Coupa Software Incorporated (COUP) Q4 2018 Earnings Conference Call Transcript

Coupa Software Incorporated (COUP)
Q4 2018 Earnings Conference Call
March 12, 2018, 5:00 p.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good day everyone, welcome to the Coupa Software Fourth Quarter Fiscal 2018 Earnings Conference. Today's call is being recorded. At this time for opening remarks, I'd like to turn the program over to Nicole Noutsios. Please go ahead, ma'am.

Nicole Noutsios -- Investor Relations

Good afternoon, and welcome to Coupa Software's Fourth Quarter conference call. Joining me today are Rob Bernshteyn, Coupa's CEO and Todd Ford, Coupa's CFO. Our remarks today include forward-looking statements about guidance and future results of operations, strategies, and plans, market size, products, competitive position, and potential growth opportunities. Our actual results may be materially different. Forward-looking statements involve risks, uncertainties, and exceptions, that are described in our most recently filed 10Q. 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 non-GAAP to GAAP is included in today's earnings release, which you can find on our IR website. A link to the replay of this call will also be available and if you prefer to access the replay via phone, you can find that information in the earnings release. Unless otherwise stated, gross comparisons, are against the same period of the prior year.

With that, I'll turn the call over to Rob.

Rob Bernshteyn -- Chief Executive Officer

Hello, everyone and thank you for joining us. I'm proud to report that in Q4 we delivered our best performance in company history. Producing excellent financial and business results across the board, to close out fiscal 2018. Revenues, calculated billings, cash flows, and margins, all came in very strong and for the first time, we were non-GAAP net income positive. I believe that our results for the period are a testament to the strength of our company culture, and the ever-increasing highly differentiated value as a service that we are delivering for our customers.

Let's talk about our opportunity. In December, we held our first ever analyst day at the Nasdaq market site in Times Square. The theme of the day was our path to becoming a billion-dollar revenue company. During our presentation, we laid out the key strategic drivers that we are focused on as a company in fiscal 2019 and forward.

First, driving enterprise and mid-market customer expansion and global sales capability. Secondly, expanding global brand awareness and demand generation. Third, developing and expanding our partner ecosystem. Fourth, acquiring key assets to broaden our value proposition. Fifth, launching innovations to drive a greater share of wallet. And finally, and perhaps most importantly, cultivating a winning, core values-driven culture.

That mentioned, in all our public company earnings calls to date, our core values are ensuring customer success, focusing on results, and striving for excellence. These values serve as our organizing principles, and unite us together in everything we do, as we aggressively pursue our substantial market opportunity. And by our calculations, our total adjustable market has grown to roughly $37 billion. Executing on these rote drivers and unified by these values, we intend to continue tackling our massive TAM one customer at a time, in both taking market share and developing the business spend management market in tandem.

As we track our progress, one non-financial metric we monitor closely is the spend under management we are driving for our customers on the Coupa platform. We believe this to be a key metric because for these transactions, our data grows and platform gets smarter. And that benefits all our customers.

In fiscal 2018, we increased lifetime cumulative spend under management from $365 billion to $680 billion. And we expect to surpass one trillion this fiscal year. There is now no doubt that this vast accumulation of transactional data has evolved into a significant and fast-growing competitive moat for us, while also translating into prescriptive and instantly actionable community intelligence based value for our customers.

And speaking of customers, let me now highlight some exciting new customer wins in Q4. Lululemon selected Coupa's source to pay expenses and several power applications based on Coupa's demonstrated commitment to success, cultural fit, and proven track record in the retail sector. Bass Pro Shops selected Coupa's source to pay based on our proven ability to drive value across organizations with many distributed lines of business. And Grupo Bimbo, the world's largest baking company based in Mexico City, selected Coupa's source to pay as the best fit to manage spend across it's complex and diverse global operational infrastructure.

Some of the other valued customers we added during the quarter include Qatar Airways, Farmer's Group, American Water Works Company, Jobvite, Canadian Imperial Bank of Commerce or CIBC, The Co-op group, National Grid, National Gallery of Singapore, Exabeam, American Zinc Recycling Corporation, Grupo Dasa, and San Mateo County Libraries, right here in our own headquarters hometown of San Mateo, California.

But of course, signing a new customer is only the initial phase of our partnership with them. The next step is a successful deployment. With that, I'd like to call out a few recent customer j. Nasdaq is the leading provider of trading, clearing, exchange technology, listing, information, and public company services across six continents. Nasdaq went live in Q4 with a global deployment on Coupa's source to pay. Their primary objective with Coupa is to better control spend through preapprovals and standardized purchasing activities.

DoorDash is a technology company that connects people with their best local businesses by facilitating door to door delivery and other services. DoorDash went live on Coupa procure to pay in a rapid deployment of just ten weeks. A good example of our platform's agility and our ability to partner with customers around assertive goals. DoorDash engaged Coupa to better manage their rapid growth and address visibility and control into spending.

Razer, Inc. is the world's largest -- the world's leading gaming lifestyle brand. The company is dual-headquartered in San Francisco and Singapore. Razer is a pioneer of e-sports and has built the largest gamer focused ecosystem of hardware, software, and services. Razer implemented the Coupa expenses solution for their offices in the U.S., China, Hong Kong, Taiwan, and Germany. From signing to go-live, to many years of ongoing success, and I mean very many, we at Coupa are focused on working side by side, hand in hand with our customers to deliver value as a service over the long-term. This is achieved by continuously ensuring customer success which as you know is one of our core values.

