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Coupa (COUP) Q2 Loss Narrower Than Expected, '18 Guidance Up

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Coupa Software Inc.COUP reported second-quarter fiscal 2018 non-GAAP loss of 10 cents per share, which is much narrower than a loss of $1.83 reported in the year-ago quarter and the Zacks Consensus Estimate of a loss of 17 cents. Management guided net loss in the range of 18-20 cents.

Revenues surged 43.1% from the year-ago quarter to $44.6 million, driven by 43.1% and 42.9% growth in subscription services and professional services & other revenues to $39.8 million and $4.8 million, respectively. Further, the figure was better than the Zacks Consensus Estimate of $42 million as well as management's guidance of $41.3-$41.8 million.

The top-line growth was primarily driven by expanding customer base. Improving adoption of Coupa's platform is driving subscription services revenues as well as gross margin.

Share price surged 7.5% during after-hour trading following the results. Notably, the stock has gained 18.3% year to date, slightly better than the 17.3% rally of the industry it belongs to.

Quarter Details

Coupa provides a unified, cloud-based spend management platform that helps enterprises keep a tab of daily expenditures. The company's customer base continued to expand in the quarter.

Moreover, cumulative spending over the platform since its launch surpassed $500 billion, reflecting growing adoption of Coupa's solutions by the likes of Amazon.com AMZN , Caterpillar Inc. CAT , Unilever and others. The company stated that its platform is helping customers save any amount between a penny and a dime.

COUPA SOFTWARE Price, Consensus and EPS Surprise

COUPA SOFTWARE Price, Consensus and EPS Surprise | COUPA SOFTWARE Quote

Total calculated billings for the trailing 12 months ended Jul 31, 2017 were $182.8 million, up 36% year over year. Total deferred revenue at quarter end was $95.8 million, up 32.9% from year-ago quarter.

Gross margin expanded 640 basis points (bps) from the year-ago quarter to 71%, driven by higher professional services revenue, scaling of the company's operations team and maturity of the spend management platform.

Research & Development (R&D) expenses, as percentage of revenues, declined 180 bps. However, General & administrative (G&A) expense increased 280 bps. Sales & Marketing (S&M) expenses decreased from 60.4% to 47.8% in the quarter.

Apart from continuing investments, operating expenses were negatively impacted by addition of 50 new employees and contractors, renewal of the lease of the company's headquarters (including expansion of space), expansion into India, and $2.5-million of net expenses related to Coupa's annual Inspire conference held in May.

Nevertheless, operating loss narrowed to $5.7 million as compared with a loss of $9.6 million in the year-ago quarter.

Balance Sheet & Cash Flow

Cash at quarter end was $208 million, down from $238 million at the end of the first quarter. The figure includes almost $39 million used to fund the Trade Extension acquisition.

Cash flow from operations was positive $9.2 million and $16.3 million year-to-date. The company noted that operating cash flows were positive on a trailing 12-month basis for the first time, well ahead of its original projections.

Free cash flow was $8.1 million and $14 million on a year-to-date basis.

Guidance

For third-quarter fiscal 2018, revenues are anticipated to be in the range of $44.8-45.3 million. Subscription revenues are forecasted between $40.8 million and $41.3 million, while professional services revenues are anticipated to be approximately $4 million.

Management projects non-GAAP gross margins to be between 67% and 69%. Moreover, non-GAAP loss from operations is anticipated to be in the range of $5.5-$6.5 million. Net loss is anticipated to be in the range of 10-12 cents per share.

Management expects operating cash flow to be negative for the third quarter.

For fiscal 2018, total revenue is now expected between $177 million and $179 million, up from previous range of $172 million and $175 million. Non-GAAP gross margin is anticipated near the high-end of the range of 67% to 69%.

Non-GAAP loss from operations is now anticipated between $25 million and $26 million. Non-GAAP net loss is now expected in the range of 48-50 cents per share narrower than previous guidance of 49-53 cents.

Management expects operating cash flow neutral to slightly positive for fiscal year 2018.

Zacks Rank

Coupa carries a Zacks Rank #3 (Hold). AppFolio APPF with a Zacks Rank #1 (Strong Buy) is a stock worth considering in the same sector. You can see the complete list of today's Zacks #1 Rank stocks here .

Long term earnings growth for AppFolio is currently pegged at 30%.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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