Coupa Software (COUP 76.85, +4.85, +6.74%) is trading sharply higher after reporting Q2 (Jul) results last night. Coupa is a cloud-based provider of business spend management (BSM) software. Its platform provides clients with greater visibility into and control over monetary spending at their companies with the goal of empowering clients to identify and realize opportunities for saving money.

The company’s platform helps clients to monitor many different forms of corporate expenditure, from supply procurement to inventory balancing to travel charges, providing capabilities suited to different types of expenses and payments. Indirect spend -- that is, expenses related to the goods and services that support a company’s operations, rather than a company’s direct spend into its products -- is particularly difficult to manage due to inefficient employee spending behavior and disparate systems that impinge on spending visibility. The core of COUP's platform consists of procurement, invoicing, and expense management modules that form its transactional engine and capture different aspects of a company's spend. As more vendors use Coupa’s BSM platform, the platform becomes more useful to clients, and the collective amount of spend under management increases.

Furthermore, the company offers purchasing programs as well as a system known as the Coupa Open Business Network, through which suppliers of all sizes can interact with buyers electronically, thus significantly reducing paper usage, improving operating efficiencies, and reducing costs.

COUP sells its product on its own, but it also works closely with systems integrators, including KPMG, Deloitte, Accenture, IBM, PwC, and Wipro, to drive enterprise adoption.

Turning to the Q2 (Jul) results, Coupa reported a non-GAAP profit of $0.05/share, up nicely from a $(0.10) loss in the prior year period. This was much better than prior guidance. COUP had guided to a non-GAAP loss of $(0.10)-(0.08), so to see a profit was a nice surprise. Revenue rose 38.3% year/year to $61.7 mln, which also was well above prior guidance of $56-57 mln. Subscription revenue rose 39% year/year and 11% sequentially to $55.4 mln. Non-GAAP operating margin improved to 6.5% from -12.9% in the prior year period.

Coupa also issued upside guidance for Q3 (Oct) as the company expects a non-GAAP loss of $(0.04)-(0.01) and revenue of $62-63 mln. Coupa also acquired the technology assets of DCR Workforce, an application provider for contingent workforce and services procurement management. The acquisition further solidifies Coupa's vision of enabling companies to manage all their business spend, including contingent workforce spend, within a comprehensive BSM platform.

On the business front, Coupa added several new customers in Q2, including Telenor, McCain Foods, Leprino Foods, US Concrete, Wabash National, Boyd Gaming, Tencent, The NPD Group, and others. Q2 also saw the launch of several customer go-lives. Unilever went live in North America in the first phase of a global procurement transformation initiative. Western Europe and Brazil are the initiative’s next planned locations as Unilever continues to roll out its Coupa-powered Easy Buy system across the globe. Additionally, the Co-op went live with Coupa Source to Pay and Supplier Management software in the first phase of their deployment, addressing spend at their food depots and support center. Now, the Co-op is planning and scoping their next phase and is considering expanding Coupa to additional spend categories.

On the call, Coupa talked about how at the end of last year, greater than 50% of new subscription revenue had come from offerings beyond Coupa's core procure module. That figure has continued to increase in the first half of this year, along with the continued increase in average deal sizes. From a marketing perspective, Coupa just rolled out a major update of its coupa.com website. The site now offers a modern, intuitive, and engaging experience for visitors, and features new, rich, easy-to-digest content.

In sum, this was another very good quarter for Coupa. The company has now posted back-to-back huge upside quarters. The surprise profit reported this quarter was also good to see. From a broader perspective, COUP sees a lot of growth ahead as spend management is still in the early adoption stage. COUP says maybe 20-30% of spend is actually being managed through an IT platform. Most of it still being managed through paper, fax, email, phone calls, and other traditional methods. COUP sees potential for this still budding spend management business area to flourish into a very sizable multi-billion-dollar marketplace.