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Coupa Software Incorporated (COUP)
Q4Â 2020 Earnings Call
Mar 16, 2020, 5:00 p.m. ET
Contents:
- Prepared Remarks
- Questions and Answers
- Call Participants
Prepared Remarks:
Operator
Good day, ladies and gentlemen, and welcome to the Coupa Software Fourth Quarter Fiscal Year 2020 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. [Operator Instructions] As a reminder, this call is being recorded.
I would now like to introduce your host for today's conference call, Mr. Steven Horwitz, VP of Investor Relations. Mr. Horwitz, you may begin your conference.
Steven Horwitz -- Vice President of Investor Relations
Thank you. Good afternoon and welcome to Coupa -- 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, market size, products, competitive position, potential growth opportunities. Our actual results may be materially different. Forward-looking statements involve risks, 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, 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. And if you prefer to access the replay via the phone, you can find that information on the earnings release.
Unless otherwise stated, growth comparisons are against the same period of the prior year.
With that, I'll turn the call over to Rob. Rob?
Rob Bernshteyn -- Chief Executive Officer
Thank you, Steven. Hello, everyone, and thank you so much for joining us. Before we begin, let's acknowledge the topic of the coronavirus. Our thoughts and prayers are with anyone and everyone affected globally. At Coupa, our top priority has been and will continue to be ensuring the health and safety of all our colleagues customers and partners around the globe. We're meeting daily and taking guidance in trusted health organization such as the CDC and the World Health Organization for everyone's health and safety and implementing safeguards accordingly. As one global community, let's hope for the return to normalcy as soon as possible.
As far as our business, we have and will continue to execute assertively despite any and all obstacles in our path. We're back in California after another busy year and well into a new one. Reflecting on the year and on behalf of all my Coupa colleagues and myself, I am proud to share that for our full fiscal year we delivered a revenue growth rate of 50% and were once again non-GAAP profitable. It is my strong sense that these annual results demonstrate the value the business spend management is able to offer companies around the world and support the strength of our undisputed leadership position in this rapidly evolving space, which is still in its early stages of maturity.
Speaking of our business, we here at Coupa have been successfully delivering value as a service to our customers in virtually every vertical around the world for over a decade. This fiscal year marks the first time that we had customer go-lives on virtually every single content. Let me now highlight one exciting Q4 example for each. It's only appropriate that the first one I mention be a company that has been deeply impacted by recent events. In North America, United Airlines, one of the world's largest and best known airlines has recently gone live with Coupa BSM, with Coupa, United is providing its employees an efficient intuitive user experience that gives them more time to serve their customers while delivering control and visibility of third-party spend. Within the first three months, United was 2.5 times -- 2.5 times the amount of spend going through Coupa compared to the previous 12 months with their legacy system. They now have spend visibility, spend agility and spend control.
In Asia, Gojek, a leading on-demand multi-service platform and digital payment technology company also Coupa's first customer in Indonesia has gone live with Coupa BSM. Using Coupa as a single platform to manage spend across the region, Gojek is increasing spend under management and peel [Phonetic] backed invoices over their first year as they streamline and standardize process to support their international expansion across Asia.
In Europe, Telia Company, a new generation telco is providing communication services to help millions of people be connected, communicate, do business, and be entertained. Telia recently replaced seven systems and fragmented manual processes with Coupa, in addition to enhancing value from suppliers, improving costs, and optimizing cash flow, Coupa is helping Telia work toward its sustainability goals of achieving zero CO2 and zero waste within its operations and across its entire supply chain by 2030.
As we move into the Southern hemisphere, first in South America, let me highlight Braskem, the largest producer of thermoplastic resins in the Americas and of polypropylene in the United States. We recently went live with Coupa BSM for both direct and indirect purchases. With Coupa, Braskem has seen rapid user adoption and within the first four months they successfully completed more than 8,000 sourcing events covering services, raw materials, and maintenance.
Moving on to Africa, Sibanye-Stillwater, an international precious metals mining company is now live on Coupa BSM in South Africa. With Coupa, Sibanye-Stillwater is focusing on enhancing contract coverage standardizing spend processes and improving their overall effectiveness of their business spend environment. Let's finish up in the land Down Under, Australia. Volkswagen Group Australia known as VGA is the sole importer and distributor of Volkswagen passenger and commercial vehicles in Australia, which also includes top brands such as Skoda. VGA recently went live with the comprehensive Coupa platform and are now gaining deeper visibility into their spend while maintaining sustainable controls around budget and delivering a great user experience. VGA is leveraging Coupa to maximize pre-approved contract back spend and to electronically exchange POs and invoices with their consolidated supplier base. VGA is also using Coupa to achieve automation and efficiencies with enforcing contract lifecycle management and supplier management, while using analytics to report on all these areas within Coupa.
These go lives that I've highlighted are indicative of the broad application of our comprehensive platform also known as the letter C in Coupa. The more our customers utilize the platform, the more return they're able to yield back to their stakeholders in visibility, control, compliance, automation, not to mention saving. In addition to these go lives, we finished the year strong welcoming some wonderful new customers into our rapidly growing and expanding community that is now more than 1300 customers strong. Q4 wins include American Signature, AstraZeneca, Blue Sphere Singapore, BMW Group, Brex, Fox Corporation, Grupo Planeta, John Lewis Partnership, Lucid Energy Group, Orangetheory Fitness, Quilter, Shinsei Bank, Skyservice Business Aviation, The University of Texas System and Wintershall Dea. In Q4, we were excited to welcome these and dozens of other new customers to our community.
Now let's talk about what I believe is one of the most exciting innovations in enterprise software, Community Intelligence. Within Coupa over 30% of our customers visited their prescriptive insights page, the P in Coupa on average approximately once a week during the fourth quarter. And the number of views and prescriptive actions are growing, all these prescriptions are of course powered and driven by Community Intelligence.
