe just one more on payments. You talked about the uptick that you're seeing in enthusiasm from your customer base. Can you maybe just rank order the payments opportunity in terms of what's most needle-moving in the near term and in the mid- to longer term?

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Robert Bernshteyn, Coupa Software Incorporated - Chairman of the Board & CEO [14]

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Sure. I mean all 3 components that we have today are all very valuable -- seen as quite valuable by our prospective customers and the customers we've acquired that are using them. So clear interest in virtual cards, clear interest in Accelerate and very good early interest in invoice payments.

I would say my sense at the moment is that the medium to longer-term opportunity around invoice payments is probably the most interesting because we'd be taking on a great bulk of the heavy-lifting that's done in a whole host of ERP systems as I mentioned in my prepared remarks.

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Operator [15]

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Your next question comes from the line of Michael Turrin from Deutsche Bank.

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Michael James Turrin, Deutsche Bank AG, Research Division - Research Analyst [16]

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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 that's leading to that big step-up for the rest of the year?

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Todd R. Ford, Coupa Software Incorporated - CFO [17]

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Yes. It's really just execution across the organization. As we kind of spoke about it in our prepared remarks, the enterprise sales team continues to execute. The mid-market team is executing, professional services team, international, et cetera. 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.

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Michael James Turrin, Deutsche Bank AG, Research Division - Research Analyst [18]

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That's helpful. Todd, just on margins, you also came in notably ahead there of what we were expecting and what prior guidance was calling for. Is that mostly just a function of flow-through from the top line outperformance? Did anything shift there during the quarter or anything else to call out there?

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Todd R. Ford, Coupa Software Incorporated - CFO [19]

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Mainly top line performance as you noted.

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Operator [20]

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Your next question comes from the line of Steve Koenig from Wedbush.

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Steven Richard Koenig, Wedbush Securities Inc., Research Division - MD [21]

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Congrats on the quarter. Just 2. First one is so on Coupa Pay, how do you guys think about the TAM, which I don't think is part of your $56 billion TAM? And what kind of part of the B2B payments opportunity kind of is going to be addressable to you guys?

And then just secondly, any color you can give us on a pretty large convert you've done, kind of how to think about what -- how you might use it for both organic and inorganic initiatives?

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Robert Bernshteyn, Coupa Software Incorporated - Chairman of the Board & CEO [22]

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Sure. So thanks for the questions. So I would say first off, that's correct, that Pay is not in the TAM that we've shared at previous Analyst Days as part of our calculations. We think it's a large addressable opportunity that we're working our way into. We're not spending a lot of time thinking about the full scope of what's possible. We know we're managing that $1.3 trillion in cumulative spend. So clearly, there's something to go after, and we're going after it thoughtfully with our customers.

In terms of the proceeds of the convert, obviously, as we leverage our cash, it will be for continued growth of the business. But in terms of acquisitions, we're currently in a period of what I would call acculturation and integration in some of the companies that have become part of the Coupa journey, and we'll continue to use the exact same criteria we've shared in the past around any potential acquisitions downstream.

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Operator [23]

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Your next question comes from the line of Joseph Foresi from Fitzgerald.

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Joseph Dean Foresi, Cantor Fitzgerald & Co., Research Division - Analyst [24]

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My first question is just on margins. It looks like -- maybe you can help us understand the balance between gross margins and operating margins because it looks like gross margins might have ticked down a little bit. What would be the cause of that? And then I know you've given mid-term guidance, and I'm not going to ask you to change that now, but maybe you can give us some color on what you're expecting margins to do this year and next year.

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Todd R. Ford, Coupa Software Incorporated - CFO [25]

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Joe, it's Todd. From a gross margin perspective, we do expect that that will continue to trend towards the mid-term targets. And clearly, one of the things that was at play in Q2 was the integration of Exari. We took the full impact of the expense, and the revenues will come in over time.

And then on the operating side, it's kind of the same story as well. We took the full hit of the expense with minimal revenue contribution, and I would expect those to continue to trend over time.

And actually, on the OpEx side, we're in pretty good shape. We had some higher G&A costs related to the acquisition, consulting fees, et cetera. And one of the things that we're working on on the gross margins side to put back up there is the rationalization of how they're hosted, the different contracts that the acquired companies had, and there's quite a bit of opportunity for us to drive more scale and leverage there as we execute over the next few quarters on that front.

