Coupa Software Incorporated

Hey, ladies and gentlemen, and welcome to the Software First 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 touchtone pad at any time. If anyone should require assistance during the conference, please press the star 0 on your touchtone pad at any time. As a reminder, this call is being recorded. I would now like to introduce your host for today's conference call, Mr. Stephen Horowitz, the VP of Investor Relations. Mr. Horowitz, you may begin your conference.

Thank you. Good afternoon, and welcome to Coupa Software's first quarter conference call. Joining me today are Rob Bernstein, Coupa's CEO, Todd Ford, Coupa's President, Finance and Operations, and Tony Tiscornia, 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. Reconciliation of certain of these measures is included in today's earnings release, which you can find on our investor relations websites. A replay of this call will also be available. Unless otherwise stated, growth comparisons are against the same period of the prior year. As a reminder, we'll be conducting an analyst day on July 15th, starting at 9 a.m. Pacific, noon Eastern, and we'll be doing so in a virtual setting. The registration site will be up on the Coupa website starting July 1st. With that, I will now turn the call over to Rob. Rob?

Thanks, Stephen. Hello, everyone, and thank you for joining us today. We delivered another very strong quarter thanks to the increasing importance of business spend management for leaders across all industries and strong execution by our team. As organizations get on with the work of building back better, they are increasingly turning to us as a trusted partner. Our financial performance reflects this dynamic. This quarter we delivered $167 million in revenue, 46% calculated billings growth, in our 12th consecutive quarter of non-GAAP profitability. We also continue to see meaningful growth in our sales pipeline. Proudly, today, our cumulative spend under management is now nearly $2.6 trillion. And we believe the success we've had is validating not just our performance, but of our broader vision of business spend management as a critical category onto itself. Let me explain what I mean by that. We see the BSM category as a constellation of intersecting needs for the back offices of global companies. At their core, those needs revolve around strategy and spend, whether it's how you optimize supply chain design and planning, how you run sourcing and procurement, or how you manage payments, cash flows, and liquidity. As you know, we bolster our platform with both organic development and acquisitions over the past several years that have allowed us to integrate these and many more areas of strategy and spend into one seamless platform. If you think about a company as a car, the BSM category is the engine, and Coupa is the platform that drives it. It is often heard category winners don't build solutions that customers want. They build solutions that customers may not yet know they need. And that's what we're hearing from many of our customers, is that they didn't fully realize just how much they needed to get control of their business spend before facing the unpredictability of the last 15 months. Many of our prospective customers were comfortable with the status quo, where business management decisions were managed in silos. Now they get it. They see that decisions around strategy and spend need to be made comprehensively, in real time, and without barriers getting in the way. At Coupa, we see it as our responsibility to give them a platform to act with speed and agility. And we believe there are a number of megatrends that are increasing the demand for our platform. and will help drive our growth for years to come. Let me highlight just a couple. The first of those megatrends is supply chain fragility. The current semiconductor chip shortage offers an example of why supply chain and procurement can't be dealt with in silos. I frequently talk to CEOs who tell me that they are looking at how to redefine their approach in ways that will allow them to balance efficiency and resiliency so they never get caught flat-footed again. And while the pandemic played an outsized role in supply chain disruption, we know that other trends would likely drive more uncertainty over the long term. Whether it was the winter storm that collapsed the Texas power grid or the sandstorm that lodged the ship in the Suez Canal, climate events will continue to create unpredictability in supply chains. And so will geopolitical issues. China has made some very aggressive moves of late, for example. And I think you could count on one hand the number of global companies whose supply chains don't include China. How to navigate those unknowns is a huge challenge that will be with us for a long time. Supply chain fragility means that supply chain strategy and planning are going to be an increasingly integral part of business spend management. This requires a solution that fully integrates traditional procurement with supply chain data in one platform to provide customers with the agility to navigate an ever-changing environment. The other mega trend we see in the near term is the ongoing pandemic environment. Over the last several months, we've seen the extraordinary success of vaccination campaigns in several countries. However, there still remain many less advanced countries who possibly won't have enough vaccine supply through the end of 2022. This creates a breeding ground for the virus, which raises the possibility of variants that could circumvent vaccines. And I know this is something that our customers are trying to navigate on a day-to-day basis, especially with respect to their supply chain and procurement issues. But there are other important knock-on effects of the pandemic too. One of which is the expectation that we will continue to operate in a low interest rate environment through 2022. And that creates both challenges and opportunities when managing corporate liquidity and asset allocation. Cheap money certainly helps companies facilitate investment over the long term. But with a bond market that doesn't offer much yield, Companies are being pushed to reimagine what it means to carry cash on a balance sheet and how to effectively maximize dollars across a closed loop of spend. And they are increasingly relying on our software to strategize and manage this. These megatrends are driving a renewed awareness within companies that have not prioritized their back office investments. Now it is front of mind, and we are poised to take advantage of that. As we have illustrated in the past, our total addressable market is massive. and we intend to own the lion's share of that market. We're the only platform that gives companies a single source of truth across all spend decisions to maximize the effectiveness of the actions they take. And this is why we are seen as the leader, proudly, in business spend management. You can see evidence of this leadership position in our