Let me give you a real world example of how these insights can help drive and sometimes influence a company spend strategy for the better. Co-op, is one of the world's largest customer cooperative, driving value from millions of members and employing 70,000 people. Co-op supplies food, insurance, legal services and even funeral services to local communities through more than 2,500 stores in the UK. In 2018, Co-op launched fuel for growth, a strategic initiative to reduce costs in order to fund an ambitious growth agenda called stronger co-up stronger community. The success of this initiative hinged on creating a leaner and more agile operating model. For this, they turn to Coupa to identify what would drive the greatest process improvements across its BSM activities. Initially there focus was to reduce approver cycle times for acquisitions and invoices while also introducing greater spend control. Coupa Community Intelligence insights illustrated that their approval cycle times are actually in line with community standards, but there was a sizable opportunity to increase savings by driving a higher percentage of spend through pre-negotiated contracts. Community Intelligence showed co-op, the best-in-class peers had on contract spent percentages that were 28 times higher than theirs and also prescribed which specific items they could move to catalog. These prescriptions were based on what cost buyers were searching for and best practices from our expansive Coupa community. Based on these insights Co-op is increasing usage of preferred suppliers and taking advantage of pre-negotiated saving. As a result Co-op is better able to meet its fuel for growth goals and service members and communities more effectively.
As I've said in the past, we are in the early innings of the value creation that Community Intelligence can provide to our customers now powered by nearly $1.7 trillion in cumulative spend under management with over one-half a trillion in the past year alone. We will continue to expand upon the power of our technology and our community in this area to bring our customers more and more of the value that no other company in the world could provide.
Now let's move on to Coupa Pay. Though we are still quite early on with pay, we have seen strong momentum in the addition of new customers and in early deployment. And we're excited about what Pay will bring to Coupa customers as a core transactional module in our BSM platform. Today I want to highlight one new Coupa Pay customer from the Enterprise World and one from mid market. The enterprise company, I'd like to highlight is aptly named Enterprise Holdings. Enterprise leads the transportation services industry with a world-class portfolio of brands like enterprise, national, Alamo rent a car and others. There are hundred thousand team members operates in 100 countries with a fleet of over 2 million vehicles. Enterprise is currently implementing Coupa's comprehensive platform to drive global BSM transformation. Coupa Pay will connect Enterprises' supply base to readily available working capital, also Coupa Pay virtual card optimizations will improve credit card control, visibility and reconciliation.
In the mid-market, Redfin is also Coupa Pay customer that we are excited to be working with. Redfin is a brokerage that redesigned real estate with map-based technology and a different set of values that put customers first. Since their launch in 2006, they have helped customers buy or sell more than 235,000 homes worth more than $115 billion. Similar to what we are experiencing with many Coupa customers, Redfin originally looked to us to improve their overall BSM process and also decided to include Coupa Pay. Last month Redfin went live with Coupa Pay using both our virtual card and invoice payment solutions. They have now begun the digital transformation of their payment process for 3,500 active suppliers, across 8 subsidiaries and expect to increase their credit card, rebates, reduce invoice processing costs and increase P2P process efficiency. No other payments offering in the market is able to leverage Coupa's core competencies in BSM and AP automation combined with widespread adoption within our customers ecosystem.
Using Coupa Pay customers can take advantage of every payment rail within a single interface. We also uniquely allow customers to leverage their existing bank relationships in one fully integrated platform. Our rich partner ecosystem allows us to provide our customers with a truly open platform. The letter A in Coupa. We will -- we will continue to provide more updates as the Coupa Pay story evolves.
Now let's move on to the Coupa Business Spend Index or BSI, a leading indicator of economic growth based on analyzing hundreds of billions of dollars in aggregated an anonymized business spend. Today, we published the Q1 2020 Coupa BSI. Before getting into the results, I'd like to once again reiterate that the BSI data is not indicative of the trends we're seeing in Coupa's business. Our Q1 BSI suggests that similar to the previous quarter that unsurprisingly US businesses continue to remain cautious about the economy at an industry level spend sentiment in the retail sector remained above trend, but declined compared to recent quarters. At the same time spent sentiment in the manufacturing sector continued below trend and declined compared to recent quarters. Given the global emergence of the coronavirus, we also analyzed purchase patterns on potentially impacted categories over the last several weeks. Our results predictably showed, more than 30% year-over-year increase in office sanitizing equipment. Similarly, we saw a more than 75% year-over-year increase on personal protective equipment such as masks and gloves. At the same time we saw a 45% year-over-year decrease in business travel spend and 21% year-over-year decrease in purchases from the -- from the category representing durable goods. We will continue to closely monitor these trends both at an overall BSI level as well as at a category level and make the data available on www.spendindex.com over the coming months.
Let's move on to M&A. During Q4 we acquired travel optimization leader Yapta. Yapta is now Coupa travel saver. Let me illustrate how Coupa travel saver works with a simple real life example. You've booked your flight and hotel for a business trip. Prices subsequently dropped however, rarely would an employee check to see if prices have dropped and looked to get rebooked. The idea of the employees would waste their time like this is a complete and total hope. This is where Coupa travel saver comes in. The solution use technology to dynamically monitor airfare and hotel prices and takes the action of rebooking de-booking and rebooking virtually identical reservations when prices drop to a point where there will be worthwhile net savings to the customer. This all happens on the back end, without any distraction, effort or work by the employee themselves. Savings are automatically delivered to the customer with a percentage going to Coupa as revenue.
Most of you have probably heard me say many times that the best UI is no UI. To that end, Coupa travel saver is the epitome of our user centric vision. The letter U in Coupa. Historically on average, Coupa travel saver has saved companies 2% to 4% of their corporate travel budget resulting in hundreds of millions of dollars of savings for customers. Furthermore with our customers having the ability to turn on travel saver functionality immediately, that's about as accelerated as you can get, a real representation of the letter A in Coupa.
As you'd likely expect this acquisition fits very well into our overall M&A strategy. As I've noted before, anytime we look at a potential acquisition we focus on -- we focus on adding technology components that maximize and enhance the value of our organic transactional core engine and/or augmenting this engine with key advanced power applications to maximize the value of these transactions. This acquisition accomplishes both most importantly, the acquired company's culture and values are in close alignment with ours and we are already well into working as one.