So I think we're well positioned to attack the mid-term targets and have the infrastructure in place to start moving towards the longer-term targets as well.

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Joseph Dean Foresi, Cantor Fitzgerald & Co., Research Division - Analyst [26]

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Got it. The second one, I guess, is on the professional services side. I think you mentioned there was maybe some federal contracts that you started to work on. Was that a pull forward? And how should we think about that revenue this year heading into next year?

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Todd R. Ford, Coupa Software Incorporated - CFO [27]

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I would look at the professional services, and with respect to the federal sector, in particular, the USPS contract is more of a onetime thing. Our strategy remains the same, to have the majority of them be partner-led. But given the significance of this initial deal in the federal sector, it made sense for us to be more involved than we would normally be with other deals.

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Operator [28]

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Your next question comes from the line of Koji Ikeda from Oppenheimer.

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Koji Ikeda, Oppenheimer & Co. Inc., Research Division - Director & Senior Analyst [29]

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Really great quarter, guys. So I saw in the press release the business was named as a leader in the Gartner Magic Quadrant for Procure-to-Pay. And actually, Coupa is the highest up and furthest right on that Magic Quadrant, so congratulations on that achievement.

I guess my question is, if you could, curious to hear your perspective on if there's maybe a specific part or module or maybe even a platform feature that Coupa has that is really the big differentiator there that is driving that leadership positioning of the business.

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Robert Bernshteyn, Coupa Software Incorporated - Chairman of the Board & CEO [30]

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Yes. Thank you, Koji. I think what Gartner and others have recognized, which we're obviously very proud of, is the differentiated vision of our overall platform. And it's the reason why in every one of these earnings calls, we tend to call out what the letters in Coupa stand for.

These customers are looking for a comprehensive solution with all the capabilities working together synergistically in a way that drives Business Spend Management value, and that's the C in Coupa. They want to be able to integrate to any existing systems they have out there, whether it's Oracle, SAP, a whole host of different ERPs and third-party products, and they need an open platform, and that's the O in Coupa.

They are tired of very complex, difficult-to-use solutions that were really built for back-office professionals, and they want something as simple as they experience in their home purchasing environment. And the U for that purpose stands for user-centricity, something we're continually focused on.

They want to learn from the community of customers that they joined. We now have a massive global community, and they want to take distilled, anonymized data from that community through Community Intelligence and get prescriptive advice, and that is the P in Coupa.

And lastly, they want to get the value quickly. They're tired of multiyear deployments that go nowhere, and they're stuck with big builds that don't deliver results, so that stands for Accelerated in Coupa. And as I've shared many times before, our time-to-value equation is really, really strong.

These 5 differentiated vision areas and approaches of our company are delivering results for our customer community, and we think these vision areas will continue to deliver results for many of the customers that we'll be happy to attract in quarters to come.

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Koji Ikeda, Oppenheimer & Co. Inc., Research Division - Director & Senior Analyst [31]

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And maybe just one follow-up. I guess since the core Coupa platform is a pretty big implementation out there for a lot of these large enterprise organizations, and I think it's safe to assume that pay it's a pretty big implementation too. Are you seeing any demand out there from prospects or maybe even customers that are currently in implementation, just to implement it all at once?

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Robert Bernshteyn, Coupa Software Incorporated - Chairman of the Board & CEO [32]

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Sure. It's very interesting. We have a host of different ways that we may enter. Our goal as a company is to be as frictionless as possible on the entry point. There are some customers that will implement internationally same day for everything. That's not that common, but we've seen that.

More likely, we see customers implement perhaps country by country or function by function, or they'll take an approach where they turn everyone on -- but they'll turn everyone on to a certain use case, and then turn on different use cases. So we have a whole host of best practices approaches that we have in our toolkit and that we've certified our 3,000-plus consultants on to go in and drive quick value for customers so they can expand as the months and quarters go by. So that's the way we're thinking about it, and we're continuing to see really strong traction with that approach.

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Operator [33]

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Your next question comes from the line of Brian Peterson from Raymond James.

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Brian Christopher Peterson, Raymond James & Associates, Inc., Research Division - Senior Research Associate [34]

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Congrats on the strong results. So Rob, I wanted to get back to your early comments on the Coupa Community. That was definitely a theme we picked up out of Inspire. At a high level, I'm curious where we should see that felt in terms of the financials. Is that something 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.

