Coupa (COUP) Q3 Loss Narrower Than Expected, ’18 Guidance Up

Coupa Software Inc. COUP reported third-quarter fiscal 2018 non-GAAP loss of 5 cents per share, which was narrower than a loss of 22 cents in the year-ago quarter and the Zacks Consensus Estimate of a loss of 11 cents. Management guided net loss in the range of 10-12 cents.

Revenues surged 33.6% from the year-ago quarter to $47.3 million, driven by 38.9% growth in subscription services, which totaled $42.8 million. However, professional services & other revenues declined 2.1% to $4.8 million.

Further, the figure surpassed the Zacks Consensus Estimate of $45 million as well as management’s guidance of $44.8-$45.3 million.

The top line was primarily driven by expanding customer base. Rising adoption of Coupa’s platform is driving subscription services revenues and gross margin.

The company’s shares fell 3.8% in after-hours trading following the results. Notably, the stock has returned 34.4% year to date, slightly better than the 30.2% rally of its industry.

Customer Base Expands

Coupa provides a unified, cloud-based spend management platform that helps enterprises keep a tab on daily expenditures. The company’s customer base continued to expand in the quarter. The company’s platform enables customers save any amount between a penny and a dime.

Moreover, cumulative spending over the platform surpassed $500 billion since its launch. This reflects growing adoption of Coupa’s solutions by the likes of Caterpillar Inc. CAT, Unilever and others. During the quarter, Caterpillar went live with Coupa at its first location.

Notable customer wins in the quarter were Toyota Financial Services, Zurich Insurance, Dansk Supermarked Group among others.

Launches R19

Coupa launched its third major release R19 in October. R19 offers more than 70 new capabilities, better risk management and sourcing optimization as well as enhanced travel and expense community intelligence.

Moreover, the company announced the availability of Coupa Open Buy with Amazon Business. The solution enhances customer buying options by giving employees access to the Amazon Business marketplace.

Additionally, Coupa announced availability of the Coupa Spend Management platform at Amazon Web Services (AWS) Marketplace.

Operating Details

Gross margin expanded 320 basis points (bps) from the year-ago quarter to 72.6%, driven by higher subscription revenues.

Research & Development (R&D) expenses, as percentage of revenues, increased 60 bps. Moreover, general & administrative (G&A) expenses increased 50 bps. Sales & marketing (S&M) expenses decreased 120 bps in the quarter.

Nevertheless, operating loss narrowed to $2.4 million compared with a loss of $2.9 million in the year-ago quarter.

Guidance

For fourth-quarter fiscal 2018, revenues are anticipated between $48.3 and $48.8 million. Subscription revenues are forecast between $40.8 million and $41.3 million, while professional services revenues are anticipated at approximately $4.5 million.

Management projects non-GAAP gross margins between 67% and 69%. Moreover, non-GAAP loss from operations is anticipated in the range of $7.5-$9 million. Net loss is anticipated in the range of 14-16 cents per share.

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

For fiscal 2018, total revenues are now expected between $181.5 million and $182 million, up from previous range of $177 million and $179 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 $19.5 million and $21 million. Non-GAAP net loss is expected in the range of 37-39 cents per share, which is narrower than previous guidance of 48-50 cents.

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

Zacks Rank & Key Picks

Coupa carries a Zacks Rank #3 (Hold).

Twitter TWTR and Apptio APTI are better-ranked stocks in the same sector. While Twitter sports a Zacks Rank #1 (Strong Buy), Apptio carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term earnings growth for Twitter and Apptio are currently pegged at 21.50% and 12.50%, respectively.

Looking for Stocks with Skyrocketing Upside?

Zacks has just released a Special Report on the booming investment opportunities of legal marijuana.

Ignited by new referendums and legislation, this industry is expected to blast from an already robust $6.7 billion to $20.2 billion in 2021. Early investors stand to make a killing, but you have to be ready to act and know just where to look.

See the pot trades we're targeting>>

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

To read this article on Zacks.com click here.

Zacks Investment Research