It is often heard [that] category winners don't build solutions that customers want, they build solutions that customers may not yet know they need. What we're hearing from many of our customers is that they didn't fully realize just how much they needed to get control of their business spend before facing the unpredictability of the last 15 months.
The COVID crisis has highlighted the importance of Business Spend Management (BSM) to organizations everywhere. That’s a message we’ve heard before from Coupa CEO Rob Bernshteyn, but it’s one that’s he continues to double down on even as the Vaccine Economy takes shape and businesses everywhere consider the lessons learned during the pandemic:
Many of our prospective customers were comfortable with the status quo where Business Spend Management decisions were managed in silos; now, they get it. They see that decisions around strategy and spend need to be made comprehensively in real time and without barriers getting in the way.
While the Vaccine Economy is increasingly in evidence in parts of the world, COVID-related uncertainties will continue, he adds:
Over the last several months, we've seen the extraordinary success of vaccination campaigns in several countries. However, there still remain many less-advanced countries who possibly won't have enough vaccine supply through the end of 2022. This creates a breeding ground for the virus, which raises the possibility of events that could circumvent vaccines. I know this is something that our customers are trying to navigate on a day-to-day basis, especially with respect to their supply chain and procurement issues.
The fragility of the supply chain that has been emphasised not just by COVID, but other macro-factors over the past year or so, he explains:
While the pandemic played an outsized role in supply chain disruption, we know that other trends would likely drive more uncertainty over the long term. Whether it was the winter storm that collapsed the Texas power grid or the sandstorm that lodged a ship in the Suez Canal, climate events will continue to create unpredictability in supply chains and so will geopolitical issues. China has made some very aggressive moves of late, for example. You could count on one hand the number of global companies whose supply chains don't include China. How to navigate those unknowns is a huge challenge that will be with us for a long time. Supply chain fragility means that supply chain strategy and planning are going to be an increasingly integral part of Business Spend Management.
And there are other Vaccine Economy considerations to be factored into strategic and operational planning, not least the assumption that there will be a low interest rate environment through 2022. Bernshteyn argues:
That creates both challenges and opportunities when managing corporate liquidity and asset allocation. Cheap money certainly helps companies facilitate investment over the long term, but with the bond market, that doesn't offer much yield. Companies are being pushed to re-imagine what it means to carry cash on the balance sheet and how to effectively maximize dollars across a closed loop of spend. And they are increasingly relying on our software to strategize and manage this. These mega trends are driving a renewed awareness within companies that have not prioritized their back office investments. Now, it is front of mind.
Coupa is well-placed to address this situation, he says, citing customer exemplars of organizations that have made positive BSM decisions:
Ally Financial, a digital financial services company, [has] recently gone live on Coupa to drive digitization across AP, sourcing, IT, vendor management and supplier diversity. Ally's IT is eliminating custom coding and moving fully to SaaS, and configuring ration-based management for lower total cost of ownership and increased agility. With Coupa, Ally chose a holistic approach to spend management, with the goal of improving operational efficiency, visibility for reporting, analytics, automation and enhanced spend control. To date, Ally has already processed nearly $2 billion in spend through Coupa.
Another example is that of Saga:
Saga had an onerous manual supplier payments process that was prone to errors, long invoice cycle times and compliance issues. The workflow for each was administered completely on paper. After attempting to implement an AP automation solution a few years prior, Saga's Finance Director realized that he needed to take a more complete approach to addressing their finance transformation. So he broadened the scope to include the entire procure-to-pay process.
Saga's use of Coupa Pay has made payments run more efficiently, reducing approval times from hours to minutes. Saga also realized the benefit of implementing Coupa Pay at the same time as the core P2P platform, which served to simplify the integration. Their payments can now be administered digitally and thus remotely versus having paper-based approval processes and paper checks.
After implementing Coupa's comprehensive platform, Saga was able to realize significant operational efficiencies, they were able to reduce headcount, reduce invoice cycle times and increase control and compliance. Now, the team has greater confidence in the data and errors no longer keep them up at night.
From a broader perspective, it's clear that demand for our offerings will continue to grow at a rapid pace. The mega trends I spoke about are certainly not going away; in fact, they're becoming more pronounced. We see ample opportunity to solve a myriad of problems in our expanding market. Companies are depending on us to meet the moment.
Late last month, Coupa’s Q2 Business Spend Index struck an upbeat note, suggesting that US economic output is on course to return to normal levels over the next few months. Specifically the Index cited:
- A 37.5% increase in business spending on air travel.
- A 20.5% increase in business spending on office supplies.
- A 9.8%increase in business spending on technology.
- A 24.9% decrease in contingent workforce spend.
- A 65.3% increase in business spending for shipping and freight.
Those are the sort of encouraging predictions about the Vaccine Economy upon which Bernshteyn is able to base his assessment of the company’s prospects. He’s perfectly correct in his thesis that organizations have had to be more focused on BSM during the crisis and in the search for any kind of silver linings from the past year, an ongoing recognition and reflection of that importance would clearly be high on the list of things to watch out for.
For its own part, Coupa yesterday turned in Q1 22 revenues of $166.9 million, up 40% year-on-year and comfortably beating Wall Street consensus expectations; subscription revenues of $140 million, up 33% year-on year; and a net GAAP loss of $100.4 million. Cumulative customer spend under management is now around $2.6 trillion.
Chief Finance Officer Tony Tiscornia rightly struck a note of caution when he said:
The economic environment is continuing to improve and head toward post-pandemic normalcy. However, with many employees in the global economy still working remotely, the continued absence of business travel and the uncertainty posed by potential variants, we're clearly not out of the woods quite yet and many customers and prospects continue to operate with some level of caution.
It could be “a few more quarters” before returning to historical norms, he added, but Coupa heads into the rest of the year with its largest pipeline to date under its belt. As CEO Bernshteyn puts it:
Never bet against us.