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Robert Bernshteyn, Coupa Software Incorporated - Chairman of the Board & CEO [35]

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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 one.

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 you of 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.

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Operator [36]

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Your next question comes from the line of Ryan MacDonald from Needham.

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Ryan Michael MacDonald, Needham & Company, LLC, Research Division - Senior Analyst [37]

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I guess first off on Coupa Pay. Clearly, there's a lot of interest building for the solution. Rob, can you talk about sort of as you're having these discussions with prospective customers, sort of what the gating factors right now to adoption are? And as you're looking at sales cycles for the Coupa Pay solution, what your expectations are compared to sort of the corporate averages moving forward?

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Robert Bernshteyn, Coupa Software Incorporated - Chairman of the Board & CEO [38]

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Sure. So thanks for the questions. I don't think we have any gating factors to speak of. I think it's the overall gating factor as a company, which is continued awareness development, continuing to get our sales team, get our marketing in line, getting in front of prospective customers, staging deployments properly.

So as you might expect, once customers buy it, it takes time to go live and start doing transactions and productions, so there's a little bit of a lag effect there, but it's progressing in a healthy way.

In terms of how we manage it, very similarly to all the modules we've built over time, get them in front of customers' hands. We continue to evolve future function requirements, we distill the things that actually matter and get them into our core code line. And 3 times a year, customers are getting greater and greater value. And I see that happening no differently with the 3 Coupa Pay modules we have today and the number that we have on the docket as well.

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Ryan Michael MacDonald, Needham & Company, LLC, Research Division - Senior Analyst [39]

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Excellent. And just a quick follow-up for Todd. As we're looking at sort of the guidance beat for third quarter and the fiscal -- remainder of the fiscal year, if we're backing into sort of fourth quarter OpEx numbers, it looks like there's perhaps some ramp-up of expense in the fourth quarter there. Is there anything outside normal seasonality that we should expect or that you'd point out or anything related to the recent acquisitions that's being thrown in there?

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Todd R. Ford, Coupa Software Incorporated - CFO [40]

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There's a piece of seasonality in there, of course, especially with respect to sales commissions and people hitting accelerators and that type of thing. But at the higher level, I would say it's more that we're aggressively investing in the business. And as we look at the runway ahead of us and what we're seeing, we are investing more heavily in some of the go-to-market teams, et cetera, so you're seeing that reflected in Q4 as well.

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Robert Bernshteyn, Coupa Software Incorporated - Chairman of the Board & CEO [41]

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I would also add to that, and I think it's important from an investment perspective to understand that not only are we addressing -- assertively investing behind this business, but we're trying to do it as thoughtfully as possible every step of the way. So we want to make sure that 100% of these expenditures are both led and managed effectively and not managing the business purely on how much we spend. Look, spend rules everything around us. It's been doing that for over 10 years here. It's doing it thoughtfully and doing it in a way that's going to deliver results for the business.

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Operator [42]

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Your next question comes from the line of Chris Merwin from Goldman Sachs.

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Christopher David Merwin, Goldman Sachs Group Inc., Research Division - Research Analyst [43]

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I wanted to ask about sales efficiency. It looks like that continued to improve, and I know you're focusing more on mid-markets. Are you able to sell those mid-market deals with the same efficiency as you are in the enterprise? Or are you just seeing really strong efficiency gains within the enterprise? Just curious what's been the main driver of the improvement in that metric. Then I have a follow-up.

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Robert Bernshteyn, Coupa Software Incorporated - Chairman of the Board & CEO [44]

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Well, look, if we take mid-markets stand-alone, as I mentioned earlier, the engine is absolutely working. Not only are we doing very well in terms of the size of deals, but we really -- we're getting really to a place where we have componentized implementations and the flywheel there is spinning really nicely.

When you look at sales and marketing costs overall, which was at the start of your question, if you look at most recently, our non-GAAP sales and marketing costs as a percentage of revenue have been about 34% in both Q1 as well as Q2, so we're spending carefully against the revenue opportunity.

We're also looking at the components of sales and marketing, just to give you a sense of the fidelity here. So you might find it interesting that we look carefully at the ratio of sales to marketing expenditures. Incidentally, that ratio has been relatively consistent for over the last 18 months.

