COUP's revenue growth has remained remarkably steady over this stretch, fluctuating between 40-55%. This outperformance and consistency helps explain why the stock has soared by over 300% since its IPO in 2016.
Favorable Trends, Acquisitions Driving Growth
There are a couple key factors that have driven its strong performance.
COUP is capitalizing on the fact that many companies, regardless of industry and size, are still using outdated methods and technology for managing and tracking expenses. With only 20-30% of companies already using an IT platform to manage expenses, the total addressable market remains enormous.
As companies transition to IT-based cost management systems, COUP has steadily increased its customer base. For instance, last quarter the company reported that it added customers like Air Methods, Emerson Electric (EMR), Randstad, Pacific Life Insurance, and Prudential Asia to the mix.
The company has also been an active acquirer, augmenting its growth through M&A. On December 10, 2018, it acquired third-party risk management provider Hiperos. COUP didn't provide any financial details for the transaction in the press release, but management is enthusiastic about the acquisition. During the Q4 earnings call, management commented that they see the area of third-party risk and compliance as a growing initiative that has also been addressed inefficiently.
Prior to that, COUP bought Aquiire, a provider of real-time search that allows for side-by-side shopping comparisions, and it acquired the technology assets of DCR Workforce, a provider of contingent workforce management and services procurement software.
In its last earnings report on March 11, COUP provided guidance for Q1. Specifically, it guided for a loss per share of ($0.06)-(0.03) vs. the prior consensus of $0.02 and revenue of $73.5-$74.0 mln vs. the $70.2 mln estimate. Analysts are expecting COUP to report results within those ranges, estimating a loss per share of ($0.04) and revenue of $73.9 mln.
That was the first time in the past year that COUP did not provide upside earnings and revenue guidance.
However, the cause for the downside EPS guidance wasn't due to a projected downturn in business. Rather, COUP is expecting its Q1 margins to be negatively impacted by expenses related to its acquisition of Hiperos. The company sees non-GAAP gross margin dipping to about 70% compared to 72.5% in 4Q18, which will drive its profitability lower for the quarter.
The company doesn't break out many other key metrics, such as revenue retention rate, billings growth, large account wins, etc. However, gross margin is one metric outside of the main headline numbers that COUP focuses on.
For the quarter, analysts are expecting COUP to report gross margin of 70.4%.
COUP will likely provide guidance for Q2 and FY20 in its earnings press release.
In order to meet the Street's expectations, the company will need to guide for a Q2 loss per share of ($0.01) and revenue of $78.1 mln, and for FY20 EPS of $0.08 and revenue of $328 mln.