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It has been about a month since the last earnings report for Coupa Software, Inc. (COUP). Shares have added about 6% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Coupa Software, Inc. due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Coupa Software Q3 Earnings & Revenues Beat Estimate
Coupa Software Incorporated reported third-quarter fiscal 2021 non-GAAP earnings of 18 cents per share that topped the Zacks Consensus Estimate by 350%. However, earnings deteriorated 10% from the year-ago quarter’s reported figure.
Revenues of $133 million outpaced the Zacks Consensus Estimate by 7.4%. Further, the top line improved 30.6% from the prior-year quarter’s figure.
Subscription revenues (88.8% of total revenues) surged 31% year over year to $118.1 million. Meanwhile, Professional services & other revenues (11.2%) climbed 28.2% year over year to $14.9 million.
The top line benefited from strong uptake of the company’s Business Spend Management (BSM) and Coupa Pay offerings. The company is witnessing robust adoption of spend management offerings amid coronavirus crisis-triggered macroeconomic weakness and work-from-home wave.
Apart from the United States and Europe, Coupa Software witnessed improvement in emerging markets. The company added that sales doubled in the last 12 months across Asia-Pacific, Japan, Latin America, the Middle East and Africa.
Coupa Software continued to add new clients to customer base in the reported quarter. Some of the notable new deal wins in the quarter include Casey's General Stores, Immunovant, GIS International, GlobalLogic, Downer EDI Services, Elevate Textiles, Flender, Ibstock Brick, LKAB, miR Scientific, Mayne Pharma, OES Equipment, Ovid Therapeutics, SafetyCulture, Sam's Mart, Welbilt and ZoomInfo.
To help customers with deployments, Coupa Software has been organizing Smarter Together webinar virtual events to engage the entire customer community.
The company also extended collaboration with American Express to enable clients in the United States to use American Express virtual card payment option with Coupa Pay.
In the current quarter, Coupa Software’s Coupa Source to Pay solution was leveraged by Walmart to modernize its source-to-pay operations. Also, Coupa solutions are being deployed by United States House of Representatives to upgrade its administrative systems.
We believe that innovation and product enhancements will allow Coupa Software to capitalize on the opportunity in the BSM market presented by ongoing digital transformation triggered by coronavirus crisis.
Non-GAAP gross margin expanded 40 basis points (bps) from the prior-year quarter’s level to 72.5%.
Non-GAAP Research and development expenses climbed 27.3% year over year to $22.8 million.
Non-GAAP Sales and marketing expenses surged 30% year over year to $40.7 million.
Non-GAAP General and administrative expenses increased 48% year over year to $18.5 million.
Non-GAAP operating income soared 23.6% year over year to $14.3 million.
Non-GAAP operating margin contracted 60 bps on a year-over-year basis to 10.7%.
Balance Sheet & Cash Flow
Coupa Software had cash and cash equivalents and marketable securities of $1.354 billion as of Oct 31, 2020, compared with $1.342 billion as of Jul 31, 2020.
Cash flow from operations totaled $19 million compared with $23.4 million in the second quarter of fiscal 2021. Adjusted free cash flow totaled $17.3 million during fiscal third quarter compared with adjusted free cash flow of $35.7 million in the last reported quarter.
The revenue guidance for fourth-quarter fiscal 2021 includes impact of the LLamasoft buyout and assumption of no revenue contribution from Coupa Travel Sabre formerly known as Yapta. In November 2020, the company acquired LLamasoft for $1.5 billion. LLamasoft offers AI-based supply chain solutions and lists Boeing and Nestle, among others, as its clients.
For fourth-quarter fiscal 2021, revenues are anticipated to be $145-$146 million.
While Subscription revenues are expected between $124.5 million and $125.5 million, professional services revenues are anticipated to be approximately $20.5 million.
Non-GAAP loss from operations is estimated in the range of $6 million to $8 million.
Non-GAAP net loss is projected in the band of 11-13 cents per share.
For fiscal 2021, Coupa Software projects revenues between $523 million and $524 million compared with previous range of $496.5-$498.5 million.
Non-GAAP income from operations is anticipated to be $34-$36 million compared with the previous range of $33.5-$35.5 million.
Non-GAAP net income is now expected in the band of 47-49 cents per share compared with prior guidance of 43-45 cents per share.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates. The consensus estimate has shifted -41.13% due to these changes.
At this time, Coupa Software, Inc. has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with a D. Charting a somewhat similar path, the stock was allocated a grade of F on the value side, putting it in the fifth quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Coupa Software, Inc. has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.
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