So it's a calibration of sales to marketing. It's understanding our fully loaded sales cost as well as the components of sales, sales headcount and incentive comp. It's understanding the marketing component, headcount as well as discretionary marketing spend, and trying to put forth the best spend profile for the revenue opportunity that exists in the quarter and to plan ahead.

And just to underscore what Todd said, and it's reflected in our guidance, we continue to assertively invest behind this business. And I'll tell you, we couldn't be more excited about it and the opportunity ahead.

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Christopher David Merwin, Goldman Sachs Group Inc., Research Division - Research Analyst [45]

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Okay. That's great. And then just one on federal. Are you still on track to be FedRAMP-certified by the end of the year? And any commentary you can just provide on traction with some of those other federal customers as you move through sales cycles?

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Robert Bernshteyn, Coupa Software Incorporated - Chairman of the Board & CEO [46]

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Yes. Absolutely. Thanks for that question. So the pipeline continues to progress really well. The USPS deployment itself is progressing really well. In fact, in Q1, we became FedRAMP-authorized, and were given authority to operate at USPS on the path to broader authority for FedRAMP. So continues to -- continue to go well at that deployment as well as pipeline. We'll continue to inform you how that progresses without a doubt.

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Todd R. Ford, Coupa Software Incorporated - CFO [47]

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Just to clarify, it was in Q2 that we got the authority to operate with USPS, not Q1.

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Robert Bernshteyn, Coupa Software Incorporated - Chairman of the Board & CEO [48]

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Yes, sorry. I misspoke.

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Operator [49]

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Your next question comes from the line of Terry Kiwala from First Analysis.

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Terrence Kiwala, First Analysis Corporation - VP of Enterprise Productivity Software [50]

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Congratulations on the quarter. You referenced the acquisition, integration costs earlier, and I'm just wondering whether the actual amount or the time line is ahead, matching or behind your expectations.

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Todd R. Ford, Coupa Software Incorporated - CFO [51]

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Yes. So one of the things we've done with the number of acquisitions we've done over the past several years is really built up some strong muscle memory. And with respect to Exari, I would say it's tracking or honestly slightly ahead of schedule, and our team did a really good job at integrating the team from Exari, acculturating them, spending time with them on the Coupa core values, et cetera.

And as Rob mentioned we're really only limited by our ability to execute, and that really drives down to the people and getting them up to speed and from our perspective also, right-sizing the business. So I think we're actually on track. There's still more work to be done from an on-people perspective, but we're doing quite well.

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Robert Bernshteyn, Coupa Software Incorporated - Chairman of the Board & CEO [52]

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I would also add, if you kind of look at it from the way we think about it internally around the metrics, around the framework of people, technology and process, all of those are progressing very well. Our teams are now fully integrated into our overall process of -- everything from marketing, sales, support, operations. Our technology stack is well underway in terms of integration, as Todd called out, at the UI level, at the platform level, at the business logic level.

And by far most importantly, we think the people are -- really joined this journey that we've been on now for over a decade and are equally fired up to make this an incredible company in the years to come. They're all our Coupa colleagues now. And we don't remotely think of them as acquired colleagues. So we're all one set of Coupa colleagues with one set of core values focused on one common vision.

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Operator [53]

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Your next question comes from the line of Terry Tillman from SunTrust Robinson Humphrey.

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Terrell Frederick Tillman, SunTrust Robinson Humphrey, Inc., Research Division - Research Analyst [54]

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Gentlemen, congrats. I had 2 quick questions. First, Todd, could you just give us an update, though, for the full year on whether it's ARR or revenue expectations for Exari? And then remind us for next year, and then I had a follow-up for Rob.

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Todd R. Ford, Coupa Software Incorporated - CFO [55]

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Yes. So with respect to Exari, we haven't broken out what we expect. Obviously, we had the opening deferred revenue of $4.7 million. We recognized $1.9 million of that in Q2. And the way the waterfall works, it will be slightly less than that from the deferred revenue bleed-off in Q3.

Obviously, the seasonality with Exari is similar to that of other software businesses and our business, where a fair amount of it would be billed in Q4, and then the revenue would be recognized. So I still think it's a relatively small contribution and not something that we would break out separately at this time other than what's kind of baked into our guidance.

