Coupa Software Incorporated (COUP) Q1 2022 Earnings Call Transcript

Image source: The Motley Fool.

Coupa Software Incorporated (COUP)
Q1 2022 Earnings Call
Jun 7, 2021, 4:30 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 First Quarter Fiscal Year 2021 [Phonetic] 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, Investor Relations

Thank you. Good afternoon and welcome to Coupa Software's first quarter conference call. Joining me today are Rob Bernshteyn, Coupa's CEO; Todd Ford, Coupa's President, Finance and Operations; and Tony Tiscornia, CFO.

Our remarks today include forward-looking statements about guidance and future results of operations, strategies, market size, products, competitive position and potential growth opportunities. Our actual results may be materially different. Forward-looking statements involve risk and uncertainties and assumptions that are described in our most recently filed 10-Q. These forward-looking statements are based on our beliefs and assumptions today and we disclaim any obligation to update any forward-looking statements. If this call is replayed after today, the information presented may not contain current or accurate information.

We also present both GAAP and non-GAAP financial measures. A reconciliation of certain of these measures is included in today's earnings release, which you can find on our Investor Relations website. A replay of this call will also be available. Unless otherwise stated, growth comparisons are against the same period of the prior year. As a reminder, we will be conducting an Analyst Day on July 15th starting at 9:00 AM pacific noon eastern and we'll be doing so in a virtual setting. The registration site will be up on the Coupa website starting July 1st.

With that, I will now turn the call over to Rob. Rob?

Rob Bernshteyn -- Chief Executive Officer

Thanks, Steven. Hello, everyone, and thank you for joining us today. We delivered another very strong quarter. Thanks to the increasing importance of Business Spend Management for leaders across all industries and strong execution by our team. As organizations get on with the work of building back better, they are increasingly turning to us as a trusted partner. Our financial performance reflects this dynamic. This quarter, we delivered $167 million in revenue, 46% calculated billings growth and our 12th consecutive quarter of non-GAAP profitability. We also continued to see meaningful growth in our sales pipeline. Proudly, today, our cumulative spend under management is now nearly $2.6 trillion. And we believe the success we've had is validating not just our performance, but of our broader vision of Business Spend Management as a critical category on to itself.

Let me explain what I mean by that. We see the BSM category as a constellation of intersecting needs for the back offices of global companies. At their core, those needs revolve around strategy and spend, whether it's how you optimize supply chain design and planning, how you run sourcing and procurement or how you manage payments, cash flows and liquidity. As you know, we bolstered our platform with both organic development and acquisitions over the past several years that have allowed us to integrate these and many more areas of strategy and spend into one seamless platform. If you think about a company as a car, the BSM category is the engine and Coupa is the platform that drives it.

It is often heard category winners don't build solutions that customers want. They build solutions that customers may not yet know they need. And that's what we're hearing from many of our customers is that they didn't fully realize just how much they needed it to get control of their business spend before facing the unpredictability of the last 15 months.

Many of our prospective customers were comfortable with the status quo where Business Spend Management decisions were managed in silos. Now, they get it. They see that decisions around strategy and spend need to be made comprehensively in real time and without barriers getting in the way. At Coupa, we see it is our responsibility to give them a platform to act with speed and agility and we believe there are a number of mega trends that are increasing the demand for our platform and will help drive our growth for years to come.

Let me highlight just a couple. The first of those mega trends is supply chain fragility. The current semiconductor chip shortage offers an example of why supply chain and procurement can be dealt with in silos. I frequently talk to CEOs who tell me that they are looking at how to redefine their approach in ways that will allow them to balance efficiency and resiliency so they never get caught flatfooted again. And while the pandemic played an outsized role in supply chain disruption, we know that other trends would likely drive more uncertainty over the long term. Whether it was the winter storm that collapsed the Texas power grid or the sandstorm that lodged a ship in the Suez Canal, climate events will continue to create unpredictability in supply chains and so will geopolitical issues.

