Coupa Software Incorporated

Good day, ladies and gentlemen, and welcome to the CUPA Software Third Quarter Fiscal Year 2021 Earnings Release Conference Call. At this time, all participants are in a listen-only mode. At the conclusion of our prepared remarks, we will conduct a question and answer session. If you would like to ask a question, you may press star 1 on your touch-tone pad at any time. If anyone should require assistance during the conference, please press star 0 on your touch-tone pad at any time. As a reminder, this call is being recorded. I'd now like to introduce your host for today's conference call, Mr. Stephen Horwitz, VP of Investor Relations. Mr. Horwitz, you may begin your conference.

Thank you. Good afternoon and welcome to Coupa Software's third quarter conference call. Joining me today are Rob Bernstein, Coupa CEO, and Todd Ford, Coupa CFO. Our remarks today include forward-looking statements about guidance and future results of operations strategies, market size, products, competitive position, and potential growth opportunities. Our actual results may be materially different. Forward-looking statements involve risks and uncertainties and assumptions that are described in our most recently filed 10-Q. These forward-looking statements are based on our beliefs and assumptions today, and we disclaim any obligation to update any forward-looking statements. If this call is replayed after today, the information presented may not contain current or accurate information. We also present both GAAP and non-GAAP financial measures. The reconciliation of these measures is included in today's earnings release, which you can find on our investor relations website. A replay of this call will also be available on our investor relations website. Unless otherwise stated, growth comparisons are against the same period of the prior year. And with that, I will now turn the call over to Rob.

Rob? Thanks, Stephen. So hello, everyone, and thank you for joining us. I hope everyone had a great Thanksgiving. I trust everyone is staying safe. I'm pleased to share that we're continuing to execute against our massive market opportunity. We're doing so with consistent tenacity and unrestrained passion. for delivering what we believe is indisputable value as a service for all our customers. Customers and prospects are looking at Coupa's comprehensive business management platform to ensure that they're creating increased agility, resilience, and, of course, profitability. To that end, we saw improved Q3 trends despite the persistent pandemic situation. We saw continued meaningful growth in our sales pipeline. We delivered multiple global marquee customer wins and go-lives. Our corporate and mid-market businesses are scaling, and our cumulative spend under management is now well over $2.1 trillion. All that translates well to our recent financial results. Specifically looking at Q3, we delivered a record $133 million in revenue, our 11th consecutive quarter of non-GAAP profitability, and 30% plus calculated billings growth. So with that, let me dive into some deeper highlights from the quarter. Let's begin with some customer goal lives. Now, corporate social responsibility is important to the Coupa community, and we are uniquely positioned to help customers in this area. With that as a backdrop, this quarter, let me share some goal lives that highlight humanitarian companies focused on corporate social responsibility and showcase how we're working together. Let's start with World Vision, who recently went live with inventory management. World Vision is responding to the COVID-19 health emergency by providing aid and essential supplies to tens of millions of people in the US and abroad. Using Coupa, World Vision has centralized its inventory model to support disaster relief efforts around the world. Norbert Su, partnership leader for Global Impact shared, we now have full visibility into our three global inventory warehouses and a more efficient ordering process. Our disaster management team can see what's available across all three locations so they could deliver and order, quickly order supplies like PPE and have it delivered to communities and children where it's needed most. World Vision is doing incredible work and my colleagues and I are proud to support them. In terms of company size, one of the world's largest shipping companies responsible for delivering PPE and ventilators during the pandemic went live this quarter in record time. This is one of the fastest deployments we've ever done for a Fortune 50 company. In terms of savings impact, NestE, number three on a global 100 list of the most sustainable companies, also recently went live with Coupa. In their first ever RFP auction event, they achieved 17% savings on IT-related subscriptions and services. This well exceeded their 10% target. And in terms of speed, New Horizons, an Australian nonprofit that helps its customers achieve greater well-being went live in truly accelerated fashion, or the A in CUPA. Jointly, we got it done in less than 10 weeks. Of course, these are just a few examples. Now let's turn to supporting diversity and inclusion, where we're also making an impact. Today, we have more than 30 uniquely designed configuration settings in our platform to support diversity for our customer spend management programs. Customers can easily find and engage with minority-owned businesses on our platform and leverage the power of community intelligence to make selections that form lasting business relationships. You'll recall that the letter O in CUPA doesn't just represent our open technical architecture. It also represents our openness to everyone with inclusion as the guiding light. To that end, we recently published a microsite on CUPA.com highlighting our own diversity and inclusion principles including how we strive to attract underrepresented minorities, how we educate our current workforce on these principles, and how we advocate to