Coupa ends fiscal 2021 on a strong note as customer focus on spend management remains high on the corporate agenda

When Coupa last announced its full year earnings, it was one year ago to the day since the first shelter-in-place orders were issued in its home state of California. It was the start of an uncertain year for everyone, of course, but one that also brought to the fore the importance of the firm’s core Business Spend Management (BSM) proposition. 

As CEO Rob Bernshteyn puts it: 

In an adverse uncertain situation, companies can often make the most important impact by controlling their spend and we helped many to do so.

One year on and Coupa yesterday turned in its latest Q4 and full year numbers, beating analyst expectations on both counts. The firm reported Q4 revenue of $163.5 million, up 47% year-on-year, with a non-GAAP profit of $13 million, while subscription revenue rose 37% to $134.9 million over the same period. For the full fiscal year, Coupa turned in revenue of $541.6 million, up 39% year-on-year, with a non-GAAP net income of $55.7 million.

Looking back on the past 12 months, Bernshteyn noted that Coupa had also had to adjust the way it operated, but still managed to onboard 1,300 employees and expanded its Business Spend Management (BSM) with new capabilities including supply chain design, planning and treasury: 

What's really working for us is our set strategy of delivering an integrated Business Spend Management platform. What we're seeing from customers of any size that we interact with is, they do not have visibility to their spend, whether it pertains to direct or indirect; whether it pertains to the cash that they're utilizing properly to manage the expenditures that they're making; whether it has to do with their expense processes, their invoice processes, their contracts management, their sourcing.

They are looking for across-the-board visibility, control and optimization of business spend management and because of that they realize the synergy of partnering with a value-as-a-service player, like ourselves, who offers a business spend management platform for that. So, they are up-taking supply chain design and planning, Treasury, and many of the modules and capabilities [we offer]. But the secret sauce to it is the alignment between ourselves and our customers around the vision of Business Spend Management and how to get to an optimized success with it.

Customers 

New customers in Q4 included Aspen Pharmacare, Ball Corporation, Bank of New Zealand, Carvana, Checkout, Cloudera, Heathrow Airport, Highspot, Honda Research Institute, Synchrony Financial, Tyson Foods and Waystar. 

As usual on the post-results analyst call, Bernshteyn flagged up a selection of customer exemplars:

BMW recently went live on Coupa BSM. They needed to migrate nearly 1 million items and more than 5,000 contracts to our platform. I'm happy to report that 100% of their content was available on day one of their Coupa launch which enabled them to maximize savings opportunities right away.

Spotless, the largest integrated facility services provider throughout New Zealand and Australia, also recently went live with Coupa. Working closely with our partners and customer success teams, Spotless implemented the Coupa platform in just 13 weeks and was able to issue 2,500 purchase orders on the first day they were live. 

We also support Westpac, Australia's oldest bank. Their CPO posted on LinkedIn, amazing that someone can use a procurement business application and purchase the product they are looking for within 15 seconds. 

Reference was also made to one anonymous user which delivered some impressive data points:

One of the world's largest medical device pharmaceutical and consumer packaged goods companies using Coupa BSM recently saved over $300 million in a single sourcing event. Coupa's platform processed over 2 million data points derived from more than 400 rules set by the customer for 6,000 items and over 300 suppliers to elegantly produce the award scenario that generated these massive savings.

Finally, Ionis Pharmaceuticals, a provider of RNA-targeted therapy, was cited. It was used to processing "a significant portion" of its 15,000 annual payments manually through its ERP, including about 50% of its US vendors by paper check. In addition to the complexity of onboarding up to 1,500 new suppliers annually, the payment processes across the company were disjointed and inefficient, with manual data entry, manual reconciliations and missed payment instructions and remittance information.

Six months ago the firm digitized its payments processes with Coupa Pay with over 90% of invoices and hundreds of millions of spend already processed through the new system. Bernshteyn said: 

Ionis has all but eliminated manual payment processes including operational efficiency improvements and significantly reduced errors. Ionis credits Coupa's ease of use, holistic approach, and mindset of striving for continuous improvement to the success that has been realized. 

Intelligence 

Coupa’s Community Intelligence ‘wisdom of the crowd’ initiative has continued throughout the pandemic months, with customers sharing experience and learnings. Bernshteyn pulled out one particular example:

Grupo Herdez, a Mexican food company with over 10,000 employees across 14 plants and 25 distribution centers, utilized Community Intelligence to dramatically reduce approval cycle times. Their average approval cycle time for purchase orders was previously over 30 days and approximately 19 days for invoice approvals. Community Intelligence showed that best-in-class consumer packaged goods companies how they were improving POs and invoices in significantly less time. Grupo Herdez then followed real-time transactionally contextual prescriptions, that were automatically shared with them on ways they can improve.

In doing so, they were able to drive PO approval cycle times down to less than three days and despite a 600% increase in volume, they were also able to reduce invoice approval cycle times to less than four days, despite the number of invoices growing by 20 times. This is an example of a key value proposition that no other company in our industry can provide - the use of a platform with real-time prescriptions based on anonymized transaction level data which makes our customers smarter together.

Getting such customers live has remained a priority during the COVID, he added: 

We successfully shifted our software implementations to fully virtual while reducing deployment times by about a month. Once live, these customers contributed to our cumulative spend under management, which now exceeds $2.3 trillion.

Some of these changes may well stick as the Vaccine Economy emerges. Bernshteyn suggested: 

If I were to predict, I would say some of that is certainly sustainable for the longer term. If you think about a typical deployment in a physical world, there are days that are spent flying into the client account or they spent flying out to their dinners - there’s a whole bunch of work that's done that might be fun or interesting for folks, but it isn't focused on the result of getting the customer live. 

Now when we're on a Zoom session, where you have the systems integrator, you have one of my Coupa colleagues, you have the right folks from the customer account and they are sharing their screens and configuring in real time and stepping through their Gantt Chart of execution to go live, obviously that's much more efficient, as long as folks are willing and tech-savvy enough to go about it that way.

So my instinct is, 100% of that operational efficiency improvement will likely not stick as people move back toward travel. I do think a significant portion of it will because we now know that it's doable. Of course, we'll see how that plays out.

My take

Over $2.3 trillion of spend is now running through the Coupa platform, while Bernshteyn notes that average annual recurring revenue for the platform for new customers has grown “virtually every quarter” for 48 quarters.  There might be a lot of uncertainly out there in terms of what the post-pandemic economy will look like and what its corporate priorities will be, but it’s a safe bet that whatever else is on the boardroom agenda, cost control is near the top. Coupa remains in the right place at the right time from that point of view.