Let me share an example of that value in action. Just last month, our longtime colleague Ben was promoted to Solutions Architect Director. Several employees here at Coupa remarked, that Ben is always acutely focused on customer success, never tiring of losing his positive attitude, consistently applying a driven, meticulous, results-oriented approach to each project he takes on. And he has taken on dozens and dozens of projects over the years. Truly living our core values is one of the ways we differentiate from others in our industry. And the difference is palpable for our customers.

Now let's talk about our platform. I'm excited to share that it continues to grow in both breadth and depth. From a financial perspective, just three short years ago, over 75% of our new subscription revenues came from our core procurement applications. But today, that figure is less than 50%, with more and more coming from expense management, invoice management, supplier information management, and a host of other key offerings.

From a product perspective in Q4, we launched our most recent major release called R20. R20 addresses supply chain risk reduction through community intelligence, management of complex services spend with Services Maestro, and a fresh approach to early payment discounts with Coupa Accelerate. Overall, R20 added more than 50 new features across the platform, covering areas such as e-invoice compliance capabilities in additional countries, expense management trip pre-approvals, contract request pre-approvals, and ability to screen suppliers against government restricted lists, and much, much more.

As you'd expect, delivering incredible solutions requires a results-oriented approach. This is where our core value of "focus on results" comes into play. Let me give you another example. A few years back, our mobile engineering team recognized the incredible opportunity for Coupa on Android. Our colleague Aaron was obsessed with delivering a stellar app for our Android users. So he led the effort to encode an unprecedented user experience. Each time a new iOS feature is rolled out, he ensured the same enhancements are made available on Android shortly thereafter. It's this very personal, specific level of commitment to our customers, borne out of our values, our core values, that helps us continue to set the bar. And setting the bar is what we're out to do.

In that vein, let me now mention a few industry accolades that we were recently proud to receive. In January, IBC released its first-ever MarketScape report for worldwide SaaS and cloud-enabled procurement applications. Coupa was named the leader, as shown on the IBC's well known two-dimensional chart, receiving the highest ranking for both evaluated dimensions. Those dimensions being capabilities and strategies. Also, last Monday, IBC released its MarketScape report for travel and expense management. And we were proud to be recognized as a leader in this area as well. We're also honored to win the 2017 Innovative Sourcing Technology of the Year category at the annual Paystream Advisors Awards Competition. On behalf of my Coupa colleagues and myself, we warmly thank those in our industry who have taken the time to fully understand our vision and support it.

Now one previously discussed component of our growth strategy is to consider acquiring key assets to further expand the depth and breadth of our offering, while simultaneously investing heavily into organic R&D. Continuing our execution in this strategic area, in December, we announced our acquisition of Simeno, based in Basel, Switzerland. Simeno's team has deep domain expertise in advanced catalog management and will help us continue our quest to provide the most open platform in our industry. The acquisition also increases our local presence in key German and Swiss markets. We are very excited about our new colleagues that have joined us from Simeno.

Overall, I'm very pleased with our business progress and the financial results we generated during the quarter. Before I hand the call over to Todd for a detailed breakdown of our financials and guidance, I'd like to take a moment to thank our growing and highly valued community of customers, partners, analysts, industry friends, and of course my Coupa colleagues around the world. With common purpose and shared values, we can continue to maintain and be prosperous.

With that, let me hand it over to Todd.

Todd Ford -- Chief Financial Officer

Thanks, Rob. And good afternoon, everyone. As Rob noted, Q4 was a breakout quarter for the company. And that is reflected in our financial results and key metrics. Total revenues for the fourth quarter grew 41% year-over-year to 53.8 million. For Q4, subscription revenues were 46.6 million, up 38% year-over-year and comprised 87% of total revenue. Professional services revenues were 7.1 million of which approximately $2 million was one-time in nature, representing the last instances of professional services revenues that were being deferred and recognized upon customer go-live.

As a reminder, we transitioned to proportional performance in Q4 a year ago, and engagements signed prior to that were deferred and recognized upon customer go-live. Our non-GAAP operating income was positive, $884,000 or 2% of revenue compared to negative 6% in the year-ago period. Calculated billings for the year were $224 million, up 40% year-over-year. In Q4, calculated billings benefited by approximately $3.5 million, related to a few customers that renewed early, who would have normally renewed in Q1.

Total deferred revenue and backlog at year-end was $359 million, up from $259 million a year ago, representing a year-over-year increase of 39%. As a reminder, we define calculated billings as the change in revenue on the balance sheet for the period, plus revenue recognized during the period.

Further, we define backlog as future non-countable amounts on multi-year contracts that we are not yet contractually able to invoice. Until these amounts are invoiced, they are not recorded in revenues, deferred revenues, accounts receivable, or elsewhere in our consolidated financial statements and are considered by us to be backlogged. Our calculated billings, backlogs, and deferred revenue results often fluctuate on a quarterly basis due to seasonality, timing of renewals and timing of annual contracted billings.

Let's now turn to operating expenses and results of operations. Our fourth quarter non-GAAP growth margins were 73%, similar to a year ago. Non-GAAP growth margin for subscriptions was 82%. And non-GAAP growth margin from professional services and other was positive 18%, benefiting from the one-time professional services revenue in the quarter, which I noted earlier. Driven by our strong Q4 revenue performance and leverage in our financial model, we delivered non-GAAP net income of $1.4 million and income per share of $0.02 on 62 million diluted shares.

Now, let's move on to the balance sheet and cash flows. Cash at quarter end was $413 million, up from $219 million at the end of Q3. This includes 200.4 million net cash in convertible bonds we issued in January. Cash flow from operations in the fourth quarter were negative 1.7 million and positive 19.8 million for the year well ahead of our original commitment to be break-even to slightly positive for the year.

