Business Spend Management market leader Coupa surprised Wall Street with a Q2 non-GAAP profit of $5.3 million on revenues of $95.1 million, up 54% year-on-year, with subscription revenues making up $83 million of that, up 51%.
New customers in the quarter 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 Incorporated and Wawa.
It’s a list of logos that is indicative of BSM’s status as a now-recognised element of wider digital transformation strategies, according CEO Rob Bernshteyn:
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, 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 are 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 with just about any company on the planet.
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 ERP's and third-party products and they need an open platform and that's the O in Coupa. They've tried 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 [in Coupa] for that purpose stands for user-centricity, something we're continually focused on.
They want to learn from the community of customers that they join. We now have a massive global community, and they want to take distilled anonymized data from that community to [become] 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 multi-year deployments that go nowhere and they're stuck with big bills that don't deliver results. So that stands for [A for] accelerated in Coupa. As I've shared many times before our time to value equation is really, really strong.
As examples of this in practice, he highlighted a number of customer go-lives from the quarter, including health and fitness firm Peloton Interactive:
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 six 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.
Also in North America, e-commerce platform provider Shopify went live with BSM after a 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.
Bernshteyn also pointed to an example of Community Intelligence in action at agro-business firm The Andersons:
The Andersons spend occurs at various corporate sites and field locations, and Chad MacDonald, 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 opportunities. 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 three times 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 spent to preferred suppliers, with negotiated discounts and quality controls, an initiative which is expected to help them save up to 10% on this category alone.
Community Intelligence is an element of the wider Coupa offering that’s going to be more and more important over time, Bernshteyn suggested, arguing that “we’re really in the early innings of something very, very special here”. He explained:
Customers are seeing the value of Community Intelligence embedded in the platforms. 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.
Back in June, Bernshteyn argued that Coupa has earned ‘enterprise legitimacy’ with more and more organizations taking BSM seriously. There’s nothing in this latest quarterly update to suggest that anything’s changed on that front. And Wall Street’s post-results boost to the share price made it clear that the firm has tapped into a clear business need with enormous potential for growth.
That said, even after ten years, the firm is still in “early innings” a phrase used by Bernshteyn a couple of times on the post-results analyst call:
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 [have] penetrated a very small percentage of that market in the Global 2000 and Fortune 500 and certainly across all of the mid-market.