China has made some very aggressive moves of late for example. And I think you could count on one hand the number of global companies whose supply chains don't include China. How to navigate those unknowns is a huge challenge that will be with us for a long time.

Supply chain fragility means that supply chain strategy and planning are going to be an increasingly integral part of Business Spend Management. This requires a solution that fully integrates traditional procurement with supply chain data in one platform to provide customers with the agility to navigate an ever-changing environment.

The other mega trend we see in the near term is the ongoing pandemic environment. Over the last several months, we've seen the extraordinary success of vaccination campaigns in several countries. However, there still remain many less advanced countries who possibly won't have enough vaccine supply through the end of 2022. This creates a breeding ground for the virus which raises the possibility of events that could circumvent vaccines and I know this is something that our customers are trying to navigate on a day-to-day basis, especially with respect to their supply chain and procurement issues.

But there are other important knock-on effects of the pandemic too. One of which is the expectation that we will continue to operate in a low interest rate environment through 2022 and that creates both challenges and opportunities when managing corporate liquidity and asset allocation. Cheap money certainly helps companies facilitate investment over the long term, but with the bond market that doesn't offer much yield. Companies are being pushed to reimagine what it means to carry cash on the balance sheet and how to effectively maximize dollars across a closed loop of spend. And they are increasingly relying on our software to strategize and manage this. These mega trends are driving a renewed awareness within companies that have not prioritized their back office investments. Now it is front of mind and we are poised to take advantage of that.

As we have illustrated in the past, our total addressable market is massive and we intend to own the lion's share of that market. We're the only platform that gives companies a single source of truth across all spend decisions to maximize the effectiveness of the actions they take and this is why we are seen as the leader proudly in Business Spend Management. You could see evidence of this leadership position in our most recent quarter. Just a few examples. Our customer community continues to grow as we welcome dozens of new companies. We unveiled more than 100 new features for our customers and our latest platform release and we saw continued momentum in a key growth driver, Coupa Pay.

Let me now touch on each of these points first by sharing a couple of customer stories. The first story is that of Ally Financial, a digital financial services company. They have recently gone live on Coupa to drive digitization across AP, sourcing, IT, vendor management and supplier diversity. Ally IT is eliminating custom coding and moving fully to SaaS and configure ration based management for lower total cost of ownership and increased agility. With Coupa, Ally chose a holistic approach to spend management with the goals of improving operational efficiency, visibility for reporting, analytics, automation and enhanced spend control. To date, Ally has already processed nearly $2 billion in spend through Coupa.

Another story is that of Saga which provides products and services for life after 50 from insurance to travel. Prior to Coupa, Saga had an onerous manual supplier payments process that was prone to errors, long invoice cycle times and compliance issues. The workflow for each was administered completely on paper. After attempting to implement an AP automation solution a few years prior, Saga's Finance Director realized that he needed to take a more complete approach to addressing their finance transformation. So he broadened the scope to include the entire procure-to-pay process. Saga's use of Coupa Pay has made payments run more efficiently, reducing approval times from hours to minutes. Saga also realized the benefit of implementing Coupa Pay at the same time as the core P2P platform, which served to simplify the integration. Their payments can now be administered digitally and thus remotely versus having paper-based approval processes and paper checks.

After implementing Coupa's comprehensive platform, Saga was able to realize significant operational efficiencies, they were able to reduce headcount, reduce invoice cycle times and increase control and compliance. Now, the team has greater confidence in the data and errors no longer keep them up at night.