Now speaking of culture and values, let me share a conversation I had at a recent prospect meeting -- prospect meeting. When discussing their interest in Coupa, it was said to me you guys are known for getting the job done. And I thought for a moment about what a wonderful complement this was, Coupa is known for getting the job done. I was filled with a sense of pride and appreciation regarding all my fellow Coupa colleagues around the world who pour their hearts into delivering meaningful measurable value to our customers every day through the embodiment of our core values in their work. So, in that spirit let me take a moment to recognize a few of them today for their outstanding accomplishment.
Let me start with Felipe Lemos Carvalhedo, who has recently been recognized by his peers for embodying our number one core value of ensuring customer success. He's always willing to help a colleague or customer at the drop of a dime and is committed to making other successful.
Next, I'd like to call out Jerome Josserand, who was recently recognized for focusing on results. Jerome takes real ownership for delivering the most meaningful results to our customers, day in and day out he exemplifies what strong leadership is all about. And when we talk about striving for excellence, our third core value, Rebecca Morris from our analyst relations team was recognized. She manages some very complex relationships with integrity, she is always collaborating, educating, and transparently showcasing Coupa to the analyst community. It is these kinds of characteristics that have helped cement us as the undisputed leader in our space. Congratulations and thank you Felipe, Jerome and Rebecca.
Now last quarter we talked about a few instances in which industry analysts have publicly recognized Coupa's platform. Since this -- this is the end of the fiscal year, I want to highlight that Coupa participated in 19 analyst reports in calendar 2019 and was named a leader, all 19 times, with reports covering every area of business spend management. Adding to the many accolades that we received during the year, the Forrester Wave for eProcurement named Coupa the leader in Q4 for the third consecutive time, stating Coupa continues to set the bar for customer success for the entire business applications industry. We could not be more proud.
Now in closing, let me say this. There are thousands of organizations out there who don't have spend visibility, spend compliance, spend control and automation and many of them don't even realize that they need it. Coupa has been solving that problem for well over a decade regardless of economic conditions. Now more than ever we believe this value proposition should be an even higher priority for all companies globally.
With that let me -- let me now hand the call over to our Chief Financial Officer, Todd Ford. Todd?
Todd Ford -- Chief Financial Officer
Thanks, Rob. And good afternoon everyone. We finished the year strong as we continue to deliver on the commitments we've made to our stakeholders, and our strong execution is reflected in our key metrics and financial results in fiscal 2020. Total revenue for Q4 was $111 million, up 49% year-over-year and for the year total revenue was $390 million, up 50% year-over-year. Subscription revenue was up 46% year-over-year for Q4 and up 48% for the full year. Professional services and other revenue for Q4 was $13 million, which includes the benefit of a few strategic direct services arrangements that continued into Q4 and are now nearing completion.
For fiscal year 2020 full year calculated billings were up 49% over the prior year. In Q4, calculated billings were $181 million by far our largest ever quarter. The strong result was delivered despite a difficult year-over-year compare due to the $6 million of acquired deferred revenue from the Hiperos acquisition at the end of Q4 of fiscal 2019.
Let's now turn to margins and results of operations. Our Q4 non-GAAP gross margin was 73% this was comprised of subscription, non-GAAP gross margin of 81.2% and professional services and other non-GAAP gross margins of 10.4%. For the year non-GAAP gross margin was 72.6%. In Q4, we delivered non-GAAP operating income of $13.3 million or 12% of revenue and non-GAAP net income was $15 million or $0.21 per share on 72.2 million diluted shares. For the year non-GAAP operating income was $31.9 million or 8% of revenue and non-GAAP net income was $36.6 million or $0.52 per share on 69.9 million diluted share.
Cash and investments at year-end were $767 million, which included approximately $100 million paid in Q4 for Yapta. Operating cash flows in Q4 were $22 million and free cash flows were $20 million, making this our second consecutive quarter over $20 million in operating and free cash flows. For the fiscal year, operating cash flows were $68 million or 17% of total revenue and free cash flows were $56 million or 14% of total revenue. Our Q4 cash flow results significantly exceeded our original expectations. This was driven by great execution across the board, in particular I'd like to call out Rick, Elaine, Rachel, Kathy, Ariel, Andrew and Sal for their contributions for the strong Q4 cash flow results.
Before moving on to guidance, let me touch on Coupa Pay. As Rob noted in his remarks, we are still early on the Coupa Pay journey with invoice payments having been made generally available just a few quarters ago. We have a strong pipeline of prospects and current customers progressing through sales cycles. We added many new customers in Q4 in both enterprise and mid-market and Coupa Pay has become more value component of the core BSM platform. This is evidenced by the fact that in fiscal 2020 on average annual subscription fee for new business deals that included Coupa Pay were more than 20% higher versus deals that did not include Coupa Pay. Now that early Coupa Pay customers are going live, transaction volumes are beginning to occur, while it's still too early to draw inferences from the transactional data as Coupa Pay continues to evolve, we will share additional metrics as they become relevant and statistically significant.
Now let's turn to guidance. As you consider Q1 guidance, we'd like to remind you that we recognize revenue based on the number of days in a quarter and since there are fewer days in Q1 due to February, steady state subscription revenues are seasonally lower by several million dollars in Q1 compared to Q4. For the first quarter, we expect total revenue of between $111.5 million and $112.5 million, this includes subscription revenue of between $101.5 million and $102.5 million taking to account the fewer number of days in February and professional services revenue of approximately $10 million. Our Q1 guidance contemplates $1 million to $2 million from Coupa travel favor, formerly known as Yapta. As Rob discussed, travel favor identify savings opportunities for customers by dynamically rebooking travel and taking a share of the real life savings as revenues. While it's uncertain at this time, we expect that the coronavirus outbreak could negatively impact travel favor revenue due to a reduction in global travel activity and that was factored into our guidance.
We expect Q1 non-GAAP gross margins of 70% to 71%, non-GAAP operating income of $4 million to $5.5 million and non-GAAP net income of $0.06 per share to $0.08 per share on 72.5 million weighted average diluted shares for the quarter. Furthermore after generating in excess of $20 million in free cash flow in each of the past two quarters, we expect Q1 cash flows to be breakeven or slightly better. For calculated billings, we expect to exit Q1 with a trailing 12-month growth rate of 45%, this includes an approximate 5% pull forward from Q2 due to timing of renewals and contracted billings. As you roll your models forward for the year, please also remember that Q2 will be a difficult compare due to the Exari acquisitions we completed in Q2 last year.