Free cash flows were negative 2.6 million for the fourth quarter, which excluded 6.5 million for the Simeno acquisition and were positive $15.3 million for the year, or positive 8% of revenue for the year. Again, well ahead of our expectations. As a reminder, we define free cash flows as operating cash flows plus investment cash flows, minus the impact of any cash paid for acquisitions.

Now let's turn to guidance. In February, we adopted ASC 606. Our guidance incorporates the impact of the adoption of this new standard. In Q1, we expect a one-time write off of approximately $2 million of deferred revenue with the adoption of 606. With that factored in, we expect a calculated billings growth rate of approximately 36% on a trailing 12-month basis exiting Q1. For the first quarter, we expect total revenues to between $51 and $51.5 million. This includes subscription revenues of between $46.5 and $47 million and professional services revenue of approximately $4.5 million. In addition to the impact of 606, Q1 subscription revenues will be negatively impacted by approximately $1.5 million because we recognize subscription revenue based on the number of days in the quarter and there are three fewer days in Q1 as compared to Q4.

We expect Q1 non-GAAP growth margins to be between 68% and 70%, which reflects the impact of integrating the Simeno acquisition we completed last November. We expect non-GAAP loss from operations to be between $5.5 and $7 million. We expect non-GAAP net loss per share of $0.11 to $0.13 on 55.8 million weighted average shares for the quarter.

For the fiscal year ending January 31st, 2019, we expect total revenues to be between $227 and $230 million with non-GAAP gross margins in the range of 70% to 72%. We expect non-GAAP loss from operations for the year to be between $11 and $14 million. As a reminder, our sales and marketing expense spikes in Q2 by approximately $3.5 million due to our annual user conference, which will be held in San Francisco this year from May 6th to May 9th.

For the full year, we expect non-GAAP net loss per share in the range of $0.23 to $0.28 based on an estimated 57.2 million weighted average shares for the year. We are not providing specific guidance for cash flows, but we expect free cash flows to be up year-over-year both in terms of absolute dollars and as a percentage of total revenue.

To conclude, our strategy remains unchanged. We are building a good market engine for long-term sustainable and profitable growth. We have a disciplined approach, as reflected in our sales and marketing efficiency metrics and cash flow margins as we continue to show operating leverage, and we are focused on winning this large and growing marketing opportunity that lies before us.

...

Now, we would be happy to take your questions. Operator.

Questions and Answers:

Operator

Thank you. At this time, if you do have a question, please signal by pressing *1. Again, that will be *1 for questions.

We'll hear first from Stan Zlotsky from Morgan Stanley.

Stan Zlotsky -- Morgan Stanley -- Analyst

Hey guys. Good afternoon and thank you so much for taking a question. Maybe just start off with a question for Rob. Really an outstanding way to finish the year. When you look at the performance you saw in Q4, was there a couple things that you could highlight that really stood out in your mind as in the key drivers to your performance in a quarter?

Rob Bernshteyn -- Chief Executive Officer

Sure thing, thanks very much for the question. Good to hear from you. I would say if I had to frame it, I'd put it into two buckets. One that we've been talking about on these earnings calls for some time which is the legitimacy that we are continually gaining in the marketplace and how that continues to move us from the early adopter phase of years past to the early majority and into the heart of the market. And I think when I look at some of the sales cycles we had, and some of the ways in which our prospective customers engage with us over the course of the quarter, that greater legitimacy and being seen more as really the leader as most of the industry analysts have called us out to be, is being felt in sales cycles and being seen on behalf of our prospects and that is very much a wonderful thing to see and it's helping us.

I would say the other side of it is the execution of our team. And the core values that I talked about and the willingness to do whatever it takes, not only to close business, but to align with our prospective customers on the measurable results that we want to deliver together, with the use of our platform and our best practices, and their know-how of their business, and locking in on measurable success criteria and then going and driving it. So again, two things, our establishment in the marketplace as a leader and wider recognition of that, and secondly, the continued step changes we're seeing internally around our execution and our focus with our customers. That's how I'd frame it.

Stan Zlotsky -- Morgan Stanley -- Analyst

Perfect, and then a quick follow-up for Todd. Todd, when you look at setting a guidance for fiscal year 19. Any changes to the way you approach the process versus what you've done in prior years? And that's it for me, thank you.

Todd Ford -- Chief Financial Officer

Thanks, Stan. No, our guidance strategy hasn't changed. We continue to make investments across the organization to support our model of 30% plus sustained growth. A lot of continued drive leverage in our capital margins. Our initial guidance implies 26% growth in subscription revenues, and roughly flat growth year-over-year in professional services revenue, primarily driven to the lack of incremental professional services revenue from customer go-lives in FY 2019. And similar to last year when our initial guidance was well below 30% revenue growth, we'll update our numbers and guidance accordingly throughout the year based on execution.

Stan Zlotsky -- Morgan Stanley -- Analyst

Perfect. Thank you, guys.

Operator

We'll hear next from Mark Murphy with J.P. Morgan.

Mark Murphy -- J.P. Morgan -- Analyst

Yes, thank you, and allow my congrats. Todd, I'm curious how many suppliers are on the network on your end, and do you see that long tail of the smaller suppliers continuing to grow a lot in the coming years or are we essentially going to reach a point where you've already attracted kind of that entire long tail onto your network and it sort of remains consistent.