Now, let's talk about how we continue to deliver on the promise of creating value as a service through our three major platform updates per year. Let me highlight a few examples. To help our customers spend smarter, we enhanced our business value dashboards to help customers promote operational spending habits. They can now configure their community intelligence metrics to those most relevant for their business. This also helps them quantify the value that Coupa has delivered by showcasing realized savings and prescribing actions for potential savings in the future. We've also built platform enhancements that can help companies meet their critical ESG goals. Our supplier diversity dashboard provides detailed information on diversity activity spending and contracting to help drive spend with underrepresented minority suppliers. From our perspective it matters a great deal how we manage our own ESG goals and fundamental to that work is leveraging our platform to help our customers manage theirs.

Moving on to Coupa Pay, we saw another quarter of increased momentum. As we've said in the past, we're early on in the pay journey, but we are encouraged by the greater than 30% attach rate on new deals we saw in Q1. In fact, though still working with small numbers, we ran more payment volume in the first four months of 2021 than we did all of the previous year. We expect that over the long-term, most of our customers will utilize Coupa Pay as their main payment solution.

Now, it truly was another strong performance in what was our 49th consecutive quarter of execution. As you know, none of these accomplishments would have been possible without our extraordinary team. And I want to call out a select group of my colleagues who exemplify our three core values. Let me start with Miriam Gonzalez who embodies our number one core value, ensuring customer success. Miriam focuses on what customers truly need and she does so while making sure that the customer is heard, while calmly and assertively steering them toward the best usage of Coupa's platform.

For our second core value focusing on results, Nicole Romoli was recognized by our peers. Our colleagues commented on her ability to anticipate what the sales team needs to be effective and get in front of problems before they arise. Finally, Sophie Enjolras demonstrated our third core value, striving for excellence. Sophie is a great example of the success that can be achieved in a remote work environment. Having joined the Company after the beginning of the pandemic, she was able to quickly forge deep relationships with her colleagues, while delivering meaningful results from products, to processes, to communication.

Before finishing up, I invite you to our Coupa Smarter Together virtual event that will be hosted -- that we'll be hosting on June 15th. It takes at least two like minds to make things go right, which is why it will also feature Accenture's CEO, Julie Sweet and our special guest from IKEA, Procter & Gamble and Ferguson.

We all know that digital transformation is accelerating. During the event, we will discuss how Coupa's Business Spend Management platform provides a new model for this transformation. We will cover a host of timely topics, including sustainability and the application of community intelligence in making us all smarter together. I invite you to join us.

To close, from a broader perspective, it's clear that demand for our offerings will continue to grow at a rapid pace. The mega trends I spoke about are certainly not going away. In fact, they're becoming more pronounced. We see ample opportunity to solve a myriad of problems in our expanding market. Companies are depending on us to meet the moment and they [Phonetic] meet the moment we will. Never bet against us.

Given our position, we have the clear opportunity to extend our leadership in the marketplace and win the BSM category over the long term. We will do so by continuing to focus on our strategic vision areas spelled out in the letters of our name Coupa, comprehensive, open, user-centric, prescriptive and accelerated. And we will do so by executing relentlessly.

Before I turn the call over, let me congratulate Todd Ford on his promotion to President, Finance and Operations. Todd is an integral member of our executive leadership team and plays a key role in guiding the growth of our business and our operations. I'm excited about our continued journey to build one of the world's best enterprise cloud software companies. Let me also congratulate Tony Tiscornia on his promotion to Chief Financial Officer of Coupa. Having been with us for over eight years, his impact on our business has been immeasurable and he has been a foundational member of all our capital market activities.

With that, let me hand the call over to Todd.

Todd Ford -- Chief Financial Officer

Thanks, Rob, and good afternoon, everyone. As Rob noted, we began fiscal '22 by delivering strong results for the first quarter. Although the global business and economic environment is not yet back to pre-pandemic norms with many employees in the global economy still working remotely and business travel still largely on hold, we continue to see signs of improvement in Q1 and we expect this trend to continue during the year. Transforming business spend management has become a critically important objective for leaders who realize they need to build long-term agility and resiliency in their organizations. The significant investments we made during the pandemic and our clear leadership position in BSM leave us uniquely positioned to partner with these customers for success.