We now like to share our initial expectations for the fiscal year ending January 31, 2021. From a revenue visibility perspective going into the year, remaining performance obligations or RPO at the fiscal -- at the end of fiscal '20 was $725 million, up from $499 million at the end of fiscal '19 representing a year-over-year increase of 45%. As a reminder, our RPO excludes customer contracts with a duration of one year or less and will not incorporate any contribution from travel favor as revenues are typically recognized has built. For the full year, we expect total revenue of $488 million to $490 million. This range assumes that professional services will be flat to slightly up year-over-year with lower contribution from direct services engagements compared to the prior year. We expect non-GAAP gross margins of 70% to 71% and non-GAAP operating income of $21 million to $23 million. As a reminder, our sales and marketing expense spike in Q2 by approximately $3 million to $4 million, due to our annual INSPIRE user conference.
For the full year, we expect non-GAAP net income of $0.30 per share to $0.33 per share on 73.5 million weighted average diluted shares. Although our customer collections at the end of fiscal '20 significantly exceeded our expectations, we still expect operating and free cash flows to be up year-over-year on an absolute dollar basis.
That concludes our prepared remarks. As we move to Q&A, please be mindful that we have a long queue of questions. In order to accommodate everyone, please limit your questions to one and we'll circle back, time permitting. Now we would be happy to begin fielding your questions. Operator?
Questions and Answers:
Operator
Thank you Mr. Ford. [Operator Instructions] The first question comes from the line of Chris Merwin.
Christopher Merwin -- Goldman Sachs -- Analyst
Hey thanks so much for taking my question. And congrats on another great quarter. Rob, I just wanted to ask about the nature of discussions with customers at the moment. Obviously, we're in a pretty unique time here and I think you at Coupa got [Indecipherable] also unique vantage point into business spend, particularly for IT. So if you can just comment at a high level about the discussions and then in particular how it relates to Coupa as it relates to sales cycles and everything else. Thanks.
Rob Bernshteyn -- Chief Executive Officer
Well, those conversations continue as you -- as you would expect. Our value proposition is our value proposition and in many ways, there is a greater focusing on controlling spend having the agility and the controls you needed at this difficult time. Unfortunately, many of them are being done over phones and video conferences, but that's proving to be fairly effective for everyone at the moment. Our demos are being done the same way and all of our correspondents is being done in the same way, but I'm feeling pretty good about -- about that. And as the weeks and quarter continues, we'll see if that, how that evolves.
Christopher Merwin -- Goldman Sachs -- Analyst
Great, thank you.
Operator
The next question comes from the line of Michael Turrin.
Michael Turrin -- Wells Fargo -- Analyst
Hey there, thanks, good afternoon. Todd, any change in terms of capital allocation framework, given the recent downturn in the markets? Does M&A remain a core piece of the strategy with valuations coming in here or is there any more focus on just keeping the war chest stocks here for now?
Todd Ford -- Chief Financial Officer
Nothing has changed from that perspective, it's -- it's business as usual. Obviously valuations may be going down, but our M&A strategy has always been, first and foremost is it a cultural fit and the market buy versus build, significant input from our engineering team and clearly value as part of that component as well. But right now, I would say, our strategy there has remained the same.
Michael Turrin -- Wells Fargo -- Analyst
Got it. Thank you.
Operator
The next question comes from the line of Stan Zlotsky.
Stan Zlotsky -- Morgan Stanley & Co. LLC -- Analyst
Perfect. Thank you so much, guys. Just going back to Coupa Pay for a second, what do you guys have baked in as far as contribution from Coupa Pay in your fiscal '21 revenue guidance?
Todd Ford -- Chief Financial Officer
Stan, this is Todd. So our guidance is very much consistent with how we've done things in the past. We look at pipeline, we look at adoption of our business spend management platform. And as we noted on the call the deals with Coupa Pay have had a significant increase in the average deal sizes. And so when we look at our pipeline and we kind of roll that into our guidance for the year, we look at as in one bucket. And it's not something that we're going to break out separately.
Stan Zlotsky -- Morgan Stanley & Co. LLC -- Analyst
Got it. Thank you.
Operator
The next question comes from the line of Alex Zukin.
Alex Zukin -- RBC Capital Markets -- Analyst
Hey guys, thanks for taking my question. So I guess Rob, maybe first if you think about holistically, I remember having a conversation where you've talked about basically prioritizing new logo acquisition over installed base selling over the last few years. I'm wondering if your -- given the market conditions, does that start to change? And then Todd, maybe just help us how do you think about the dollar based net written expansion as you scale and continue to sell Coupa Pay into the customer base?
Todd Ford -- Chief Financial Officer
Thanks very much for the questions Alex. I would say that's a wait and see on that. We will see if we shift our strategy there at the moment it's business as usual. We haven't, we don't have any statistically significant signs in front of us that The suggest we can continue exactly the way we've been doing with logo acquisition as well as organic expansion into the core. In fact, I think this is not a bad time to tell you that in terms of the core and frankly, given the situation that's out there now, we're are looking at ways to help folks particularly suppliers that don't have a great deal of cash flow or may need cash flow. So what we're offering now is our customers' ability to ease Coupa digital check at no charge through April 20. So we think these small supply cash flows could be an issue. We have speed of payments may be critical at this time. And as you know with millions of suppliers that our customers interface with, we believe it's our responsibility to try to make an impact here. So we've actually made that public at coupa.com/payments. So that's just an example of really the power of having over 1300 customers transacting with millions of suppliers around the world, managing their business spending and our opportunity to get into that environment and drive more and more value, whether it's free in this case, to support a cause or whether it's needed for us to continue to grow our business via an alternate strategy at that presents. of time.
Rob Bernshteyn -- Chief Executive Officer
And Alex on the dollar based expansion and renewal rates, dollar based expansion has continued to go up as people are adopting more and more of the -- the platform. With respect to payments and the impact, we do believe over time when you look at what take rate there has been of our current products and the ability to sell into the installed base. As we noted before that, we think over time we can get that closer to 120%. In Q4, I will say it was meaningfully above the historical range, but just given the strength of Q4, I'm not at this point ready to call a new range, but the trend is definitely up.