Rob Bernshteyn -- Chief Executive Officer

Well Mark, if you don't mind, I'm happy to take that first. Our vision as you well know, for the company, is to help organizations get smarter and better using information technology to apply to the problem of how they spend money. So our primary core focus is on the spenders. And because we've selected that as our vision and because our values propositions tie directly to that vision, we've been picking up millions and millions of suppliers onto our platform in terms of how we interact with them. So we can actively go out and have an internal target that we'd like to get to 3.5 million or 4 million suppliers or something of that nature. That continues to grow organically. Because their buyers are inviting them and folks are understanding this is a very low friction way of doing business. So it's hard to say whether or not that's going to grow to five, seven, eight, nine, or ten, but I can tell you, that's not one of the metrics that we're overly concerned about. Our focus is largely around helping organizations spend smarter, optimize the way they spend money, help them get value out of every dollar that their company is spending.

Mark Murphy -- J.P. Morgan -- Analyst

Okay and Rob as well, is it possible to separate out the company-specific executions in Q4 versus potentially any broader uplift in a demand environment? And what I'm getting at is do you sense CFOs or CIOs or purchasing managers moving ahead any more quickly because of tax reform or any other macro taxes?

Rob Bernshteyn -- Chief Executive Officer

I would have small sample sets, but nothing that I would feel statistically big enough to go call it out. And interestingly enough I have in front of me a sales force all the deals we closed last quarter and some of them were the typical three to four-month cycle some were big enterprise deals that took over a year. Some enterprise deals here's one for 149 days or something, so. I don't feel that we have enough of a data set, we definitely don't have enough of a statistically big argument to support or refute what you're putting forward.

Mark Murphy -- J.P. Morgan -- Analyst

The final one for me Todd, you have this goal out there for 30% sustained top line for five to seven years, and then the guidance for this year is coming in at 23%, and I heard the prior comment that you made. I just wanted to clarify any material amount of that spread being impacted by the option of 606 or is anything unusual about this year or is it the typical conservatism that we've seen from you over the years?

Todd Ford -- Chief Financial Officer

Our guidance strategy hasn't changed. Clearly, there's going to be some revenue impact from 606. We're basically writing off $2 million of deferred in Q1 because of 606 and while it's less than a million on a quarterly basis, it's well over a million dollars for FY 19. So there's definitely some impact there. And then clearly in the professional services perspective, last year we benefited from some customer go-lives in addition to the professional services revenues that was being recognized on a professional performance. So it's small numbers, it's a few million dollars, but I think it's consistent with our strategy of, let us execute, and then give us credit for it.

Mark Murphy -- J.P. Morgan -- Analyst

Thank you.

Operator

And from Barclays, we'll move to Raimo Lenschow.

Raimo Lenschow -- Barclays Investment Bank -- Analyst

Hey, congrats from me as well. Rob, can you talk a little bit about what the acquisition of Simeno will do for the international buildout? I mean, a lot of U.S. software companies struggle if they go to continental Europe. Now you kind of acquired, looks like a really nice starting point and nice base to have. Can you help me kind of understand a little bit how you go about it in terms of the international expansion from there?

Rob Bernshteyn -- Chief Executive Officer

Sure, sure. Now, if you look back Raimo, at the kind of the way we've grown the business over the last nine years or so, it's always been in an organic fashion. We typically don't go into a new environment, put a lot of people in, and wait for the payback to come in a longer period of time. We do this organically. We put a few folks into a given environment, we land some key, marquee, highly referenceable accounts, we make them highly successful in a measurable way, and then we leverage that success to grow and expand. And we're continuing that mindset as we enter new and emerging markets.

Now in the case of Simeno, there are two components that are of interest to us. One component is just that the main expertise in what we call advanced catalog management and this is really part of our overall vision to provide an open platform in our industry. And to support the value proposition I was just discussing with Mark. So that's one thing. The domain expertise in that area is very important to us.

And secondarily, they happen to have a local presence in German and Swiss markets where we've hired organically, but why not pick up the opportunity to have new folks join us who ascribe to our common set of values. Who are already present in those markets, who have some very interesting interactions with customers and prospects in those markets. And together we can develop a business around that. I'm actually very looking forward to visiting them here the week after next and many of the members of the team here have been in Switzerland and many of them have come here. We already don't feel like they are some sort of acquired entity, they are very much a part of our Coupa colleagues here and we're excited to build a business with them.

Raimo Lenschow -- Barclays Investment Bank -- Analyst

Perfect, thank you, and then the other question I had, as you think about flat professional services in 19, overall business keeps growing nicely, so that to me suggests that the system integrators are getting on board, even more than before. Can you talk a little bit about what you're seeing in the SI market around Coupa?

Rob Bernshteyn -- Chief Executive Officer

Sure, sure. Then maybe both Todd and I can address this. The question was broad but also had some potential financial implications to it. So we're seeing continued momentum with the large systems integrators. There's no question about it. There's a whole host of relationships that these systems integrators have with prospective customers all over the world, and I think it's fair to say there's a very strong feeling of safety in working with Coupa, and that we're able to get customers meaningful measurable value in a rapid time frame and in working with us would be something that they would look very well to continue to promote. We're continuing to certify folks from each of these systems integrators on Coupa, in fact, in some markets, in some areas we're trying to go as fast as possible, it almost doesn't feel like we have enough ability to certify fast enough. And we're catching up to doing that. So the relationships are very healthy, they're robust, they're growing. And each of these folks are putting real measurable professional services revenue targets that they'd like to build out for themselves working around the Coupa platform. So very healthy.

