Coupa Software Incorporated

Good afternoon, ladies and gentlemen, and welcome to the Cooper Software first quarter fiscal year 2022 earnings conference call. Our host for today's call is Stephen Horwitz. At this time, all participants are in a listen-only mode. Later, we will conduct a question and answer session. I would now like to turn the call over to your host, Mr. Horwitz. You may begin, sir.

Thank you. Good afternoon and welcome to Coupa Software's first quarter conference call. Joining me today are Rob Bernstein, Coupa CEO, and Tony Toscornia, 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-K. 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. A reconciliation of certain 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. Unless otherwise stated, growth comparisons are against the same period of the prior year. With that, I will now turn the call over to Rob.

Thanks, Stephen. Welcome, everyone, and thank you, everyone, for joining us. I'm excited to share our first quarter business results with you today from our New York offices. It's been amazing getting back in front of customers to collaborate in face-to-face, real-time sessions to help them fully understand what we're doing here at Coupa. We're giving them visibility, control, and agility over their business spending, helping them build foundational resilience in their back office operations for the long term, and empowering them to make strategic, data-driven decisions that yield positive outcomes for their businesses. As we look at our results, let me start by sharing a few financial highlights from the first quarter. This being our 53rd quarter of execution. In Q1, we delivered 196 million of total revenue, including 178 million of subscription revenue. Calculated billings for the quarter were 188 million. We once again reported strong free cash flow margins coming in at 23% for both the quarter and the trailing 12 months. We're able to deliver strong free cash flows while simultaneously continuing to make thoughtful investments into our business to capitalize on our growth opportunity. Our approach remains dynamic and agile in the context of consistently changing times which we have navigated over the last 13 years of operational execution. We continue to drive meaningful top-line growth while maintaining best-in-class unit economics and sales efficiency and strong free cash flow metrics as well. As businesses plan for tougher economic times, we believe our model of growth with profitability makes us especially resilient over the long term. And speaking of resiliency, we were overwhelmed with incredible positive energy from the thousands of our customers and prospects that we connected with live at our Inspire events in Las Vegas and Berlin this quarter. The resiliency they showed with respect to their businesses leveraging our platform was nothing short of humbling and inspiring for all of us at Coupa. As well, they are preparing to use our platform to help their businesses navigate the potential uncertainties ahead. Now, as we are all acutely aware, the global business environment is currently highly volatile. We have seen some early signs of potential softening in Europe, especially as the war in Ukraine and inflationary pressures appear to be weighing more on business leaders than they were before. Yet, in this context, we remain agile and pragmatic in how we run our business and make investments. With that backdrop and a strong pulse on our business, we feel confident raising our subscription revenue guidance for both the second quarter and the full year. Now more than ever, it's undeniable that business leaders recognize the importance of optimizing their business spend. Coupa is empowering companies to build the transformational business architecture they need to forge on into this uncertain future. Through our industry-leading BSM platform, built on our vision areas of being comprehensive, open, user-centric, prescriptive, and accelerated. We are providing our customers with one source of truth to run their businesses. And as we look to the coming years, we believe that we're on our way to becoming the de facto businessman management platform for CPOs, CFOs, and with the support of forward-thinking CIOs. Now, Our path to winning the BSM market and unlocking vast amounts of real measurable value for customers is paved by our three wave strategy. First, capturing all spend. Secondly, optimizing every dollar spent. And finally, amplifying community value. For the first wave, capturing all spend, let me share a couple of customer stories that demonstrate how our platform increases operational efficiency by digitizing processes. The first story is that of CBRE, the world's largest commercial real estate services and investment firm. CBRE uses Coupa in 49 countries around the world, including in Japan, where the digital payments processes for more than 700 supply partners were streamlined. They were quickly able to mitigate 80% of the region's spend from manual processes to digital e-invoicing. Not only did they reduce cycle times by more than 50%, they were also able to improve payment fulfillment in Japan by 85%, positively impacting cash