most recent quarter. Just a few examples. Our customer community continues to grow as we welcome dozens of new companies. We unveiled more than 100 new features for our customers in our latest platform release, and we saw continued momentum in a key growth driver, Coupa Pay. Let me now touch on each of these points, first by sharing a couple of customer stories. The first story is that of Ally Financial, a digital financial services company. They have recently gone live on Coupa to drive digitization across AP, sourcing, IT, vendor management, and supplier diversities. Ally IT is eliminating custom coding and moving fully to SaaS and configuration-based management for lower total cost of ownership and increased agility. With Coupa, Ally chose a holistic approach to spend management with the goals of improving operational efficiency, visibility for reporting, analytics, automation, and enhanced spend control. To date, Ally has already processed nearly $2 billion in spend through Coupa. Another story is that of Saga, which provides products and services for life after 50, from insurance to travel. Prior to Coupa, Saga had an onerous manual supplier payments process that was prone to errors, long invoice cycle times, and compliance issues. The workflow for each was administered completely on paper. After attempting to implement an AP automation solution a few years prior, Saga's finance director realized that he needed to take a more complete approach to addressing their finance transformations. so he broadened the scope to include the entire procure-to-pay process. Saga's use of Coupa Pay has made payments run more efficiently, reducing approval times from hours to minutes. Saga also realized the benefit of implementing Coupa Pay at the same time as the core P2P platform, which served to simplify the integration. Their payments can now be administered digitally and thus remotely versus having paper-based approval processes and paper checks. After implementing Coupa's comprehensive platform, Saga was able to realize significant operational efficiencies. They were able to reduce headcount, reduce invoice cycle times, and increase control and compliance. Now the team has greater confidence in the data and errors no longer keep them up at night. Now let's talk about how we continue to deliver on the promise of creating value as a service through our three major platform updates per year. Let me highlight a few examples. To help our customers spend smarter, we enhanced our business value dashboards to help customers promote operational spending habits. They can now configure their community intelligence metrics to those most relevant for their business. This also helps them quantify the value that Coupa has delivered by showcasing realized savings and prescribing actions for potential savings in the future. We've also built platform enhancements that can help companies meet their critical ESG goals. Our supplier diversity dashboard provides detailed information on diversity activity, spending, and contracting to help drive spend with underrepresented minority suppliers. From our perspective, it matters a great deal how we manage our own ESG goals, and fundamental to that work is leveraging our platform to help our customers manage theirs. Moving on to Coupa Pay, we saw another quarter of increased momentum. As we've said in the past, we're early on in the pay journey, but we are encouraged by the greater than 30% attach rate on new deals we saw in Q1. In fact, though still working with small numbers, we ran more payment volume in the first four months of 2021 than we did all of the previous year. We expect that over the long term, most of our customers will utilize Coupa Pay as their main payment solution. Now, it truly was another strong performance in what was our 49th consecutive quarter of execution. As you know, none of these accomplishments would have been possible without our extraordinary team. And I want to call out a select group of my colleagues who exemplify our three core values. Let me start with Miriam Gonzalez, who embodies our number one core value, ensuring customer success. Miriam focuses on what customers truly need, and she does so while making sure that the customers heard, while calmly and assertively steering them towards the best usage of Coupa's platform. For our second core value focusing on results, Nicole Romilly was recognized by our peers. Our colleagues commented on her ability to anticipate what the sales team needs to be effective and get in front of problems before they arise. Finally, Sophie Enjolras demonstrated our third core value, striving for excellence. Sophie is a great example of the success that can be achieved in a remote work environment. Having joined the company after the beginning of the pandemic, she was able to quickly forge deep relationships with her colleagues while delivering meaningful results from products to processes to communication. Before finishing up, I invite you to our Coupa Smarter Together virtual event that we'll be hosting on June 15th. It takes at least two like minds to make things go right, which is why it will also feature Accenture's CEO, Julie Sweet, and our special guests from IKEA, Procter & Gamble, and Ferguson. We all know that digital transformation is accelerating. During the event, we will discuss how Coupa's business fund management platform provides a new model for this transformation. We'll cover a host of timely topics, including sustainability and the application of community intelligence in making us all smarter together. I invite you to join us. To close, from a broader perspective, it's clear that demand for our offerings will continue to grow at a rapid pace. The mega trends I spoke about are certainly not going away. In fact, they are becoming more pronounced. We see ample opportunity to solve a myriad of problems in our expanding market. Companies are depending on us to meet the moment, and to meet the moment we will. Never bet against us. Given our position, we have the clear opportunity to extend our leadership in the marketplace and win the BSM category over the long term. We'll do so by continuing to focus on our strategic vision areas spelled out in the letters of our name CUPA. Comprehensive, open, user-centric, prescriptive, and accelerated. And we will do so by executing relentlessly. Before I turn the call over, let me congratulate Todd Ford on his promotion to president, finance, and operations. Todd is an integral member of our executive leadership team and plays a key role in guiding the growth of our business and our operations. I'm excited about our continued journey to build one of the world's best enterprise cloud software companies. Let me also congratulate Tony Toscordia on his promotion to chief financial officer of Coupa. Having been with us for over eight years, his impact on our business has been immeasurable, and he has been a foundational member of all our capital market activities. With that, let me hand the call over to Todd.