provide support to our diverse communities. Now let's talk about our pipeline generation as well as our recent sales. Our early stage pipeline continues to grow rapidly, and no small thanks to our developing customer community. To help scale their efforts, we're using larger group virtual events to engage the entire community like our recent Smarter Together webinar series. Then we follow up with smaller curated events where current customers from similar industries and geographies share best practices and showcase the successes of their Coupa deployments. The Coupa community and the customer advocacy flywheel comes to life at these events where new friends get with existing friends and we become friends. The success of our virtual go-to-market initiatives and community events is clearly evidenced by the fact that we saw more user groups, training sessions, click-throughs on email campaigns, and downloading of content by customer prospects in Q3 than we saw in Q1 and Q2 combined. What these prospects and customers are finding is that Coupa's value-as-a-service platform better positions them to be resilient during difficult economic conditions, while simultaneously preparing them to be highly agile as things improve. Now, in terms of sales, in Q3 we saw improved conditions in the U.S. and Europe, as well as in emerging markets. Before I welcome our long list of new customers, let me call out two, which I believe showcase how we're extending our market leadership position. The first of these is Walmart, one of our largest customers using Coupa Source2Pay. Alongside Amazon, we are now providing our comprehensive platform, the Seen Coupa, to the two largest companies on the Fortune 100 list. The second customer, new customer to call out, is the United States House of Representatives. As we continue our pursuit in the federal sector, it's wins like this that will propel our growth. Let's now welcome many other organizations that joined the Coupa community during the quarter, including ADB companies, Axel Nobel, KC General Stores, DHL Global, Elevate Textiles, GIS International, Globalogic, iCapital Network, Immunovant, Ovid Therapeutics, Pilot Freight Services, Safety Culture, Sam's Mart, Turo, United Safety and Survivability, United Care Queensland, University of Bristol, Well Built, Zoom Info, and many others. We are excited that these and many other customers have joined our thriving community. Now, to close out sales, we also saw strong growth in emerging markets. In fact, business in Latin America, Asia Pacific, Japan, the Middle East, and Africa essentially doubled over the last 12 months. In terms of business updates, let's start with our federal business. As I mentioned a moment ago, the U.S. House of Representatives has recently joined the CUPA community. Adopting the CUPA platform is part of the House's initiative to modernize all administrative systems. Once they go live, Coupa will be used by every person in Congress and by their staff as well. By law, we can't disclose which additional federal opportunities are currently in front of us, but we can confirm there is a robust, broad pipeline across several federal agencies. During the quarter, we also graduated into the next stage of FedRAMP, which is the federal government's standard for cloud-based solutions. We are now FedRAMP-ready moderates. which signifies that we have passed all the vigorous tests and are ready for a federal sponsor. We're excited about the inroads we're making in federal. Let's now touch base on community intelligence. Community intelligence represents perhaps the greatest barrier to entry for our business over the longer term. Given the significant interest we're seeing from some of the largest financial services institutions in the world who are looking to re-platform themselves for their digital futures, Let me share what's possible with Coupa Community Intelligence at our existing customer, Barclays. Barclays is one of the largest banks in the world, serving millions of businesses and individuals globally. With the financial disruptions from COVID-19, Barclays has played a leadership role in helping businesses and individuals weather the storm. With Coupa Community Intelligence and real-time performance benchmarks against peers, Barclays head of sourcing, Phil Thomas, and Barclays Procurement Transformation Lead, Sonia Pinoro, were able to optimize their electronic invoicing and approval cycle times. Leveraging community prescriptions, the P in CUPA, Barclays targeted suppliers that the CUPA community already identified as electronic invoice enabled. This allowed them to increase electronic invoicing by 26%. With community intelligence, they also optimized their workflow to reduce approval cycle times by an amazing 73%. This is just one customer example of the power of community intelligence we're seeing in action. Another exciting aspect of our developing business is Coupa Pay. During the quarter, we continued to strengthen our Coupa Pay partner ecosystem with the addition of American Express, now supporting virtual card payments in the United States. These and the many other partnerships we've launched are helping us build the foundation for Coupa Pay success over the long term. In the near term, we're proving to be especially important in today's work-from-home environment, where customers need better ways to pay suppliers virtually. As the overall offering expands, so too does the customer base. It took nearly two years to reach the 100-customer milestone for Coupa Pay that I shared with you in June, and now that number has grown to over 150 in just the last two quarters. In addition, with new customers, we're seeing a Coupa Pay attach rate of approximately 30%. This growth comes despite the headwinds of a difficult market environment and the fact that our most recent offering in invoice payments has only been available for a few quarters. In terms of invoice payments, Couchbase, a leader in NoSQL databases, recently