flow. I'm appreciative of the comment they shared with us, which was, Coupa has made material improvements in CBRE's cross-functional collaboration internally and with their business partners. The platform is critical to our ability to execute our business spend management strategy. Another example of transforming business spend from manual to digital is that of Rivian, an electric vehicle automaker. They're a testament to how businesses scale on our platform. By leveraging Coupa's ability to improve processes and drive automation, Rivian has maintained the same procurement operations team size, while its overall employee base has grown 20x in the last 18 months. They have gone from a completely manual approach, having 93% of their purchase orders and 90% of their invoices processed electronically. With Coupa, Rivian has gained visibility into and control over their spend and has benefited greatly from the scalability of our platform. As many of you know, a key component of our first wave is Coupa Pay. Our attach rate on new customer deals in Q1 was again meaningfully above 30%, with mid-market attach rates being well over 50%. Also, we surpassed $10 billion of cumulative total payment volume in Q1 and are now processing payment transactions at a run rate of more than $1 billion per month. Now let's move on to the second wave of our strategy. optimizing every dollar spent through suite synergy. The first example I'll share with you is that of Ally Financial, a financial services and insurance company that is experiencing firsthand the benefits of end-to-end business spend management. Ally greatly simplified its IT landscape by replacing several systems with one integrated Coupa platform. They are using source-to-pay, contingent workforce, third-party risk, supplier diversity, and T&E. By taking a comprehensive approach, Ally is able to work more strategically and collaboratively across the organization, delivering strong ROI and maintaining the agility to make changes when necessary. Another example is Microsoft, who is a Coupa supply chain design and planning customer. Microsoft joined us at our Inspire conference a couple of months ago to discuss the importance of using data to manage their supply chain. With such a wide range of products from multiple types of customers that get delivered through so many different distribution channels, they clearly have an extremely complex supply chain to manage. Microsoft emphasized that with massive amounts of data coming in every day, digitization is incredibly important to them. The data helps drive the organization to make the correct decisions today while also considering than necessary planning as far out as three to five years. Each business decision can't just be correct for one part of Microsoft. Collectively, all the decisions need to work in concert with each other. Using Coupa's supply chain design and planning solution, Microsoft is achieving its goals of maximizing the cost benefit equation, minimizing lead times, and working towards being carbon neutral by 2030. with data as the driving force. Now, it's also data, along with community collaboration, that makes up the key components of our third wave, amplifying community value. With our cumulative spend under management reaching nearly 3.6 trillion this quarter, our customers are tapping into real-time spend data and prescriptions to better identify ways to reduce risk, increase efficiency, and be more profitable. While the best is yet to come, we continue to unlock value for our customers through community.ai, and we see an increase in utilization of prescriptions by our customers. Nearly 70% of customers that are live on the platform have used Community Insights or Community Connections multiple times per month on average. A common example of one of these prescriptions might be contextually informing the customer that they should move specific unstructured spend to on-contract spend. By linking negotiated contracts, the customer can ensure better pricing and compliance to the company's preferred suppliers. As I mentioned, collaboration is also key to our third wave. Our app marketplace is a collaborative environment where customers can connect their enterprise systems to Coupa to further break down silos. We offer enterprise apps that are used for connecting to systems both inside and outside of business spend management. We now have nearly a dozen apps that are pre-built and certified. These applications are easy to use and are essentially instantly accessible for our entire growing customer community. Coupa certification comes from our engineers with a specific focus on reliability, performance, and security. A great example of one of these pre-built apps is a key solution from Interos. Customers using the Interos app can access supplier risk at the time of sourcing. It also provides ongoing monitoring of third party data and instant visibility into supplier risk scores across cyber, ESG, financial, geopolitical, and operations. This is just one example of the value our customers can extract from our platform and how it's expanding through our growing app marketplace. As we continue our pursuit of winning the BSM market, our