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Terrell Frederick Tillman, SunTrust Robinson Humphrey, Inc., Research Division - Research Analyst [56]

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Okay, fair enough. And I guess, Rob, just reminiscing about your book that you wrote a couple of years ago, Value as a Service -- or I guess more than a couple of years ago. As the product and the platform is evolving more and more, do you see kind of that vision or aspirational goals starting to play out, where you actually get paid on value?

And I know some of the products like Coupa Pay, like with the invoice payment or processing, that there's some potential there. But just maybe an update on how you can package and monetize your products going forward given where you are now.

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Robert Bernshteyn, Coupa Software Incorporated - Chairman of the Board & CEO [57]

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Yes. Thanks very much for the questions. So look, in many ways, we are getting paid based on value delivery, and we have been for a number of years, as you could see by our average ARR per customer going up and et cetera. But in terms of transactional spend, a component of value, and sharing and value, we continue to test that on the fringes.

Our biggest barrier there is customers' willingness to change and adapt that type of mindset. And I think as we continue to gain market leadership, there'll be a greater willingness to engage in these types of dynamics. So we're very open to it, and we continue to test it on the fringes.

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Operator [58]

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Your next question comes from the line of Raimo Lenschow from Barclays.

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Raimo Lenschow, Barclays Bank PLC, Research Division - MD & Analyst [59]

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Congrats from me as well. Two quick questions. First, Rob, can you talk a little about now that you have these expansions to the platform, and Rob was talking about like the increasing pull of net retention, can you talk about the cross-selling, where you are in terms of -- you mentioned everything is in place. Everyone feels like one company. But what do you see in terms of like customer understanding of the much broader offering there now and the sales guys kind of getting that message to the market? And then I have one follow-up for Todd, please.

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Robert Bernshteyn, Coupa Software Incorporated - Chairman of the Board & CEO [60]

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Yes. Thanks, Raimo. Look, we're pretty self-deprecating here, so we think we could always do a lot better. But I would say generally speaking, there's a pretty strong awareness amongst our entire sales team in terms of how to position the entire platform. And they clearly see the synergistic value of these capabilities working together at all levels of the technology stack and in terms of the value they deliver from a business perspective. I think that's going quite well.

Everyone has been cross-trained in every capability. All of our core platform demo environments as well as production environments can be turned on with all the capabilities working together, so we're well underway.

If I had to point out a challenge for us, it's just simply awareness amongst the Global, as I say, 2000 as well as all mid-market customers, prospective customers around the world that such a comprehensive, open, user-centric, prescriptive and accelerated platform is available for them to subscribe to, to get the kind of value that our well over 1,000-something customers are getting today.

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Raimo Lenschow, Barclays Bank PLC, Research Division - MD & Analyst [61]

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Okay, perfect. That's really helpful. And then Todd, can you remind us, so if you kind of have these acquired assets, you write down deferred, are they coming back within a year or so? I guess you start recognizing revenue as the customer renews, is that typical within a year that you get the benefits back?

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Todd R. Ford, Coupa Software Incorporated - CFO [62]

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Yes. I mean it obviously depends on when we do an acquisition. So doing an acquisition at the end of Q4 is obviously the worst time for that, right? Because you have the asset for a year before you get to go back and rebill it and start recognizing the revenue. But yes, as the renewal would come up, obviously, we bill it, and then we could start the full revenue recognition from that.

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Operator [63]

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Your next question comes from the line of Brent Bracelin from KeyBanc.

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Brent Alan Bracelin, KeyBanc Capital Markets Inc., Research Division - Senior Research Analyst [64]

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One for Rob and a follow-up for Todd. Rob, I wanted to go back to the Coupa BSI index. On one hand, you're signaling some of your customers are being a little more cautious. I think you cited retail is one of those areas, financial services. But on the other hand, you're taking numbers up in the second half of the year.

I guess my question for you is, is this an environment where as people tighten up that they're willing to spend more on your software to save? Or walk us through how we should interpret the BSI index and some cautionary comment there versus your own business looks very, very strong.

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Robert Bernshteyn, Coupa Software Incorporated - Chairman of the Board & CEO [65]

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Sure, sure. Well, thanks for that question. So just to level set BSI for those that are kind of new to it. This is based off of hundreds of billions of dollars of pure transactional data, and we think it's a real leading indicator versus a lagging indicator. Because we've done some heavy-testing including historical regression analysis against other indices and markers before rolling this out. And just to give you a sense of why we think it's a leading indicator, look, we're looking at average spend, rate of spend -- average rate of spend approval. So how long does it take to get something approved within the company?