Todd Ford -- Chief Financial Officer

And then from a financial prospective Raimo. First, we've never looked professional services as a growth driver of the business, but over the next several years I would expect professional services revenues to increase because we're still providing customer oversight, we're still making a big investment in that organization so I would view FY 19 as more of an anomaly than a long-term trend.

Raimo Lenschow -- Barclays Investment Bank -- Analyst

Perfect, thank you.

Operator

We'll hear now from Joel Fishbein with BTIG.

Joel Fishbein -- BTIG, LLC -- Managing Director

Thank you and congrats again on a great quarter. I guess Rob, I have a question just on pipeline and deal sizes. Any qualitative information you can give us there as it appears that larger customers are adopting here quicker. Any commentary there would be helpful.

Rob Bernshteyn -- Chief Executive Officer

Sure, sure. Thanks for the question. One of the things that's very important to us is that we continue to grow the business by tying the value that we have -- that we offer to our customers with recurrent subscription revenues and continue to build up preferably forever with these customers. So, this is very, very important to us, now one of the things I will tell you qualitatively or quantitatively, the average annual subscriptions we're seeing from our customers continues to go up. And I look back over the last 36 quarters, it's virtually every quarter, if not every quarter, that continues to go up.

Now that goes up, again, commiserate with the value that we're offering to customers. With every quarter, our platform is more robust, our best practices of the deployment is stronger. Our ability to tie the success metrics and lean back on existing customers where we've either stumbled or done something very, very well. Learn from the stumbles and accelerate the things we've done well. So that's a very healthy metric for us that we track and it's trending very much in the right direction. No doubt about it.

Joel Fishbein -- BTIG, LLC -- Managing Director

Great, thank you.

Operator

We'll move now to Ross MacMillan with RBC Capital Markets.

Mr. MacMillan, your line is open, you may have us muted.

Ross MacMillan -- RBC Capital Markets -- Analyst

Oh sorry about that, I think I was on mute. Hopefully, you can hear me now.

So Rob, congratulations. You commented on spend under management and I think your number was 680, which incrementally means over 300 billion in the year, which by my math is orders of magnitude larger than your biggest competitor on an incremental spend under management. Which is obviously super impressive given your scale versus theirs. And I was just curious, obviously, there are a lot of drivers to that, but was interested on your take on what you think the primary drivers are on that, and then also we're seeing the take rate, your subscription revenue on that spend going up and I'd love your thoughts on what's driving that as well. Thanks.

Rob Bernshteyn -- Chief Executive Officer

Sure, sure. Well, thanks very much for the question. As we said, I think it was first earnings call six calls ago, the one non-financial metric that we really care about and we wanted to keep you all apprised of quarterly and spend under management measure because it's such a strong leading indicator to the kind of adoption that we're seeing across our customer base and the pace of that adoption. And I'll tell you, there are a couple of things that play into that.

One of them, of course, is the pace of the wins, right? So you have to have customers that subscribe before you can begin to implement them. So greater wins, more wins, more robust wins, more sort of aspirational projects that attempt to take on big, big categories of spend. Whether it be indirect, direct, long tail, cross services and products, all of that plays into that, so wins is a big thing.

Categories of spend expansion is a big thing. So you have customers who have done very, very well with us. They've addressed their goals for year one, two, three but maybe in year four, five, and six they're tackling even harder to reach categories in highly distributed organizations where they simply weren't able to get at those categories before and now through highly user-centric technology that is very intuitive, that has gotten very, very sticky across the organization, empowers our buyer to get even more aspirational about the categories they can undertake. So that's second.

And third, it's simply go-lives. Just the pace of go-lives. We have dozens and dozens of go-lives happening here on a quarterly basis and so as they go live, more spend begins to run through. And it is a very rewarding thing, I appreciate you calling it out. When you say, 680 billion cumulative, but just at the end of last year, that was roughly half of that. So this is accelerating, and for us, it's something to be proud of because it's a leading indicator to the value that we're delivering for our customers and that feels very healthy.

Ross MacMillan -- RBC Capital Markets -- Analyst

That's great, and Todd, maybe a quick one for you. I heard you on the early renewals on billings. Should we most of those would have fallen into Q1 and then, I guess as we're thinking about calculated billings for Q1, we should include that as well as the deferred write down on our math?

Todd Ford -- Chief Financial Officer

That's correct. Those were definitely Q1 renewals that renewed in Q4. And part of that was upsells and expansion within those accounts. So a lot of times, they'll do them all at once. But yeah, definitely the write off related to 606 and then the quarterly renewal boundaries will be something that would impact Q1 calculated billings.

Ross MacMillan -- RBC Capital Markets -- Analyst

Understood. Congrats again.

Operator

We'll go next to Joseph Foresi with Cantor Fitzgerald.

Joseph Foresi -- Cantor Fitzgerald -- Analyst

Hi, I wonder if you could just maybe break out for us again, any thoughts about expenses in the upcoming year. I think you talked about in your initial remarks a couple of items, and then the Q2 conference, but if you could just point to a couple of different expensive lines that we should be billing in for cap backs.

Todd Ford -- Chief Financial Officer

For cap backs, or the other operating income?

Joseph Foresi -- Cantor Fitzgerald -- Analyst

I'd take both, if you wanted to.

Todd Ford -- Chief Financial Officer

Okay, I thought you said cap backs. From a cap backs perspective, we can hit that first, obviously, very low cap backs requirements at Coupa. Typically, on a quarterly basis, it's somewhere between a million and $1.5 million. So I wouldn't say there's anything material there. And then when you look at the other expense lines, too when we noted a pickup in some of the cost of sales related to the Simeno acquisition as a fair number of that headcount. It's cost of sales and not the full quarter impact from there. But other than that on a cost of sales perspective, we're going to continue to hire people on a professional services organization or support organization, et cetera. So I would view that as kind of normal run rate expense increasing. I would continue to invest heavily in R&D, and particularly in the first half of this year, we're going to be hiring more aggressively R&D people, as compared to historically.