thought leadership and innovation play an increasing role in the mind activation of our community, especially through ESG. Our customers are establishing key ESG goals that they want to achieve, but aren't necessarily sure how to accomplish. To help these customers, we have introduced more than 80 different capabilities in our sustainable BSM toolkit to impact ESG. One example of functionality we deliver to our customers is providing minority owned and sustainability data on their suppliers, as well as the suppliers of their suppliers. And we provide that data at the time a transaction takes place to help our customers make better decisions that will help them achieve their ESG goals. Now, speaking of ESG, we are making an impact on each area. For environmental, We recently introduced price benchmarks for ocean freight and scope three carbon emissions tracking. We've also launched a partnership with the climate software platform to help measure and reduce carbon footprint. On the social front, we recently shared our own diversity, equity, and inclusion statistics via blog for our chief people officer, Ray Martinelli, and have reinforced our commitment to continued improvement in our own hiring processes. While we are early in the process, In 2021, we increased our global female representation and our underrepresented minorities in our colleague base. And we are already doing more in 2022, as we believe that by increasing diversity, we become more creative, empathetic, and productive. Along the lines of governance, we joined the Chief Executives for Corporate Purpose, an organization that advises companies on how to further their corporate purpose strategies and shares actionable insights with its CEO-led coalition to address stakeholder needs. Now, speaking of making an impact, let me share with you Coupa's MVP award winners for Q1, who best exemplify our core values as voted by colleagues. I'll begin with Kate McIntyre, who exemplifies our first core value of ensuring customer success. Kate consistently finds solutions to challenging issues. She quickly earns the trust and respect of our customers She helps get situations addressed expediently and positively. Kate always puts the customer success first. Next, Rahul Mehta was recognized for epitomizing our second core value, focusing on results. Rahul makes sure we aren't just delivering functionality, but rather using the feedback of all members of the community to deliver a solution that is highly impactful and adoptable from day one. Regardless of how complex a problem is, Rahul is there to successfully drive towards an elegant solution with a strong bias for action. Finally, Julie Prochesin RestretchPro was recognized for our third core value, striving for excellence. Julie played a key role in our journey together. She has an amazing focus and attention to detail that enables us to maximize the likelihood of success on each project. Our customers commended her on her tireless work ethic, which resulted in clear value delivery. My congratulations go out to Kate, Rahul, and Julie. As we recognize our colleagues for their contributions, we're also humbled to be recognized for the values of service we're delivering to the market as a company. Forrester recently published its first ever comprehensive analysis of the business management market in their supplier value management wave analysis We are proud to have achieved the highest scores in the industry in strategy and technology. This recognition is also a result of the deep relationship we have with our community of customers and partners. As I mentioned earlier, we couldn't have been more thrilled to reunite with these groups at our Inspire event in Las Vegas a couple of months ago, and again more recently in Europe. We welcome thousands of attendees who continue to embrace being united by the power of spend, and who appreciate the value of being part of a global community of forward-thinking leaders from supply chain, procurement, finance, treasury, and IT. There was incredible excitement and energy at both events, with customers sharing their transformation success stories and learning from each other. We're thankful to the dozens of customers who shared their stories at our events. They include ADM, AstraZeneca, BMW, DHL, General Mills, General Motors, Jabil, Lowe's, MasterCard, Marist, Microsoft, Staples, Unilever, UPS, Walmart, and so many more. Now, before I turn it over to Tony, let me restate the obvious, that the global market environment remains uncertain, yet we are well-positioned to navigate and thrive. We continue to deliver solid top-line growth, best-in-class unit economics, and strong free cash flows. Keep in mind that we built the foundation for this business during the heart of the financial crisis over a decade ago, and the discipline forged during those years is in our DNA. We are the leader in business management, which has a huge total addressable market. We couldn't be more excited about our journey towards becoming one of the world's best enterprise cloud software companies by delivering unprecedented value to our customers. With that, let me now hand the call over to our CFO, Tony Ciccornia. Tony.