Coupa had a rough ride on Wall Street yesterday, its stock apparently punished behind a perfectly reasonable market outlook that didn’t sit up to the more unreasonable expectations of some investors.
In fact, the Business Spend Management champion posted solid Q4 and full year 2022 figures. For Q4, the company posted $ 193 million in revenue, up 18% year-over-year, with a GAAP loss of $ 96.0 million. Subscription revenues were $ 173.0 million, an increase of 28%. For the full year, revenue reached a record high of $ 725.3 million, up 34% year-over-year, with GAAP losses of $ 379.0 million. Subscription revenues were $ 634.0 million, an increase of 35% from the previous year.
But it’s a forward -looking guide that Wall Street has not reacted well to, with the company predicting revenue in fiscal 2023 of $ 836 million to $ 840 million. For his part, Coupa CEO Rob Bernshteyn expressed the positives:
We feel we have a really strong core business, especially when it comes to subscriptions themselves. We are seeing more and more customers adding subscriptions at higher price points around the world. So we feel good about that. If we look at the pipeline, we have the largest pipeline we have as we enter the year.
Opportunities
Bernshteyn places great emphasis on market opportunities that are not yet fully utilized:
First is our business to business. Many of the world’s largest companies have partnered with Coupa and are seeing incredible success. We have strong retention rates. We have an incredibly rich library of customer advocacy, and we often see business leaders use Coupa [before], then bring Coupa to their new employers when they change companies. Even with incredible organizations like Amazon, BMW, Procter & Gamble, Unilever and Walmart already in our community of customers, our core penetration in Global 2000 is still less than 20%.
Then there’s the mid-market segment, he said:
Tens of thousands of mid-market companies around the world are in the process of taking their first steps in the world of digital transformation. We have seen significant growth in our mid-market business over the past two years. And with less than 2,000 mid-market customers in our community so far, we are in the very early stages of entering this segment.
And there are new offers to expand the company’s functional footprint, he added, citing:
Our current customers subscribe to less than 1/5 of our total platform, and new customers are coming in with more modules. Some of the growth areas I will highlight are the Supply Chain, Coupa Pay, Treasury, as well as Travel & Expense, all of which are in the very early stages of their respective journeys. We expect all of these sectors to be accelerators for our long -term growth rate.
Strategic waves
For Coupa, the focus now is doubling down on a three wave strategy, Bernshteyn says – taking all costs; optimization of “every dollar spent”; and strengthening community value. To illustrate the first of these, he pointed to Coupa Pay:
We are transforming the world of payments by delivering a fully unified solution that uses the Coupa Business Spend Management platform to center and streamline payments for organizations. We continue to see strong customer growth momentum. Q4 was another quarter where the attach rate on new customer deals was significantly over 30%. For the mid-market specifically, the Q4 attach rate is over 50%. Although we are still in the early stages of the Coupa Pay trajectory, we are beginning to see noticeable increases in our Total Payment Volume (TPV) processed through our payments hub as more and more customers. went live.
As an example of spending optimization, he turned to the case of using a supply chain design and planning company:
We have a large company in South America in the gas station and convenience store business, which uses our supply chain offering to design their delivery network and to determine their transportation needs. These insights are used to conduct sourcing events using the Coupa Sourcing Optimization solution. This customer has a distribution-centric business. The margins are thin and each piece of accumulation is counted. By using our supply chain and sourcing solution simultaneously, they see clear optimization of their quality associated with the supply chain as well as spending.
There are other examples of this type of benefits, he added, pointing to semi-conductor manufacturer Onsemi, which has reduced supply chain decision-making time from about 2.5 weeks to just a few days, while also generates 10% to 15% improvements in capital efficiency and savings, or IKEA, which lowers the average decision -making time from 5 days to 5 minutes.
Meanwhile, community value is driven by Community.ai, using real-time spending data from the Coupa community around the world to come up with ways for customers to be more efficient, profitable and sustainable. Bernshteyn turns again to use case examples to state his point:
Saint-Gobain, a global multi-billion dollar manufacturing company, is using community data to reach its goal of being carbon neutral by 2050. They have reduced transportation emissions by an average of 13%-and in some cases up to 60%. CHEP, a pallet and container pooling company, has used Coupa to help improve the efficiency of their supply chain, reducing CO2 emissions per delivery unit by 33%. The American Red Cross uses context -aware prescriptions to increase spending at diverse suppliers so far by 37%.
What I take
Unreasonable expectations are almost uncommon on Wall Street, but the volatility – to say the least – of the current macro -environment suggests that this is something we can expect to see more clearly in the coming weeks and months. ‘Stay calm and move on’ is a thought that everyone should remember-and fix some thinking. Perhaps Coupa has better predictive data on the state of the economy than the market.
For his part, Bernshteyn was admirably pragmatic when, behind the emphasis on the positives, he said:
With that said, there’s clearly a lot of uncertainty out there, and we really pride ourselves on saying something and delivering it, and we’re not going to change that approach.
Neither should he.
In passing, another note announcement from Coupa yesterday was its successful achievement of FedRAMP public sector authorization for us in the US Government. That’s a hugely profitable market as seen by others like ServiceNow, and a big mark in the box for Coupa. As Bernshteyn observed:
It is not an easy task to complete the authorization process.
But it is worth the effort and Coupa must be properly positioned to build its existing government customer foundation.
.