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Why Is Coupa Software (COUP) Down 12.5% Since Last Earnings Report?

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It has been about a month since the last earnings report for Coupa Software (COUP - Free Report) . Shares have lost about 12.5% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Coupa Software due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

Coupa Software Q2 Earnings & Revenues Top Estimates

Coupa Software Inc. reported second-quarter fiscal 2022 non-GAAP earnings of 26 cents per share in contrast to the Zacks Consensus Estimate of a loss per share of 7 cents. The bottom line increased 23.8% from the year-ago quarter’s reported figure.

Revenues of $179.2 million outpaced the Zacks Consensus Estimate by 10.3%. The top line increased 42.3% from the prior-year quarter’s figure.

Subscription revenues (87.2% of total revenues) increased 40% year over year to $156.2 million.  Professional services & other revenues (12.8%) surged 60.5% year over year to $23 million.

The top line benefited from strong uptake of the company’s Business Spend Management (BSM) and Coupa Pay offerings, including Coupa Treasury and Coupa Supply Chain Management.

Major Highlights

For the fiscal second quarter, calculated billings came in at $195 million, up 49% year over year. In April 2021, Coupa Software entered into a strategic partnership with Japan Cloud to establish a joint venture known as Coupa K.K. This joint venture will enable Coupa to scale up to support the growing number of Japanese companies looking to gain greater efficiency and agility through BSM.

The company continued to add clients to its customer base in the reported quarter. Some of the notable new deal wins in the quarter included Adastria Co., AR Holdings, Asklepios BioPharmaceutical, Cuprum, DiCE Molecules, Fairlead Integrated, FIFA, Foghorn Therapeutics, Garrett Motion, Greenstone Financial Services, Groupe Lapointe Dentaire, Imago BioSciences, JG Summit Holdings, JGC Holdings, Jubin Frères, mobilezone, Novelis, PACT Group, Progress Rail Services, ProSciento, Sasol, SCG Packaging, Schwan's Company, Sumitomo Dainippon Pharma, Suzano, Unilab, Walker & Dunlop, WestJet Airlines, and Workato.

Moreover, this Zacks Rank #3 (Hold) company launched Coupa App Marketplace, connecting businesses with certified, pre-built solutions to tap into a global ecosystem.

However, Coupa Software faces stiff competition from SAP’s Ariba, Fieldglass, and Concur solutions, and Oracle’s Procurement Cloud offerings.

Margin Details

Non-GAAP gross margin contracted 50 basis points (bps) from the prior-year quarter’s level to 71.6%.

Non-GAAP research and development expenses increased 34.3% year over year to $30.7 million.

Non-GAAP sales and marketing expenses surged 31.8% year over year to $50.9 million

Non-GAAP general and administrative expenses increased 17.3% year over year to $20 million.

Non-GAAP operating income surged 117.5% year over year to $26.7 million.

Non-GAAP operating margin expanded 520 bps on a year-over-year basis to 14.9%.

Balance Sheet & Cash Flow

Coupa Software had cash and cash equivalents and marketable securities of $633.5 million as of Jul 31, 2021, compared with $600.3 million as of Apr 30, 2021.

For the fiscal second quarter, cash flow from operations came in at $40.8 million compared with $32 million in the previous quarter. Adjusted free cash flow totaled $36.9 million compared with $30 million reported in the prior quarter.

Guidance

For third-quarter fiscal 2022, revenues are anticipated in the range of $177-$178 million. While Subscription revenues are expected between $158 million and $159 million, professional services revenues are anticipated to be approximately $19 million.

Non-GAAP income from operations is estimated in the range of $6-$7 million. Non-GAAP net income per share is projected in the range of 1-3 cents.

For fiscal 2022, Coupa Software projects revenues between $706 million and $708 million.

Non-GAAP income from operations is anticipated in the range of $40-$41 million. Non-GAAP net income per share is now expected in the band of 27-29 cents.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended upward during the past month. The consensus estimate has shifted 15.79% due to these changes.

VGM Scores

At this time, Coupa Software has a nice Growth Score of B, though it is lagging a bit on the Momentum Score front with a C. However, the stock was allocated a grade of F on the value side, putting it in the fifth quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Coupa Software has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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