Alex Zukin -- RBC Capital Markets -- Analyst
Perfect, thank you guys.
Operator
The next question comes from the line of Peter Levine.
Peter Levine -- Evercore ISI -- Analyst
Great. Congrats on the quarter and thanks for taking my question. So, just one on the partnered channel. I mean obviously they play a big role in success that you've seen up markets. So any difference in the conversation or conversations you're having with your customers versus kind of what you're paying from your partner channel? And then just any impact, I guess for Q1 from partners there. Anything that they're seeing over the past couple of days would be great. Thank you.
Rob Bernshteyn -- Chief Executive Officer
I can't really comment on anything meaningful from the last couple of days, but broadly speaking, our customers continue to see us as the standard in the space. They are building very meaningful services revenue businesses around Coupa. We see more and more deals where we're being recommended as the preferred provider by multiple systems integrators and even some of the management consulting firms. That continues to be very, very healthy for us and that's encouraging given how many referenceable customers we now have in virtually every industry and the renewal rate that we are able to deliver. So very, very encouraging, continued growth in our partnership community and the impact of that -- of that growth on the future.
Peter Levine -- Evercore ISI -- Analyst
Great, thank you.
Operator
Your next question comes from the line of Brad Sills.
Brad Sills -- Bank of America Merrill Lynch -- Analyst
Well, thanks guys for taking my question. Just wanted to ask on Coupa Pay, it sounds like you're seeing some good early success here with the [Indecipherable] uplift here you're describing, is there any color you can provide on just cases or transaction types that you're seeing go through Coupa at this point or even verticals? Thank you very much.
Rob Bernshteyn -- Chief Executive Officer
Yes, sure. No. Thank you for the question. We're really seeing three types of transaction types and they really map pretty well to our ordering of launch of product. So, the first is virtual credit card usage. We came out with that first, we're seeing good uplift in that area. It's just a no-brainer type of approach to get rid of physical cards and maintain control and minimize the need for back-office reconciliation just an obvious no-brainer, that leverages our core competencies and our customers are adopting that swiftly. The second area is in dynamic discounting effectively. So the collaboration between a buyer and supplier around when payment is made and have made earlier perhaps made at a lower amount such that the supplier can have the cash flow needs that they need and so we're seeing good uplift there. And then most recently with invoice payments, and I shared just one example here would Redfin, but leveraging Coupa for the entire process of procure-to-pay, the request, the order, the receipt, the invoice, and then ultimately the payment done in batch for invoice payments across virtually any rail. So all three are seeing good adoption and there adoption waves are coming effectively sequence the same way in which we launched the product.
Operator
The next question comes from the line of Raimo Lenschow [Phonetic].
Raimo Lenschow -- Barclays Capital Inc. -- Analyst
Thank you. Rob, can you talk a little bit -- everyone is obviously focusing on pay, but you kind of extended product portfolio quite a bit into contract lifecycle management etc. and that always obviously driving the strength and the -- can you talk a little bit about like how these expansion of the portfolio have been integrated and what you see in terms of cross selling, up selling them? Thank you.
Rob Bernshteyn -- Chief Executive Officer
Yes, absolutely. Let me take that from two perspectives, both the business side as well as the technology side, which I think what you're asking Raimo. On the technology side, we are well under way with the technical integration. The user interface is common, the business logic layer has been streamlined, the hosting environments are common, the interfaces between the power user application that is CLMA, what we call contract lifecycle management advanced and our transactional engine has been able. And our sales team has been empowered with integrated demos, integrated production instances that showcase how the completion of a contract leads to transactional purchasing activity and that is playing out as well in our business. We are seeing more and more deals where the customers understanding and locking arms of this around the vision of business spend management, purchasing more modules upfront and setting in place a deployment path that hits the areas that are most opportune for them first and then deploys outward from there. So very, very healthy despite any challenges that anyone would anticipate in taking on M&A and we hope to continue that path.
Todd Ford -- Chief Financial Officer
And Raimo, the other thing I would say is when you look at it holistically, the other element of that is our average deal sizes continue to go at meaningful -- meaningfully as more and more people are adopting the platform of our competitive leadership position extends. We saw some of our largest transactions in Q4 as well. So it's all coming together nicely nice.
Raimo Lenschow -- Barclays Capital Inc. -- Analyst
Nice. Well done. Congrats.
Operator
The next question comes from the line of Terry Tillman.
Terry Tillman -- SunTrust Robinson Humphrey -- Analyst
Hey, yeah, gentlemen thanks for taking my question. Tremendous ending for the year. So nice job on that. Maybe the question for you Rob, is just -- to me as I look back over all the years we've been covering the story is this concept of Community Intelligence being kind of the secret sauce of all this is that transaction volume build. Could you help us and investors just understand Community Intelligence going forward? And you talked about like the prescriptive nature of it, people looking at the prescription, is it going to be something that just over time as part of that secret sauce and create stickiness around the rest of all the workflow and software modules and/or do you see it actually becoming a revenue engine on its own? Thank you.
Rob Bernshteyn -- Chief Executive Officer
Sure Terry. Thank you for the question. So absolutely, it's already beginning impact -- to impact our revenue as well because people understand the power of it, our customers understands the power of it, our community is galvanizing around it. If you're a customer, why would you go to any other information technology provider when we're able to tell you what are the best practices of doing any business process related to spending, in real time and prescribed for you right there on the screen, ways that you can improve. Why would you go to any other supplier when we can showcase for you areas where you have supplier risk and allow you to seamlessly hot swap from one supplier to another to avoid it particularly in these turbulent times. Why would you think about working with anybody else when you can work with us and understand your commodity areas, understand all your supply hotspots, areas where you need to improve and areas that you can optimize and save and remove risk. So with every area of our enterprise application, Community Intelligence is being showcased through prescriptions that appear right there for users to improve the way that they do their business spending. It's not only a huge mote on our business, but it creates a value proposition that is very, very difficult to replicate. We've been designed to build it this way from the start, we've contracted with our customers to do it in this way. And we're driving a lot of value for them already. So we will continue to see this both from a defensive mote perspective as well as a meaningful continued growth and value perspective that will play out in our revenue for the quarters and years to come.
