During this eleven-quarter stretch, its top-line growth has fluctuated within a tight 40-55% range illustrating the consistency of its business model and the firm demand for its business spending management software.
For the quarter, it generated EPS of $0.03 vs. the ($0.04) consensus on record quarterly revenue of $81.3 mln, also comfortably ahead of the $73.9 mln expectation. Calculated Billings jumped by 50% yr/yr to $75.1 mln, also hitting a quarterly record.
Click here to access COUP's earnings press release.
Enterprises are increasingly interested in finding more efficient and effective ways of managing expenses. Since its platform consists of tools like invoicing, sourcing, analytics, contract management, supplier management, and inventory management, COUP is at the center of this trend.
Furthermore, COUP estimates that only 20-30% of enterprises across the world have implemented an IT platform to manage expenses, giving it plenty of runway for growth.
The company has also assembled a formidable team of partners, including Accenture, Deloitte, and KPMG, which bolsters its in-house sales efforts. In fact, of the 35 new customers that COUP signed on this quarter, all but a handful were led by partners.
Acquisitions have been another part of the equation. Last December the company acquired Hiperos, providing it with exposure to third-party risk and compliance management. This is a growing field that oftentimes isn't addressed sufficiently within organizations.
At the beginning of Q2, it acquired Exari, a provider of contract life-cycle management (CLM) that will allow its customers to realize savings through contract negotiations.
This acquisition is a primary reason why COUP's Q2 EPS guidance of ($0.12)-($0.10) came in below the ($0.01) consensus, but its revenue guidance of $84.5-$85.5 mln was above the $78.0 mln estimate.
COUP adopted ASC 606 accounting standards in relation to the acquisition. In effect, this means that the amount of deferred revenue COUP can claim up front is reduced, but it will take on the full expense impact immediately.
Therefore, the costs associated with the acquisition, including wages for Exari employees, and higher marketing expenses related to its annual Inspire user conference, are expected to impact operating margins by $5-$6 mln in Q2.
Key Takeaways: As a provider of business spending management applications, COUP is in a sweet spot within the cloud software space.
It also isn't dependent on a single means of generating growth as its robust partner base and its acquisition strategy have accentuated its own sales efforts.
On the surface, its Q2 guidance doesn't look overly strong. However, the main cause to the downside EPS guidance is related to how the expenses related to its Exari acquisition are handled on an accounting basis. Its revenue guidance was above expectations, further illustrating that its mixed outlook is not the function of an expected slowdown in business.