Let's now review our Q1 results. Q1 was a strong quarter across the board. Calculated billings were $149 million, up 46% year-over-year, driven by continued steady improvement from a go-to-market perspective coming out of the pandemic combined with strong execution from both our enterprise and mid-market teams. The billings contribution from LLamasoft for Q1 was approximately $18.5 million. This $18.5 million represents all LLamasoft billings for the quarter, including new business and professional services.

Total revenue for Q1 was $167 million, up 40% year-over-year. Subscription revenue was $140 million, up 33% year-over-year. Given the impact from the pandemic last year, revenue growth will naturally lag billings growth.

Turning to gross margin. Our first quarter non-GAAP gross margin was 69%, well above our guidance of 65% to 66%, but still below historical norms of 70%-plus as we continue to focus on synergies from the LLamasoft acquisition. As we noted last quarter, given the size of LLamasoft, we expect to experience meaningful gross margin pressure for approximately all of fiscal '22.

Now let's look at our Q1 results of operations. Our first quarter non-GAAP operating income was $7 million or 4% of total revenue. Non-GAAP net income was $5 million or $0.07 per share on approximately 77 million diluted shares. Cash at quarter-end was $600 million, a slight decrease from $606 million at the end of last quarter. During the quarter, we paid approximately $45 million in net cash for the acquisition of Pana, which was an all-cash deal. This was almost completely offset by cash generated from the business.

Q1 operating cash flows were $32 million and adjusted free cash flows were $30 million. We also generated approximately $13 million of cash from financing activities.

In summary, Q1 was a strong quarter across the board. In fact, while Q1 is typically a seasonally lighter quarter, our new business more than doubled compared to the same period last year. We continue to pursue winning this market assertively with a strategy of disciplined growth. Looking at the Rule of 40 on a trailing 12-month basis and in Q1, we delivered 58%. As previously stated, we define Rule of 40 as revenue growth rate plus adjusted free cash flow margin.

With Q1 in the books and as we look forward to the future, let me briefly review some of our recent organizational changes. As Rob noted in his prepared remarks, I'm excited to be taking on the new position of President, Finance and Operations. In this capacity, my role will expand to other strategic areas of the business, including but not limited to Coupa's international operations and Coupa Ventures, which was announced last week. Part of my responsibility will also, of course, be to support Tony in his new role as CFO. Most of you on the call know Tony quite well, having interacted with him frequently since Coupa's IPO in 2016.

Now, it is with great pleasure that I pass the call over to Tony Tiscornia, CFO of Coupa Software, who will provide guidance. Congratulations, Tony. Take it away.

Tony Tiscornia -- Chief Accounting Officer

Thank you for the kind introduction, Todd. Congratulations to you on your new role as well. I look forward to continuing our work together on many fronts.

For those on the call, I've worked closely with you -- with many of you over the last five years and I look forward to our continued interactions in my new capacity as CFO. For those of you I have not spoken with, I look forward to meeting you soon.

With that let's turn to guidance. Let me begin by laying out some of the background for our Q2 and full-year outlook. First, as Todd noted earlier and as evidenced by our Q1 results, the economic environment is continuing to improve and head toward post-pandemic normalcy. However, with many employees in the global economy still working remotely, the continued absence of business travel and the uncertainty posed by potential variants, we're clearly not out of the woods quite yet and many customers and prospects continue to operate with some level of caution. While we expect it to be a few more quarters before returning to historical norms, we're happy to see things trending positively. As Rob noted, we entered Q2 with our largest pipeline ever, positioning us well for the balance of this year.

Next, our guidance once again assumes no billings or revenue contribution for Q2 or the full year from Coupa Travel Saver. We anticipate that business travel should begin to recover in the back half of the year.