What is the -- how often are spend rejected, spend that we never even see hit the economic environment because it was rejected through our platform? And we're also looking at things like average spend per person. So we think it's a strong leading indicator.

Now when we look at our business separately from that, as I mentioned, we see a good strong pipeline. We are having great conversations, positive conversations with prospects as well as existing customers. So how do you kind of map these 2 together? Well, what I'd say to you is as Coupa, we may not yet be at the scale where our sheer brute force execution can't overcome any potential economic headwinds. Only time will tell whether that's the case or not.

And secondly, I do think that profitability doesn't go out of style. You have companies that are using very antiquated systems and paper-based processes for doing the fundamentals around Business Spend Management, so that's how I would put those 2 together.

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Brent Alan Bracelin, KeyBanc Capital Markets Inc., Research Division - Senior Research Analyst [66]

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Helpful. And then just, Todd, as a follow-up, a couple of numbers on Exari. I think you mentioned $2.8 million as one number in the quarter and then that $1.9 million, what was the subscription component of Exari in the quarter? And then as a follow-up to that, if I just think about the subscription growth profile here, you're now 3 straight quarters of over 45% growth. Is there any sort of balance between kind of geo or large enterprise or mid-market? What would you say is kind of driving that sustained momentum even if I back out kind of the $2.8 million of Accelerate? I wanted to make sure that's the right number.

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Todd R. Ford, Coupa Software Incorporated - CFO [67]

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Yes. So the ARR from Exari in Q2 was $2.8 million, which includes the $1.9 million amortization of the acquired deferred revenue number. And when you look at the subscription growth rate, to your question, it really is execution across the board.

Our revenue from international went up slightly during the quarter, but nothing I would call out. The mid-market is -- as Rob mentioned, is really starting to hit on all cylinders, and as he noted, we closed our largest deal there. So average deal size is getting bigger, more recognition. And we've talked about this before, but I think when we went public roughly 3 years ago now, we were viewed as maybe the risky choice. And I think that's changed with the awareness in the market, the advocacy of our customer base, the FIs bringing us into their installed base. So I really can't point to one thing as to what's driving it.

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Operator [68]

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Your next question comes from the line of Brad Sills from Bank of America Merrill Lynch.

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Bradley Hartwell Sills, BofA Merrill Lynch, Research Division - VP [69]

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I wanted to ask about power apps. I know the focus is primarily on landing accounts, and you've done great there, it sounds like, across mid-market and big enterprise. But are you seeing any change in momentum? Would you call out any specific application maybe where you're seeing stronger attach on the initial sale or even a renewal where you are focusing on some of that renewal and expansion activity?

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Robert Bernshteyn, Coupa Software Incorporated - Chairman of the Board & CEO [70]

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Sure. That's a great question, Brad. I wouldn't say we're seeing anything statistically significant in that area. The key for us is to enter with our customers in a way that we could drive the fastest value and overcome the greatest areas of resistance to change that they might be dealing with. That might be via spend sourcing optimization, that might be via spend analytics, that might be via advanced contract life cycle management approaches or Contingent Workforce. But we typically like to see customers engage in the transactional application areas first because that's where the greatest amount of value to be recognized almost instantaneously, when their employees across the world begin to spend against contracted rates that either we brought to the table or they brought to the table through their own negotiations. So it continues to be that type of approach, and it feels very healthy.

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Bradley Hartwell Sills, BofA Merrill Lynch, Research Division - VP [71]

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That's great. And then one more if I may just please on Coupa Pay. How would you characterize the SI channel readiness here? Are you feeling like you're getting the message out to the SI channel? Is it resonating? And just general channel readiness for Coupa Pay.

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Robert Bernshteyn, Coupa Software Incorporated - Chairman of the Board & CEO [72]

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I would say we're in the early innings of that, and we need to continue to work, do a better job in that area. I think you called out a very interesting point that we're aware of. And I don't think we're where we will be in coming quarters, it's still quite early. But it does sort of parallel the way we've launched other modules in years' past. Each quarter, we get broader and broader reach, awareness, certification, deployment, value realization and then referenceability, renewal and more customers. So very similar to past trajectories.

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Operator [73]

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At this time, there are no further questions. This concludes the conference for today. We do thank you all for joining us. You may now disconnect.