Terry Tillman -- SunTrust Robinson Humphrey -- Analyst
Thank you.
Operator
The next question comes from the line of Siti Panigrahi.
Siti Panigrahi -- Mizuho -- Analyst
Thanks for taking my question. Rob, I mean this is unprecedented time. I mean, every day, every hour situation changes. I'm wondering what, how will your go-to-market strategy will change -- in this environment. You talked about business as usual and also it sounds the customer also except critical employees, they are working from home, how does this impact your deal closing or even implementation in this environment?
Rob Bernshteyn -- Chief Executive Officer
Well, let me first say very clearly sales is very important. But number one is our employee safety. That's our number one priority. Let me be clear on that. As far back as March 9 we encouraged everybody to work from home last Thursday, March 12, we made it mandatory for everybody to work from home, but I'll tell you we're first of all 100% cloud, the only physical things we need are windows into the Internet whether they are on phones or PCs or other access points. We are a very tech-savvy company and I've been on many, many zoom meetings over the last 7 days to 8 days, just to today, some with individuals in the sales team thinking about how to manage a sales account, some with our safety committee talking about how to manage some of the -- some of the decisions that we're making there, some with members of the management team to think through other initiatives. So this is not the way it was maybe 5, 6, 7, 8 years ago, it was very hard to manage through this type of process. We think we're very, very well equipped, we're very agile and we're committed to the cause. So whether it's raining outside or sleeping. There is no rain delay here, we're going to battle each and every day to build this business.
Siti Panigrahi -- Mizuho -- Analyst
Thank you.
Operator
The next question comes from the line of Ryan MacDonald.
Ryan MacDonald -- Needham -- Analyst
Good afternoon gentlemen. Thanks for taking my question. Rob, can you talk about sort of the mix you're seeing between enterprise and the mid-market, particularly as you've been refocusing again in terms of packaging and go-to-market strategy for the mid-market? And as we move into fiscal '21 here do you expect any shift in the mix mid-market versus enterprise given that mid-market tends to be a little bit more low touch? Thanks.
Rob Bernshteyn -- Chief Executive Officer
Sure. No, thank you very much for that question. There are two very encouraging patterns that we've seen historically. Taking the enterprise first, we continue to see larger deals and more importantly from a qualitative perspective, we're seeing greater vision lock with prospects around the comprehensive business spend management footprint and the fact that we have the vast majority of that footprint already functionally well integrated and aligned with their strategy for both rollout and many years to come. That's a really, really promising part of the enterprise value proposition that we're seeing unfold. As well in the mid-market about four -- I would say now about four quarters to six quarters ago, I believe we had started seeing this really nice mapping of cost of customer acquisition and the speed of that acquisition as well as the lifetime value of those customers with a really measured and nice renewal rate where we thought that we could really begin to press into that business and scale it both cost effectively, but also in a way that would be mindful of our long-term growth aspirations, that is happening. And the number of logos we're seeing in the market, the mid-market continues to increase, the quality of those logos continues to increase and the stickiness of those deployments continues to be really, really strong. So we feel really good about both the portfolio effect of having those businesses as well as the potential of both of those businesses in coming quarters and years.
Operator
The next question comes from the line of Bob Napoli.
Robert Napoli -- William Blair -- Analyst
Hello Bob Napoli from William Blair. The question on just supply chains and what you're seeing day to day and supply chains and where if any that you were seeing concerns in US supply chains? And if I could on just on business mix, few years ago procurement was 80% of your business, today I think it's only about a third, what do you think that mix will look like five years from now with procurement and invoice pay etc.? Thank you.
Rob Bernshteyn -- Chief Executive Officer
Sure. So let me take the second question -- second question first. So procurement actually now represents 25% [Phonetic] of the business -- the recurring business in the last quarter. So as we continue we're seeing it fan out more and more widely as more and more modules and capabilities are offered to our customers. I can't necessarily predict to you what that number will be a few years out, but I would absolutely anticipate with customers buying the broader suite that the numbers of procurement and every incremental module as a percentage will decrease, but the overall pie will obviously get larger and larger and larger.
From a supply chain perspective, they are very early data and it's probably not material enough to get into on this call, but help a number of our customers most recently source and procure safety equipment, protective equipment, sanitization equipment, face masks and other needs, very, very quickly. So they could address their obvious concerns. So our platform allows that and our community can now come together with source together activities to get these things sourced and at their doorstep very, very quickly.
Robert Napoli -- William Blair -- Analyst
Thank you.
Operator
The next question comes from the line of Daniel Jester.
Daniel Jester -- Citi -- Analyst
Yeah, thanks. Thanks for taking my question. So it sounds like from the sales perspective you've done a lot on the virtualization to keep to keep -- to keep the business going. I'm just wondering it might be a little bit early, but given your success in managing disruption does that change how you view sort of the opportunity for business travel management is this as good an opportunity today as it was maybe six months ago? And just, is there anything else you can do to sort of help your customers from that perspective through this time? Thanks.
Rob Bernshteyn -- Chief Executive Officer
Well, I'm not sure I fully understand the question. Are you referring to the Yapta acquisition and travel? Are you referring more broadly to business spend management?
Daniel Jester -- Citi -- Analyst
I think for travel, specifically, given that you've done a pretty good job yourself so far managing through the -- if travel restrictions become more substantial or companies notice they can get through this through more virtualization we travel less. Do you see as good an opportunity here in the future?
Rob Bernshteyn -- Chief Executive Officer
Yeah, absolutely. I'm not sure the opportunity changes that much for the longer term. I mean, as you know our story here at Coupa has been playing the long game for as I mentioned well over a decade and that's where we're playing if they're going to be -- if there is going to be less travel in a given quarter or there is going to be a lot more in a given quarter, we'll be there to help our customers manage that, have agility in changing that, recognize savings in replanning their travel as need be, but it's the longer opportunity that we're focused on, regardless of travel gyrations on a given quarter or even given the current content.
Operator
The next question comes from the line of Koji Ikeda.