Sales and marketing, kind of the same thing. That's actually something we look at on a quarterly basis and adjust based upon what we're seeing on the market, how we performed. Certainly, from a G&A perspective as a percentage of revenue, I would expect to see that come down in the second half of FY 19. We just recently gotten through socks, 606, a lot of M&A activity last year, so G&A expenses were definitely higher than last year, as a percentage of revenues and I would expect it to trend over the next several years.

Joseph Foresi -- Cantor Fitzgerald -- Analyst

Got it. And then maybe you could just highlight for us a couple of areas of growth. And maybe you can do it in two different categories, geographically and then from a functionality standpoint. I know you talked about, I guess it's R20. So maybe you can just give us some of those areas. Thanks.

Rob Bernshteyn -- Chief Executive Officer

Sure, so maybe I'll take the functional first, and this is something we've shared over time. But I think it's important you understand the underlying strategy, which is an organic transactional engine that's collectively exhaustive in terms of all spend areas, which includes procurement, expenses, and invoicing. Something that we're continuing to go deeper and deeper into, to address virtually any permutation of spend across those three different spend approaches. And then a whole host of what we call power user applications. Applications that wouldn't necessarily be used by everyone in the company, but used by certain individuals to help get more and more value out of that ongoing spend, and able to optimize that outgoing spend. So we continue to make strides in our spend analytics engine, our contract life cycle management, our contract collaboration capabilities, our supplier information management capabilities, our inventory management capabilities, and much more. I'm looking forward to sharing a lot more of what we've done and what we plan to do with this strategy at our upcoming INSPIRE conference here in May.

In terms of geographic expansion, we started, again, historically in the United States, expanded into all areas of Europe, and then more recently, I've been going into emerging market areas both north of us in Canada, down into South America, certain areas of South America, and in APAC, Australia and areas around APAC, specific countries where we can land those initial key marquee accounts and build our business around that. Most strategies around product depth and breadth and expansion, as well as geographic depth and expansion, continue to be areas that we execute on and monitor quarterly and carefully. So we're getting the best bang for our buck in terms of our expenditures and delivering the best future for the company.

Joseph Foresi -- Cantor Fitzgerald -- Analyst

Thank you.

Operator

And from SunTrust Robinson Humphrey we'll hear from Terry Tillman.

Terry Tillman -- SunTrust Robinson Humphrey -- Managing Director

Thank you and good afternoon gentlemen. I'd like to echo other people's comments, nice job on the quarter. Rob, I guess the first question is in terms of community intelligence, post the quarter or post-mortem, have you been able to look at some of those larger deals, some of those signature wins in some of these new country markets? Or even in the U.S. and see how relevant analytics in your emerging strength and analytics and community intelligence has to play in the field and where are you potentially on a monetization cycle with community intelligence?

Rob Bernshteyn -- Chief Executive Officer

Sure, Terry and thanks for the question. This is an area that's very exciting for us and an area that a lot of our energy is focused on because we just see the opportunity so clearly in front of us. There's no question that some of the larger deals, as well as mid-market deals, across geographies, had a component of understanding on behalf of the prospects about what we have done with community intelligence and what we're planning to do in community intelligence. We have this really once in a lifetime opportunity to take this huge multi hundred billion dollar transactional spend data store and normalize and sanitize data to distill insights that can be made available to individual customers so they can all get smarter and smarter about the way they employ their spending. And we're doing that today in a host of areas from operational prescriptive community intelligence to key domain community intelligence around suppliers you should or shouldn't work with, around areas of operations that you should fine-tune, or make quicker, or better. So absolutely, this vision, as well as the reality of what we've created to date in our releases, is something that our prospective customers and now many of our customers are not only using but gaining with. And we think we're just at the very, very beginning of that.

In terms of how that plays out from a monetization perspective, again our strategy has always been to be paid fairly for the values that we're delivering. So the more value we deliver to our customers, the greater the likelihood we'd be able to command the right price point. And so we can dissect these things with the many different products, and charge that way, or we can charge as part of our platform for community intelligence. We've got a whole host of ways that we're doing that, again, I'm looking forward to sharing more about this at INSPIRE, but very much at the tip of the iceberg for what's possible for us.

Terry Tillman -- SunTrust Robinson Humphrey -- Managing Director

That sounds good. I guess Todd, just one for you. Not to keep you out of this. One of the things that we've been watching is to see some of the purposeful investments and focused investments and mid-markets make that a very repeatable business as opposed to just orders coming in. And I may not be articulating that perfectly right, but in terms of the investments you're making to create more volume and velocity in mid-market, where are you and are you seeing some fruits of the labor there? Thank you.

Todd Ford -- Chief Financial Officer

I'm going to let Rob take this one.

Rob Bernshteyn -- Chief Executive Officer

Yeah, sure. I'm happy to take it. I appreciate the question, Terry. So let me break that off a little bit in two parts. I would say in terms of the things that were doing, we absolutely are focused on No. 1, being able to better identify targets in every sector, but let's talk about that sector. So much smarter about specific industries, and sub-industries where there's a higher likelihood or propensity to work with us, we're getting better at that. We're getting much better at formulating our overall packaging strategy, so that prospective customer's more likely to need or desire the things that we offer and packaged properly.

