Coupa tops off 2020 with strong Q3 revenue growth, customer wins and that important supply chain acquisition

Profile picture for user slauchlan By Stuart Lauchlan December 8, 2020 Audio version
Summary:
Spend management specialist Coupa has had a solid calendar year against a pandemic backdrop that's made keeping on top of spending an even more critical requirement for businesses.

Coupa
(Coupa CEO Rob Bernshteyn)

Fresh from its announcement of the acquisition of supply chain planning firm Llamasoft last month, spend management specialist Coupa turned in a solid set of Q3 numbers to top off a strong calendar year.

The firm reported revenue of $133 million, up 31% from $101.8 million this time last year, with a loss of $60.8 million, up from $26.3 million. Subscription revenue for Q3 was $118 million, also up 31%. Wall Street was happy with the numbers, which beat revenue expectations, and sent the Coupa share price up on the announcement.

New customers during the quarter included Akzo Nobel, Casey's General Stores, DHL Global, Elevate Textiles, GIS International, GlobalLogic, iCapital Network, Immunovant, Ovid Therapeutics, Pilot Freight Services, SafetyCulture, Sam's Mart, Turo, United Safety and Survivability, Uniting Care Queensland, the University of Bristol, Welbilt, and ZoomInfo.

On the post-results analyst call, Coupa CEO Rob Bernshteyn picked out a few significant wins for closer attention:

The first of these is Walmart, one of our largest customers using Coupa Source-to-Pay. Alongside Amazon, we are now providing our comprehensive platform, the 'C' in Coupa, to the two largest companies on the Fortune 100 list. The second new customer to call out is the United States House of Representatives…[It] has recently joined the Coupa community, adopting the Coupa platform as part of the House's initiative to modernize all administrative systems. Once they go live, Coupa will be used by every person in Congress and by their staff as well.

Notable go-lives during Q3 included:

  • World Vision, which uses Coupa to centralize its inventory model to support disaster relief efforts around the world.
  • Neste, number three on the Global 100 list of the most sustainable companies, held its first ever ROC [Return of Capital] auction event and achieved 17% savings on IT-related subscriptions and services, beating its 10% target.
  • New Horizons, an Australian non-profit that helps its customers achieve greater wellbeing, went live in less than 10 weeks. 

More Intelligence

Bernshteyn also pointed to the continued growth of the firm’s Community Intelligence initiative, citing financial services giant Barclays as an exemplar of this in action:

Barclays is one of the largest banks in the world, serving millions of businesses and individuals globally. With the financial disruptions from COVID-19, Barclays has played a leadership role in helping businesses and individuals weather the storm. With Coupa Community Intelligence and real-time performance benchmarks against peers, Barclays Head of Sourcing, Phil Thomas, and Barclays Procurement Transformation Lead, Sonia Penoro, were able to optimize their electronic invoicing and approval cycle times. Leveraging community prescriptions, the 'P' in Coupa, Barclays targeted suppliers that the Coupa community already identified as electronic invoice-enabled. This allowed them to increase electronic invoicing by 26%. With Community Intelligence, they also optimized their workflow to reduce approval cycle times by an amazing 73%.

Coupa Pay, which has now added American Express to its partner ecosystem, passed another important milestone during the quarter, said Bernshteyn:

It took nearly two years to reach the 100 customer milestone for Coupa Pay and now that number has grown to over 150 in just the last two quarters. In addition, with new customers, we're seeing a Coupa Pay attach rate of approximately 30%. This growth comes despite the headwinds of a difficult market environment and the fact that our most recent offering in invoice payments has only been available for a few quarters.

He cited NoSQL database firm Couchbase as a use case exemplar for Coupa Pay:

It recently switched to Coupa Pay from a legacy payments provider. While using its legacy solution, Couchbase needed to toggle between multiple systems, which created room for error and complicated reconciliation processes. With Coupa Pay, Couchbase now makes their invoice payments from the Coupa platform in one seamless, integrated experience that provides their financial organization with increased visibility into their payments, greater data accessibility and a streamlined approvals process…In addition to the value of having one platform, Couchbase leverages our ease-of-use, configurability and flexibility, essentially our user centricity or the 'U' in Coupa. They're now processing approximately 90% of their payments through Coupa Pay and are planning to take advantage of our cross border payments, and virtual credit cards soon.

Llamasoft addition

The other big product news comes via the recently-announced acquisition of LLamasoft, an AI powered supply chain design and planning software company, a move which Bernshteyn characterised as an extension of Coupa’s direct spend capabilities:

Supply chains are being rewired globally. Today, it's all about agility and the ability to design, transact, learn and optimize very quickly. Combining LLamasoft’s data-driven platform with Coupa's two-plus trillion dollars of community-powered spend data creates a synergy that can build on itself. Introducing that amount of new timely and relevant data to what is already considered the supply chain design and planning platform of choice will help customers make optimized supply chain decisions. Those smarter decisions will drive additional direct spend through our platform, which will in turn yield additional valuable data. This cycle will allow our newly-integrated supply chain design and planning technology to continually improve and yield greater and greater value for all our customers.

Some 46% of Llamasoft revenue came via on premises licences for its last full fiscal year, while 32% comes from subscription SaaS, a balance that will change over time, said Bernshteyn. Indeed in the first 6 months of this year, prior to the takeover announcement, that mix had already shifted to 24% licensed, 45% subscription. In addition, Coupa has 150 data scientists working on one IP data model with an algorithm that he calls “very, very robust”:

That's going to allow us to take their supply chain simulation, their demand planning capabilities, their own build-your-own app environment and merge that with the transactional Community Intelligence we have - all the data we have around order cycle times, restocking patterns, time to delivery, ordering trends to help customers actually predict the way that their supply chain is going to function, help [customers] forecast with a high degree of accuracy what is going to be happening within the way they spend organizational money.

That's going to help them in big, big ways that'll be seen in their financials. When should they do restocking? When should they re-negotiate to drive their margins? What are the landed costs of any item that they purchase? How do they optimize order quantities? How do they figure out optimal transportation routes and mitigate supplier risk and so much more? So the value here is really in the data model, the IP and the people. And the delivery model and topology for that will be merged over time into a 100% cloud-based environment.

My take

A solid Q3 for Coupa in a year that has seen its share price more than double since January. As noted across 2020, keeping on top of spend in crisis times is even more important than it already is during normal periods. Coupa’s own ongoing Business Spend Index research shows that while confidence in the economy is still low, it has recovered from the sharp drop it saw at the top of the year, indicative perhaps of a coming to terms with the so-called ‘new normal’.

For Coupa, that ‘new normal’ for now is still unfortunately made manifest by zero contribution from its Coupa Travel Sabre offering, a situation that’s been the case since the pandemic hit the travel business in March. But overall the firm heads into calendar 2021 in a healthy position and well-placed to tap into a post-vaccine economy. Bernshteyn concluded:

What we're doing is making us stronger and stronger every week, every month, every quarter. Our customers see incredible value in what we're offering. They’re paying us more and more on an annual subscription basis. The customers that we have are renewing and looking to add on more business without us actually pushing sales in their way. They’re actually absorbing a lot of our additional offerings. There's a great deal of value in thinking about supply chains at this moment and thinking about optimized ways to run your business when we get back to a ‘new normal’.