Moving on to Coupa's supply chain design and planning. As you know, our strategy is to align the legacy LLamasoft business model with Coupa's optimizing for long-term success. This is undoubtedly the right strategy for our business, but will continue to create near-term headwinds in our financial results until the transition is complete. Success in executing on this plan will cause supply chain revenue to be lower for all of fiscal '22 and most of fiscal '23. As a reminder, there are three items causing this impact. Number one, converting term license contracts to SaaS. Number two, transitioning professional services work to partners. And number three, the impact of the 50% opening deferred revenue haircut from Q4.

With these considerations as a backdrop, we must get into the numbers. We expect total Q2 revenue to be $162 million to $163 million. This includes subscription revenue of $142 million to $143 million and professional services revenue of approximately $20 million. For calculated billings on a trailing 12-month basis, we expect to execute to at a year-over-year growth rate of approximately 39%. We expect a Q2 non-GAAP gross margin of approximately 66%. The lower Q2 gross margin is attributed to several items, including our expectation that we will have success converting supply chain term licenses to SaaS and professional services arrangements to partners, as well as continued efforts on synergy alignment.

We expect a Q2 non-GAAP operating loss of $2 million to $3 million and a non-GAAP net loss of $4 million to $5 million, resulting in a non-GAAP net loss per share of $0.05 to $0.07 on 73.5 million weighted average basic and diluted shares for the quarter. We expect Q2 adjusted free cash flows of approximately $5 million. For the fiscal year ending January 31st, 2022, we expect total revenue of $681 million to $684 million, and this includes subscription revenue of $591 million to $594 million and professional services and other revenue of approximately $90 million. This full year guidance reflects our assertive assumption that we will be successful in converting legacy LLamasoft term license contracts to SaaS. The interesting dynamic is that to the extent we are not successful with these conversions, our revenues will be higher.

Moving down the income statement. For fiscal '22, we expect a non-GAAP gross margin of 66% to 67%, a non-GAAP operating loss of $2 million to $7 million and a non-GAAP net loss of $10 million to $15 million, resulting in a non-GAAP net loss per share of $0.14 to $0.20 on 74 million weighted average basic and diluted shares for the year. We reiterate our expectation that adjusted free cash flows will be up on an absolute dollar basis year-over-year for fiscal '22. That concludes our prepared remarks. We'd now be happy to take your questions. Operator?

Questions and Answers:

Operator

Thank you, Mr. Tiscornia. [Operator Instructions] Your first question comes from the line of Stan Zlotsky from Morgan Stanley. Your line is open.

Stan Zlotsky -- Morgan Stanley & Co. LLC -- Analyst

Perfect. Thank you so much, guys. And congratulations to both Todd and Tony on new role -- your new roles, very well deserved for both of you gentlemen.

Question from our end. Can you just walk us through the outperformance that you saw in the quarter from LLamasoft? Obviously, very strong result there, $18.5 million contribution versus a little under $10 million, I think, that you guys were guiding to for the year -- I mean, for the quarter. What drove that? And is it fair to say that some of that outperformance came from licenses components of LLamasoft and that's why that drove the big billings beat [Phonetic] in the quarter and maybe the guide for the year is not going up as much as a result?

Rob Bernshteyn -- Chief Executive Officer

Sure, Stan. Good to hear from you. So let me just take a step back and kind of look at LLamasoft in a broader context. I think what we're seeing proudly is our overall strategy and our M&A component of our strategy is working, and it's working really, really well. We are able to really -- we've been able to really create a machine here for integrating acquisitions from all areas of people, process and technology, and Coupa's supply chain design and planning is certainly no exception to that.

I will tell you looking forward, you should looking at our pipeline. I mean, we have nearly two dozen opportunities that are going in both directions as part of our cross-sell efforts. So there is clearly a great interest in a unified business spend management suite.

Now, when we look at Q1, there are numerous deals that closed and closed at higher price points due to that synergy and that included our overall platform as well as Coupa supply chain design and planning as a part of that.