We're also getting much better at the best practices deployments for those types of customers because they tend to be a little bit more streamlined than a large enterprise deployment where there may be many more moving parts. I think we're getting better at commanding the right price points and winning more business in those markets. So all of that is going well.

At the same time, I will tell you that we continue to be very careful and very thoughtful about the way we expend our resources from both the sales and marketing efficiency perspective and just an overall company efficiency perspective, as thoughtful executives. So we don't want to put all of our eggs in certain baskets that may or may not produce over the longer term. So we're very, very thoughtful, very careful about it. But I will tell you it continues to be a very positive element of our business, it contributes to our ongoing growth, and I don't see that changing anytime soon.

Terry Tillman -- SunTrust Robinson Humphrey -- Managing Director

Okay, thank you.

Operator

We'll go next to Koji Ikeda with Oppenheimer.

Koji Ikeda -- Oppenheimer -- Analyst

Oh great, congrats on the great quarter and thank you for taking my questions. I just got a quick question here on the partner network. One of the big positives that we hear out there on Coupa is a very enthusiastic partner network that's investing heavily in the Coupa practices there. I guess, what's the best way to think about the partner network over the next 12 to 24 months and its contribution to your growth?

Rob Bernshteyn -- Chief Executive Officer

Yeah, thank you for that question. That's a very thoughtful question. Now the "o" in Coupa stands for open. And we've designed our product to be very, very open, such that partners, technology partners can build capabilities that when working with Coupa would provide a more than one plus one equals two. We would rather one plus one equals two point five for the customer and to do it quickly and seamlessly. We continue to see that program grow, and more and more technology is coming to us for those cases that we may not be building anytime in the near future, but there are things that are their core competency and could help our customer. So we would anticipate that continuing to grow.

I think the other area of openness is not just technology partners but open in spirit. To working with existing encumbering ERP providers, getting continually certified, so we can seamlessly work with any ERP system. In many of these global deployments were doing, we're seeing many instances of one ERP three times, another ERP four times, a third ERP three times. 16, 17, 18 different instances of ERP and Coupa is the one Cloud solution of choice for all of spending. That sits on top of all of them. Postmodern ERP paradigm that Gartner and others talk about. So we're going to continue growing this way and we think it's really the way applications and approaches should be in the future and we want to be on the very front end of that.

Koji Ikeda -- Oppenheimer -- Analyst

Great, thank you so much and congrats again on the quarter.

Rob Bernshteyn -- Chief Executive Officer

Thank you.

Operator

From JMP Securities, we'll hear from Pat Walravens.

Matthew Spencer -- JMP Securities -- Analyst

Hi, this is Matthew Spencer on for Pat, thank you for taking our questions and congratulations on a great quarter. Could you talk about any changes Mark Riggs has made as Chief Customer Officer since you brought him in end of last year? Should we expect Coupa to hire any other C level executives this year? Thanks.

Rob Bernshteyn -- Chief Executive Officer

Thanks for your question Matt. First of all, we really enjoyed getting to know Mark and I think I speak on behalf of all my colleagues here on the management team. He's brought in a great deal of experience having been a Customer Success Officer in the past. And also a very open mindset to understanding that just taking approaches from the past and replicating them is not a recipe for necessary success.

Now I would say in that area of our business, we've had a very good and well-structured organization. But as we continue to scale into the future, we want to make sure it not only stays that way but it continues to get better and better. Our third core value of "strive for excellence" comes into play. So we have seen some great meetings that have been conducted by him with SIA leaders coming to headquarters, real thoughtfulness on how to get more leverage out of certain areas, not continually have repeat processes in certain sub-departments but find ways to create centralize them, more subservice, get smarter and smarter about how to prioritize tickets and how to manage tickets and how to be more responsive to customers. That area is really something that we anticipate getting more and more operationally efficient, and more and more customer oriented as we continue to scale the business and we're excited about his leadership in that area.

Matthew Spencer -- JMP Securities -- Analyst

Thank you and can you just maybe some find some high-level bullet points on what's driving the traction you're seeing beyond your corporate procurement offerings? Thanks.

Rob Bernshteyn -- Chief Executive Officer

Sure, well I think that's twofold. One is obviously, one of the things we're most proud of, is that we see a lot of companies out there, they simply want to work with us. They see a company that has values that align with theirs, they see a company that's willing to do what it takes to drive measurable results for them, using what is a phenomenal modern technology platform.

And speaking of the technology platform, the second piece is that they're seeing it as a platform. When we were growing six years ago, five years ago, it was still a matter of "Do you have the features and functions of this subarea or can you meet the requirements of this area?" We're well past that. We've done dozens and dozens of releases, we've been tested by some of the largest companies in the world. Now of course, it's a never-ending story and you want to get better and better and better. But I think customers are really starting to see us as the business spend management platform that we're becoming. And because of that, they're betting on that platform for their future and that's really rewarding for us to see.

Matthew Spencer -- JMP Securities -- Analyst

That's helpful. Thank you very much.

Operator

We'll hear next from Ken Wang with First Analysis.

Ken Wang -- First Analysis -- Analyst

Hey, thanks for taking my question and congratulations on a very strong close to the year. I'm just wondering, can you comment a bit on just sales and marketing, it was down at the projected revenue quite a bit in Q4. Was that any up sale success, or was it sales productivity, any comment there would be really helpful.