Koji Ikeda -- Oppenheimer Securities -- Analyst
Great, thank you for taking my questions. Question for you Rob, sorry about the date here, but you joined the company over a decade ago, in 2009, during the thick of the Great Recession. I'm curious to hear your thoughts on how Coupa fared back in those days. I mean I totally gather the business was much smaller suited to more the mid-market versus enterprise that we see today, but spend management really cost savings as an initiative must have been top of mind of organizations back then. So I guess what I'm getting at is from a high level, any thoughts there would be helpful to better understand the end market mind set for tools like Coupa in volatile times that we're seeing right now? Thanks for taking my question.
Rob Bernshteyn -- Chief Executive Officer
Sure. No. Thank you -- thank you for the question. I would say that the priority of business spend agility and spend control tends to get elevated on the list of digital transformation initiatives even though they weren't call that back in 2009, but IT initiatives let's say in times like these. Having said that, of course for every technology provider there is some wind in the face of technology providers in addressing those with customers, but we're in a very different position than we were 10 years ago. We're the undisputed industry leader in this area, we have a proven set of reference customers all over the world across every major industry and we believe that as the priority of some of the things we're focused on is raised on the list of initiatives, we should be able to gain ground from that especially with the massive moat we have in Community Intelligence and the spirit and culture that we've built here over the last decade.
Operator
The next question comes from the line of Mark Murphy.
Mark Murphy -- J.P. Morgan Securities LLC -- Analyst
Yes, thank you Rob. The spend categories that you mentioned relating to coronavirus very helpful and appreciate it. The ones that are increasing sounds like very small categories. I think you mentioned sanitizing [Phonetic] equipment, rubber gloves, the ones that are decreasing sound like enormous categories where I think you called out business travel and durable goods, so I'm just trying to understand what was the inference there or how is that netting out in terms of the growth of your spend under management?
Rob Bernshteyn -- Chief Executive Officer
Well, I'm not sure yet how it's going to net -- net out on growth and spend on management, because the data I shared there is really just four weeks of data right, the February data around the personal protective equipment, sanitizing equipment and things of that nature, but you are right, it is concerning, if you look at something. I'll give you another statistic, if you look at something like property building, and engineering services, these are the types of things that are more long-term type investments. And if you look at this February year-over-year we saw a 62.1% decrease in spend in that area so it is concerning. And when we get to next quarter, we'll have another quarter of spend data and we'll have a better sense for it and we'll reported on spendindex.com, but I think you raise a very, a very important point Mark.
Mark Murphy -- J.P. Morgan Securities LLC -- Analyst
Thank you.
Operator
The next question comes from the line of Steve Koenig.
Steve Koenig -- Wedbush Securities -- Analyst
Hey, gentlemen. Thanks for taking my question. Good timing. Just kind of a follow-up from the prior question. So I get asked by investors sometimes about how is Coupa sensitive or not sensitive to business spend trends? And so you have your index and you've been indicating what you're seeing there recently, but can you just, I know you don't have transactional fees for suppliers like Ariba does, but what is your sensitivity to business spend trends and how would you characterize any linkage there or lack -- lack thereof? Thank you.
Rob Bernshteyn -- Chief Executive Officer
Sure. Well, I think part of that actually ties into pricing strategy. Our theory for the entire time has been to sit on try to -- try to sit on the exact same side of the table with our customers. We don't charge a transactional fee for the amount of spend that they're running through the system. Sometimes, we've been criticized for that, but at the same rate the value proposition is much more than a percentage of spend, it is the ability to control that spend, its the ability to route that spend to preferential suppliers, it is the ability to route that spent to non-risky suppliers, its ability to stop that spend from happening on a mobile phone by clicking reject with the click of a button. So we think that a cloud-based platform like ours that is offered in a values-as-a-service subscription approach for customers is a very, very thoughtful way for them to get this visibility, control, and agility that many of them didn't even know they needed until they are faced with times where they realized they don't have it. And because of that it's our belief that given uncertain times these areas become a greater priority. And as per the prior question, we've experienced less decade ago, but we experienced it in a very, very different position of size, growth and proven leadership and we think that in this environment we are better positioned to deliver for our customers in the environment.
Steve Koenig -- Wedbush Securities -- Analyst
Thanks Rob.
Operator
The next question comes from the line of Brent Bracelin.
Brent Bracelin -- Piper Jaffray -- Analyst
Thank you and good afternoon. One for Rob and one for Todd, if I could. Rob, as you just think about the changing environment, clearly appreciate the long game approach you have, completely appreciate the business as usual approach, but if I look at what part of the business could be at risk. The one thing that stands out to me is implementation time. This is a BSM software platform that can be implemented over a six month to eight month timeframe. Is that the right way to quantify the risk in the short run? Is potentially the risk of longer implementations, is that right way to frame it? And then one quick follow-up for Todd.
Rob Bernshteyn -- Chief Executive Officer
That's a very thoughtful question and obviously something that we're thinking about as we are with all areas of our business. I would say that the ability to do these implementations virtually is absolutely there. In fact many of the implementations that we do across a host of our customers are done completely virtually. Having said that, people like to see people and if there are situations where implementations are slowed down because of the customers' desire to do that, we'll manage our way through it, but I think we will be first to showcase our number one core value, which is ensuring customer success. And if it can be done over the web and it can be done over email, and if it can be done over phone calls, we'll be able to do it. As I mentioned earlier, our team is very tech-savvy and we have a lot of experience in doing it that way. So while there might be a bit of a headwind, we'll work our way through that to the best of our ability.
Brent Bracelin -- Piper Jaffray -- Analyst
Clearly makes sense. And then -- then Todd here as we think about the guide, you're guiding to 25%, 26% growth, which is what we essentially had modeled for the business prior to kind of the global outbreak of the virus here. You did talk about hair cutting the Yapta travel saver kind of business. Did you hear cut in other parts of the business on the BSM or Coupa Pay side because of the coronavirus or at this point the close rate assumptions that you're using are all the same that you used last quarter?