Tony Tiscornia -- Chief Accounting Officer

And, Stan, let me touch on the full year guide what you mentioned as part of your question. This is Tony. So, of course, Q1 was a really strong quarter to kick off here. While we're seeing an increasingly positive trend, we're still going to operate with cautious optimism, which is reflective of our DNA as a company. Most employees in the global economy are still working remotely, business travel really hasn't restarted. So there's not much face-to-face interaction between businesses.

Another thing you mentioned, you called out is that we did have some -- several million dollars of LLamasoft license revenue in Q1 that didn't convert to subscription. The majority of the conversions we tried to make in Q1 were successful, but there was some. As you know, our full year model incorporates a pretty assertive assumption on making those conversions. So to your point, not having converted some of these in Q1 will, to some degree, reduce subscription revenue in the out quarters for the year.

Operator

Your next question comes from the line of Brian Peterson from Raymond James. Your line is open.

Brian Peterson -- Raymond James & Associates, Inc. -- Analyst

Well, I'll start by saying congratulations to Rob and Tony -- I'm sorry to Todd and Tony, [Indecipherable]. But -- so Todd, maybe one for you just on the venture side of things. I'm curious as you think about swimlanes for BSM, is that opportunity going to focus more on kind of what's in the existing swimlane today or maybe thinking about a broader platform and building out maybe adjacencies or forward-looking things? Anything you can comment on there?

Rob Bernshteyn -- Chief Executive Officer

Hey, Brian. Let me actually take that, this is Rob. So the idea is absolutely adjacencies and opcom [Phonetic] and swimlanes. We have this really core belief at Coupa that we want to focus on what is truly our core competencies and we're not trying to step into other places where we can't leverage those core competencies. But at the same time, we're completely committed to building a large business spend management ecosystem. We've been strengthening partnerships in periphery business spend management areas for quite a while and we plan to continue doing so. And in this vehicle of Coupa Ventures that we'll be partnering with Todd on is another way for us to broaden that reach and most importantly deliver more and more meaningful value to our customer community, which is clearly what this is all about.

Operator

Your next question comes from the line of Chris Merwin from Goldman Sachs. Your line is open.

Christopher Merwin -- Goldman Sachs -- Analyst

Okay. Thanks so much for taking my question and let me pass along my congrats to both Todd and Tony as well. I wanted to ask about the transaction monetization opportunity for Coupa Pay. I think the last update we had, there were around 200 customers, and just to make sure I understand, like, are they all paying transaction based monetization fees today and are you able to give us a rough sense for the size of that revenue stream relative to subscription? Thanks.

Rob Bernshteyn -- Chief Executive Officer

Sure. Thanks. So let me first say that in the broadest terms when we look at Coupa Pay, we're definitely executing to the arc where we've been wanting it to grow for some time and there is no question about that. And that's clearly seen in, first of all, that it's the fastest-growing new module that we ever had as a company and we're now up to about -- roughly about 240 customers. I also mentioned in my prepared remarks that we had just in this last Q1 over a 30% attach rate with Coupa Pay.

And what we're seeing to your question is that customers are taking a thoughtful methodical approach to ramping transactional spend. So the mix of both recurring subscription and transactional spend continues to be maintained. We look forward to sharing more about that with the group at our coming Analyst Day as well.

Operator

Your next question comes from the line of Siti Panigrahi from Mizuho. Your line is open.

Siti Panigrahi -- Mizuho -- Analyst

Well, hi. Hi, guys. Siti Panigrahi. Yeah. Thanks for taking my question and congratulation to both of you. I want to ask you about the BELLIN's acquisition and how successful have you been, say, selling -- cross selling BELLIN to your customers in the US? And it would be helpful like how much was the contribution from BELLIN this quarter?

