No complaints on Wall Street over Coupa’s current performance, with the spend management firm’s stock price soaring on the back of strong Q2 earning and a confident outlook for Q3.
Revenue for Q2 was up 42% year-on-year to $2.11 million with a net loss of $75.3 million. Subscription revenue was $193 million.
Inevitably the macro-economic environment can’t be ignored and CEO Rob Bernshteyn noted that European demand is softer than the US at present, but explained that conversations with customers and prospects there continue:
There are just more approvers, more time being spent, more evaluation, more uncertainty in the European context, which is definitely not a prioritization change. It's not removal of initiatives around Coupa from the list of priorities. It's simply longer time in the pipe.
Pointing to what he called “our largest ever pipeline” overall, he added:
The question that continues to be debated broadly in the market is whether we are headed for a recession or a soft landing? Our most recent Business Spend Index provides some interesting insights into this topic with respect to macro-economic data, unemployment and inflation.
Just as an example, we have seen significant increases in air fare prices. Yet despite the uptick in prices, demand has not fallen. But rather has increased as businesses progress towards returning to pre-pandemic levels of travel. The net effect of the underlying data shows some signs of projected growth in certain areas and signs of potential contraction in others.
He went on:
I'm sure we can all agree that the current environment is highly dynamic, and how the macro picture plays out is yet to be known. That ambiguity is being contemplated by leaders across industries and businesses globally.
There are various scenarios that could play out, he suggested:
The first scenario would be that the economy experiences a softer landing, and the demand environment remains relatively healthy. In this scenario, we will continue to thoughtfully invest for growth, and as always, balanced with profitability. Of course, a recession is possible. So another scenario would be that we enter an environment that impacts IT spending budgets in the near-term. In this scenario, we are prepared to moderate our investments appropriately, resulting in increased profitability and cash flows. In more extreme cases, we will show spend discipline at significantly increased levels.
But whatever does end up happening, the need for disciplined Business Spend Management will remain the case. Bernshteyn pointed to a number of use case exemplars to back up his point, beginning with oilfield services firm ProPetro and energy company Talos Energy:
ProPetro implemented the Coupa platform to enable process improvements, efficiencies and increase controls. 94% of their spend is now pre-approved, and they are electronically processing 89% of their purchase orders and 80% of their invoices. By capturing the spend, they have visibility and control freeing them to focus on growth-oriented initiatives.
Talos Energy requires timely operational support to keep their 60 drilling operations platforms running 24/7. Manual procurement processes let the company vulnerable to duplicate or missed orders resulting in inventory overages, shortages, and costly overnight delivery orders. Previously, their Accounts Payable personnel dedicated nights and weekends to verify receipts, assigning GL codes and posting accruals. Talos implemented Coupa in just three months and was able to automate their processes and reduce invoice cycle times by 90%.
He also cited logistics giant Maersk as an example of an organization that’s looking to optimize spend:
They digitized their entire procurement process and are using Coupa for Procure-to-Pay, Supplier Risk Management and Sourcing Optimization. With sourcing optimization Maersk identified over $100 million of potential savings by utilizing reverse auctions, where several shippers are bidding for their business. It is not just savings, it's about efficiency. With the help of Coupa, Maersk only needs seven people to cover thousands of supplier negotiations and auctions per year. We were humbly appreciative of their comment. They said, it's actually relatively easy from a technology technical point of view. Since it’s SaaS, you can get it up and running, generating impact for your business in weeks. Maersk is also leveraging our platform to support their sustainability goal of achieving carbon neutrality by 2050.
Coupa’s offerings have always been designed to be recession-proof. As Bernshteyn has long noted, the need for spend control and spend management is ongoing. Q2 was a strong one for the firm and its positive outlook stands in contrast to the more cautious predictions by some other enterprise vendors. Onwards!