Todd Ford -- Chief Financial Officer
First, let me say Brent, all of our guidance has been developed using the same methodology as we've used in the past and looking at all the key drivers that drive our model. And as you would expect, we're obviously monitoring developments with the coronavirus very closely as the situation continues to unfold. And if you look over the past several years from a guidance perspective, we've tended to put a mid 20s and then update that as we've continued to execute. And I guess one of the other things that's maybe even more important to highlight is we have annual plans and we modulate based upon what we're seeing and recently we've had our higher literally our largest new higher sales boot camp. And then we modulate on a quarterly basis and if you look at the deferred revenue in RPO and we have very high visibility into this initial guide and the free cash flows and the ability to generate free cash flow so there is the ability to sustain [Indecipherable] is very strong on a go-forward basis.
Brent Bracelin -- Piper Jaffray -- Analyst
Helpful color. Thank you.
Operator
The next question comes from the line of Brian Peterson.
Brian Peterson -- Raymond James & Associates, Inc. -- Analyst
Thanks gentlemen. I'm glad to hear the team is safe and back in Cali. So Todd, just wanted to hit on the opex for fiscal year '21. I know there's some acquired company expenses in that, but anything you could share around investment intensity maybe where you guys are spending there? And a follow-up was Yapta a big factor in the net customer adds in the fourth quarter? Thank you.
Todd Ford -- Chief Financial Officer
With respect to the customer adds very minimal impact there. With respect to the operating expense, as I mentioned, we modulate that on a quarterly basis, but if you look at the investments for the upcoming year clearly continuing to invest in our support team and professional services. Given the number of new customers and significant implementations that are currently going on and we're going to continue to invest in R&D. One of our things we have done is the -- we have now two technology centers in India, one in Pune and one in Hyderabad. So we're still adding a lot of people, but it may not show up in the expenses as much. And then clearly, of all the category still investing heavily in sales and marketing and G&A is starting to show some scale, but we've got more room to do there and we'll modulate that as the year progresses as we do every year.
Brian Peterson -- Raymond James & Associates, Inc. -- Analyst
Thanks Todd.
Operator
The next question comes from the line of Joseph Foresi.
Joseph Foresi -- Cantor Fitzgerald -- Analyst
Hi, another question for Todd. If the numbers start to show up a little bit lighter because of all the friction in the economy, what area would you be most likely to address from a spend perspective for maybe a pullback? And how do you kind of look at the numbers or think about the numbers from that perspective? I guess, I'm basically asking, what's the financial downside scenario that you might be implementing? Thanks.
Todd Ford -- Chief Financial Officer
At the highest level, I mean we're always looking at all of the key business processes whether it's lead to cash, whether it's new product introductions, whether it is post deal support and then some of the surrounding infrastructure around that. And literally we look at each one of those on a quarterly basis. You know where to invest more maybe pull back a little bit, but at this time, it's way premature to one make that call or two indicate what it might be because it's not something we've looked at yet.
Rob Bernshteyn -- Chief Executive Officer
But in spirit, I would add that if we feel in any point that we can't make a new hire productive we have the ability to control hires at the individual level. All hires still roll up to me and I approve them individually. So we have controls in place for that. Equally, we have controls around all of our spending through our own My Coupa implementation. So we feel like we have arm squarely on -- on the steering wheel and navigating through whatever lies in front of us.
Joseph Foresi -- Cantor Fitzgerald -- Analyst
Thanks.
Operator
Our final question comes from the line of Patrick Walravens.
Pat Walravens -- JMP Securities LLC -- Analyst
Great, thank you. So Rob, looking back in '08. I think you were still success factors and I pulled out one of my old notes. So the billings growth rate for success factors April of '08 was over 100% and then it went 68%, 52%, 2%, negative 6 in Q1 of '09. I guess my question is, when do you know that things are really starting to go downhill? And then, when do you know when they're getting better?
Rob Bernshteyn -- Chief Executive Officer
That's an extremely, extremely difficult question. Pat that can't be answered very, very briefly. I think it's one of the things that history typically states or some of the best CEOs or some of the more typical ones, so we take that very, very seriously and tried very, very hard to see around corners as much as humanly possible. I would also tell you that the way we've built this business over the last 10 years has been very, very mindful to not run it so hot if something presents itself in front of us, it will burn -- it will burn us up. We've been very, very mindful in the talent, in the culture, in the systems, in the customer base, in the value we're delivering for them. So we think we're sitting in a good position from which to try to see around corners. And you have our commitment as a management team to do exactly that no matter what presents itself in front of us in coming months and in coming quarter.
Pat Walravens -- JMP Securities LLC -- Analyst
Great, thank you.
Operator
I will now turn it back over for closing remarks.
Steven Horwitz -- Vice President of Investor Relations
Thank you. Thank you for joining us here for the fourth quarter earnings call. As we said the replay is available on the website, you can get the information for telephonic replay in the press release and we look forward to speaking to you next quarter. Thank you.
Operator
[Operator Closing Remarks]
Duration: 66 minutes
Call participants:
Steven Horwitz -- Vice President of Investor Relations
Rob Bernshteyn -- Chief Executive Officer
Todd Ford -- Chief Financial Officer
Christopher Merwin -- Goldman Sachs -- Analyst
Michael Turrin -- Wells Fargo -- Analyst
Stan Zlotsky -- Morgan Stanley & Co. LLC -- Analyst
Alex Zukin -- RBC Capital Markets -- Analyst
Peter Levine -- Evercore ISI -- Analyst
Brad Sills -- Bank of America Merrill Lynch -- Analyst
Raimo Lenschow -- Barclays Capital Inc. -- Analyst
Terry Tillman -- SunTrust Robinson Humphrey -- Analyst
Siti Panigrahi -- Mizuho -- Analyst
Ryan MacDonald -- Needham -- Analyst
Robert Napoli -- William Blair -- Analyst
Daniel Jester -- Citi -- Analyst
Koji Ikeda -- Oppenheimer Securities -- Analyst
Mark Murphy -- J.P. Morgan Securities LLC -- Analyst
Steve Koenig -- Wedbush Securities -- Analyst
Brent Bracelin -- Piper Jaffray -- Analyst
Brian Peterson -- Raymond James & Associates, Inc. -- Analyst
Joseph Foresi -- Cantor Fitzgerald -- Analyst
Pat Walravens -- JMP Securities LLC -- Analyst
