From a broader perspective, its healthy growth has been driven by the vast market opportunity in front of it as many companies still manage costs through paper, fax, email, or other inefficient methods. In fact, the company estimates that only about 20-30% of all corporate spending is being tracked and managed through an IT platform.
COUP's cloud-based platform includes procurement, invoicing, and expense management tools that capture and analyze a company's spending activity. Therefore, it provides insights and visibility into how a company can better spend, and save, money -- something that is appealing to virtually every kind of business, of every size.
Additionally, the company has secured a few key business partnerships, including a prominent one with Amazon Web Services (AWS), as well as with system integrators like KPMH, Deloitte, Accenture, IBM, and PwC.
The stock has stalled out over the past month, trading within a $90-$95 price range, where it continues to remain heading into tonight’s report. However, this sideways action comes after a 70% surge from late December to early February. So, this consolidation after that incredible run up is healthy, in our view. It also sets the stage for another run higher should COUP blow out estimates once again.
- Rewinding to last quarter, COUP issued upside revenue
guidance of $67.8-$68.3 mln vs. the prior consensus of $64.1 mln. Now the
consensus estimate stands at $68 mln. On the bottom line, analysts are
expecting the company to break even.
- COUP will also likely provide guidance for both 1Q19 and FY19. In order to meet expectations, it will need to guide for Q1 EPS of $0.02 and revenue of $70.2 mln (+25%) and for FY19 EPS and revenue of $0.23/share and $315.1 mln, respectively.
- As noted above, COUP has a history of comfortably
outperforming quarterly estimates. On that note, it has beaten the top and
bottom line estimates for nine straight quarters, with the degree of upside on
EPS averaging a robust $0.12/share. On top of achieving strong double-digit
revenue growth, COUP has also demonstrated good cost management, which has
helped it to exceed expectations.
- For instance, last quarter, Sales & Marketing expense increased by a very modest 12%, declining to 43% of revenue from 53% in the year ago period. Pedestrian sales and marketing growth is quite rare for a recent tech IPO, and the fact that its top-line growth rates are still so strong and consistent despite the modest spending is a testament to the value customers are finding in the platform.
- 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. Last quarter, it posted non-GAAP gross margin of 73.3%, up from 72.6% in 3Q17. For this quarter, it guided for gross margin of 71-72%, noting that quarterly margins could fluctuate as it continues building for scale and due to the near-term impact from acquisitions.
- On the topic of acquisitions, COUP has been fairly active on the M&A front. In Q3, it announced the acquisition of Aquiire, a leader in real-time supplier search, supporting side-by-side shopping comparison. Also, on September 4, 2018, it acquired the technology assets of DCR Workforce, a provider of contingent workforce management and services procurement software.
- Overall, COUP's acquisition strategy is focused on adding advanced user applications that can be seamlessly integrated into its platform and/or acquiring technology components that could enhance its transactional engine.
- On top of this, the company continues to organically add new capabilities and products to the platform, including its newest offering, "Spend Guard", which uses community intelligence and machine learning to identify potential spend fraud. As of last quarter, the feature was in early access for a select group of customers, with the expectation that it will be made generally available in the near future.