Coupa Software (COUP) 4th Quarter Earnings: What to Expect

Shares of Coupa (COUP), a provider of a cloud-based corporate spend management software, have fallen 21% over the past month amid the route in tech and software stocks. Investors have become concerned about the possibility of slower growth and an increased valuation that recently placed Coupa at 40 times forecasted revenue. But is the recent decline a buying opportunity?

The company is set to report fourth quarter fiscal 2021 earnings results after Tuesday’s closing bell. Coupa makes money by analyzing large quantities of corporate transactional expense data, looking for spending patterns and areas of inefficiency. Its platform helps customers with actionable insights that can lead to improved inventory management, smarter purchasing decisions, while lowering expenditures.

Aiming to become a BSM (Business Spend Management) leader, Coupa makes money by analyzing large quantities of corporate transactional expense data, looking for spending patterns and areas of inefficiency. With its total addressable market measured at $56 billion and growing, now could be a solid opportunity to buy on the recent dip, particularly as its customers becoming more integrated. Goldman Sachs analysts recently added Coupa to its Conviction List, citing the potential benefits from post-pandemic enterprise digital transformation trends.

Goldman's Conviction List also included software giants Microsoft (MSFT) and Salesforce (CRM). So Coupa is in great company. The analyst's bullish calls stems from their projections that digital transformation spending will outpace overall IT budgets "for the foreseeable future.” Nevertheless, on Tuesday Coupa’s revenue and earnings growth must match these expectations. The market will also want Coupa's management to provide bullish guidance to install more confidence in the share price.

In the three months that ended January, the San Mateo, CA-based company is expected to lose 11 cents per share on revenue of $145.66 million. This compares to the year-ago quarter when it earned 21 cents per share on revenue of $111.45 million. For the full year, earnings of 47 cents would be down from 52 cents per share earned a year ago, while full-year revenue of the $523.82 million would rise 34.4% year over year.

Coupa's BSM platform, which includes a comprehensive suite of procurement solutions that helps businesses assess expenditures from things such as sourcing, invoicing as well as travel/expense management, enables customers to realize stronger and more targeted working capital by de-segmenting organizational silos to better assess risks across the organization. This is one of the reasons Goldman Sachs regarded the company as an "accelerating growth story in 2021.”

And the corporate shift towards digital transformations, which bodes well for long-term upside revenue revisions, was evident in Coupa’s top- and bottom-line beat third quarter, featuring growth within each business segment. Third quarter revue surged 31% year over year to $132.96 million, topping estimates by $8.26 million. But what really matters is subscription revenue which rose 31% to $118.1 million, also above consensus.

Calculated billings — a closely-watched metric among software companies — increased 33% year over year to $140 million, well above estimates of $117.5 million. Just as important, Q3 operating cash flow totaled $19 million, while free cash flow reached $17 million. On Tuesday the market will want to see if Coupa can repeat this performance, particularly amid the corporate shift to work-from-home.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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