Todd Ford -- Chief Financial Officer

I think it was a bit of both. One of the things that we saw with some of the early renewals with some of our larger customers expanding, and historically our base expansion rate has been in the 107 to 110 range and in Q4 it was actually above that range. I would caution that I don't necessarily know that's a long-term trend yet, so I wouldn't get ahead of ourselves there, but I definitely did see significant expansions in Q4 as well.

Also new ACV growth. We don't break that number out, but if you look at the sales organization, they executed quite well, and as Rob referenced, part of that was the traction with the systems integrators, the sense of legitimacy in the markets. So all those things contribute to sales efficiency and to Steve's credit, over the last year, he's made some changes to the sales organizations. Not wholesale changes but in key roles and we started to see the impact of that in Q4 as well, so. I wouldn't necessarily point to one specific thing, but just overall it's just solid execution.

Ken Wang -- First Analysis -- Analyst

That's helpful, thank you. And any notable change in growth or net retention rate during the quarter?

Todd Ford -- Chief Financial Officer

So the growth renewal rate historically, or I should say over the past several quarters, has been in the 94% to 95% range, and in Q4 it was slightly above that range. So once again, we did some pickup in the gross renewal rate, albeit small but definitely trending in the right direction and then the net retention rate, as I mentioned, it was greater than 110%.

Ken Wang -- First Analysis -- Analyst

Thank you. Congratulations again.

Operator

And we'll hear from Brian Peterson with Raymond James.

Brian Peterson -- Raymond James -- Vice President

Thanks for taking the question and congrats guys on a great quarter. So just wanted to hit on a few quick ones. So Todd, any update on the customer account, I'm sure we'll get that in a K, but anything you can share there? And I guess, just thinking through seasonality, obviously, there's a lot of moving parts particularly as it relates to billings, but Todd, should we increasingly model seasonality of billings more toward a fourth quarter ramp going forward? Just trying to -- how should we think about that?

Todd Ford -- Chief Financial Officer

Let me take the billings question first. Clearly, there's seasonality in our business, especially from a new ACV perspective and if you look historically on an absolute dollars basis, Q4 is by far the biggest number from a billings perspective, followed by Q2. Q1 and Q3 are the lower quarters. But definitely, we would expect that trend to continue.

With respect to customer account, we will update that in the K, one of the things we're going for right now is what is the best way to communicate that to you guys, because we do have customer account from acquisitions as well, so we'll update that in the K and find out the way to best represent that at that time.

Brian Peterson -- Raymond James -- Vice President

Good. Thanks, Todd.

Operator

We'll move on to Needham & Company's Peter Levine.

Peter Levine -- Needham & Company -- Analyst

Thanks guys, and congratulations on the quarter. Saved the best for last. Just to piggyback off some of the prior questions on services, in terms of partner leg implementation, obviously better reserve out of you guys. Can you quantify any impact for bookings, change in tax rate or the deal size entering the final partners and I don't know if you gave the match rate but can you provide the percentage of bookings or ACVs that are partner influenced?

Rob Bernshteyn -- Chief Executive Officer

What was the last part of the sentence? You cut off at the very end of the sentence.

Peter Levine -- Needham & Company -- Analyst

Oh, the percentage of bookings or ACV that is partner influenced?

Rob Bernshteyn -- Chief Executive Officer

Partner influenced. Got it. That's exactly right, and that's the right word, influenced. This is not a direct correlation, there's no causal effect that we're seeing as markets between a partner and directly handing over businesses, nor the other way around. But there definitely is a large portion of influence and what we see historically anywhere between two thirds and maybe 70% or so of our deployments and new customers have partner influence and obviously in the positive direction.

So that's very encouraging for us so that continues to be the metric that needs to be in that kind of range, and so what we're focused on in getting wider and wider in terms of awareness. So not only all the partners with the deep relationships around the world, but prospective clients hear of us, also clients themselves hear of us from a branding perspective and realize that there's a business spend solution for them, we can help them optimize their spending. And there are great folks that can help implement it for them, in a best practices way. So very encouraging in that area as well.

Peter Levine -- Needham & Company -- Analyst

Just a final question, Todd, for ASC 606, can you talk about the amortization period for your sales commission? Did that change?

Todd Ford -- Chief Financial Officer

Yeah, it has changed but the impact in FY19 is going to be muted. It's a positive for FY19 but not as much as you might think, and the amortization period has increased to five years compared to three, but the benefit is offset by the fact that approximately $12 million we've already expensed in prior years, is being pulled back under the balance sheet, and will be expensed again over the remaining amortization period. So we won't start seeing a meaningful benefit until the majority of recapitalized expenses have bled off of the next few years. But it's a slight positive for FY19 in sales expense.

Peter Levine -- Needham & Company -- Analyst

Thank you for taking my question.

...

Operator

And that will conclude today's conference for today. We do thank you all for joining us. You may now disconnect.

Duration: 58 minutes

Call participants:

Nicole Noutsios -- Investor Relations 

Rob Bernshteyn -- Chief Executive Officer

Todd Ford -- Chief Financial Officer

Stan Zlotsky -- Morgan Stanley -- Analyst

Mark Murphy -- J.P. Morgan -- Analyst

Joel Fishbein -- BTIG, LLC -- Managing Director

Ross MacMillan -- RBC Capital Markets -- Analyst

Joseph Foresi -- Cantor Fitzgerald -- Analyst

Terry Tillman -- SunTrust Robinson Humphrey -- Managing Director

Koji Ikeda -- Oppenheimer -- Analyst

Matthew Spencer -- JMP Securities -- Analyst

Ken Wang -- First Analysis -- Analyst

Brian Peterson -- Raymond James -- Analyst

Peter Levine -- Needham & Company -- Analyst

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