switched to Coupa Pay from a legacy payments provider. While using its legacy solution, Couchbase needed to toggle between multiple systems, which created room for error and complicated reconciliation processes. With Coupa Pay, Couchbase now makes their invoice payments from the Coupa platform in one seamless, integrated experience that provides their financial organization with increased visibility into their payments, greater data accessibility, and a streamlined approvals process. As Manisha Gol, Director of Accounting for Couchbase, put it, there's now one source of truth. In addition to the value of having one platform, Couchbase leverages our ease of use, configurability, and flexibility, essentially our user centricity or the U in Coupa. They are now processing approximately 90% of their payments through Coupa Pay and are planning to take advantage of our cross-border payments and virtual credit cards soon. Now let's move on to M&A. Immediately after the end of Q3, we announced our acquisition of Llamasoft. an AI-powered supply chain design and planning software company. This acquisition represents our continued expansion of our direct spend capabilities and is very much in line with our declared vision of comprehensively managing all business spend. Supply chains are being rewired globally. Today it's all about agility and the ability to design, transact, learn, and optimize very quickly. Combining Llamasoft's data-driven platform with Coupa's $2-plus trillion of community-powered spend data creates a synergy that can build on itself. Introducing that amount of new, timely, and relevant data to what is already considered the supply chain design and planning platform of choice will help customers make optimized supply chain decisions. Those smarter decisions will drive additional direct spend through our platform, which will in turn yield additional valuable data. This cycle will allow our newly integrated supply chain design and planning technology to continually improve and yield greater and greater value for all our customers. Now, of course, this deal is very consistent with our stated M&A strategy of adding technology components to maximize and enhance the value of our organic transactional core engine and or augmenting this engine with key advanced power applications that optimize the value of these transactions. As always, in making this decision, we considered culture first. We considered buy versus build, and we considered whether it could be integrated into our platform in several product releases. I could not be more excited to welcome our colleagues from Llamasoft to Coupa. Now let's move on to the Coupa Business Spend Index, or BSI. Before getting into the Q4 outlook, I'd like to once again reiterate that the BSI data is not necessarily indicative of the trends we're seeing in our own Coupa business. The Coupa Q4 BSI indicates that business spent sentiment is continuing to recover from its sharp drop in Q1 as companies grow increasingly more comfortable operating in the new normal. However, despite the positive adjustments made by companies in most major sectors, Our analysis shows that confidence in the economy is still low and is likely to remain below trend for at least the next three to six months. Sector data indicates that the health and life sciences industry showed the largest quarter-over-quarter improvement, while financial services, retail, and high tech showed some modest improvement. Spend sentiment for manufacturing, though, continues to decline. For a closer look at our Q4 BSI, where we share more data on each of these trends, I invite you to visit spendindex.com. Now let's talk about our people. I'd like to start by recognizing a few of my colleagues that have made outstanding contributions in alignment with our core values. Let's start with Sunil Moore, who was recently recognized by his peers for exemplifying our number one value of ensuring customer success. Sunil is accessible on top of issues and always aiming to provide better service. He is always positive and consistently exceeds expectations. Simon Devane was recognized for focusing on results. He is both a leader and a great team player. Simon is well known for his ability to rise to new challenges and share his deep knowledge and expertise with members of our community. And finally, Michael Shanker was recognized for embodying our core value of striving for excellence. Mike's colleagues noted that he has the most genuine approach towards inclusion and collaboration. Simply put, he makes an already strong team 10 times stronger. Congratulations and thank you to Sunil, Simon, and Mike. Recently, we also made a number of key leadership promotions. Today, let me highlight the promotion of our very own Rob Glenn to Executive Vice President of Global Sales. While Rob was responsible for approximately 70% of our sales footprint, he will officially be taking over 100% of the effort from Steve Winner on February 1st, 2021. Steve will nonetheless be available for CUPA during 2021 as he moves into retirement. Let me say that Steve and I have been planning for Rob's promotion for a number of years as we've jointly supported Rob's professional growth at CUPA, watching him take on challenge after challenge and deliver. In tandem, I'm extremely grateful to Steve for the incredible teamwork and camaraderie we've shared over the years and I wish him a wonderful retirement. So in closing, we are currently well into our 48th quarter of execution. We continue to focus on delivering unprecedented value as a service for each and every one of the customers in our growing community and thus winning the business spend management market in the process. Success is going to bring us together and we are on the road to that success. With that, Let me now hand the call over to our Chief Financial Officer, Todd Ford, who will review our Q3 financial results and provide our outlook for the third quarter and updated fiscal 2021. Todd?