Coupa Software Inc. (COUP - Free Report) recently announced plans of offering $200 million of convertible unsecured senior notes to enhance liquidity. The interest rate, conversion rate and certain other terms of the notes are yet to be determined.
The notes will be offered to qualified institutional buyers only and in accordance with Rule 144A under the Securities Act of 1933, as amended. The company will also give the initial purchasers of the notes an option to buy up to an additional $30 million aggregate principal amount of the notes to cover any over-allotment. This option will be exercisable for 13 days.
Interest on the notes will be paid semi-annually and will mature in 2023, subject to customary closing conditions.
Coupaintends to use the net proceeds from this offering for the general corporate purposes, strategic acquisitions and working capital. The company will also utilize it to pay the cost of the capped call transactions.
Notably, the stock has returned 28.7% in a year, slightly better than the 25.2% rally of its industry.
Coupa’s Cash Position
The enhanced capital deployment reflects Coupa’s strong balance sheet and confidence in long-term business prospects. The company exited third-quarter fiscal 2018 with cash, cash equivalents and marketable securities of $219.3 million compared with $208.3 million in the previous quarter. Cash flow provided from operating activities for the nine months ended Oct 31, 2017 came in at $21.5 million.
We believe that the company has a strong balance sheet, which will help it in capitalizing on investment opportunities and pursuing strategic acquisitions, further improving growth prospects. Moreover, the senior notes offering will lower the company’s cost of capital, consequently strengthening balance sheet and supporting growth.
Coupa provides unified, cloud-based spend management platform that helps enterprises keep a tab of daily expenditures.
An expanding partner base is expected to drive top-line growth. The partnership with Software AG makes it easy for companies to integrate Coupa with most leading enterprise resource planning (ERP) systems, including those from SAP and Oracle. The company has expanded CoupaLink certified solutions by adding Software AG’s webMethods Connector.
Coupa launched third major release R19 in October. R19 offers more than 70 new capabilities, better risk management and sourcing optimization as well as enhanced travel and expense community intelligence.
Moreover, the availability of Coupa Open Buy with Amazon Business in the United States is a catalyst.
Zacks Rank & Key Picks
Coupa carries a Zacks Rank #3 (Hold).
NVIDIA Corporation (NVDA - Free Report) , Applied Materials, Inc. (AMAT - Free Report) and Analog Devices, Inc. (ADI - Free Report) are better-ranked stocks which sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Long-term earnings growth for NVIDIA, Applied Materials and Analog Devices are currently pegged at 10.3%, 12.7% and 10.4%, respectively.
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