Rob Bernshteyn -- Chief Executive Officer

Well, I can tell you that, without question, the treasury area is becoming more and more pronounced much like the broader areas of business spend management and the customer is trying to figure out how to best manage spend in this environment. And we're seeing customers joining us globally at different speeds and a different path [Phonetic] but joining us globally to address their treasury issues. And that as well still feels very much in early stages of where we're going to be taken in coming years.

Operator

Your next question comes from the line of Michael Turrin from Wells Fargo Securities. Your line is open.

Michael Turrin -- Wells Fargo -- Analyst

Hey, there. Thanks and good afternoon. I'll both echo my congrats and then just ask the question around it too. Todd, in moving over to President bringing Tony up to CFO, I think we are familiar with both of you for quite some time. But what does that help open up from an organizational perspective? It sounded like there were some commentary around international and maybe more focused efforts there, but it would just be great to hear more around the rationale from an org perspective and what that helps enable for Coupa?

Todd Ford -- Chief Financial Officer

Yeah. It really enables me to spend time executing on operational initiatives and tight partnership with Rob and the other leaders at Coupa. So international is certainly one area, Coupa Ventures, but there is many other strategic things that we're working on here that it frees me up to really go move the needle from an operational perspective that drives long-term shareholder value. But very much in partnership with Rob, the executive team and the broader leadership team at Coupa as well.

Operator

Your next question comes from the line of Terry Tillman from Truist Securities. Your line is open.

Terry Tillman -- Truist Securities -- Analyst

Yeah. Can you hear me OK?

Rob Bernshteyn -- Chief Executive Officer

Yes, Terry.

Terry Tillman -- Truist Securities -- Analyst

Yeah. Thanks for taking my question, and I will also echo everyone else's congratulatory comment to Todd and Tony. My question is just related to, I think -- I don't know if it was from Todd or Rob, maybe I need some coffee too, but it was a great comment about new business was doubled year-over-year. What I'm curious about, and maybe we could bring Tony into this as well, you all gave guidance for how to think about TTM billings, I believe. What is the progression on new business bookings as you see it going into 2Q and 3Q and then 4Q? Do you think it's kind of -- you're still just kind of going along just a moderate improvement in 2Q, 3Q and then there is more of a seasonal big uplift? Any way to frame how you could see this new business bookings part of the equation continue to improve? Thank you.

Rob Bernshteyn -- Chief Executive Officer

Thanks, Terry. Well, look, I would say conditions in general continue to improve steadily. I mean, we're trending positively here coming out -- hopefully coming out of the pandemic, right. And we're being really -- continue to be really thoughtful in terms of our investments, and our people, and our platform, while remaining disciplined as you come to expect from us, thoughtful growth, disciplined approach, mindful of cash flow and profitability, but at the same time attacking what is a really big total addressable market. And I think one of the biggest themes that we're seeing is that true cloud is really starting to hit what I would call a critical mass as far as unpacking the back-office. When we got this company going over a decade ago, that was one of the big hypothesis we had is that we will be able to go into that back-office, begin to unpack the back-office with key use cases and then create a unified platform that really pulls them together in a way that's going to drive incredible value for customers in every area, from supply chain, from transactional spend [Indecipherable] spend, to treasury and other areas we touched on. And I can tell you, we feel that there is strong momentum coming out of this pandemic and we feel really well positioned going forward as you think about the coming quarters and the coming years.

Operator

Your next question comes from the line of Brent Bracelin from Piper Sandler. Your line is open.

Brent Bracelin -- Piper Sandler -- Analyst

Thank you and good afternoon. Was hoping to drill down on the enterprise activity in the quarter. If I look at billings growth overall and billings ex-LLamasoft, you saw some moderation there again this quarter, but you did talk about kind of a record pipeline. So could you provide additional color on the pipeline build in Q1? Any signs that large deal pipeline is starting to come back yet with the reopening? Are you seeing any early signals that enterprise sales cycles could begin to shorten here or do we have to wait a couple more quarters -- early leading signals that things comes back?

Rob Bernshteyn -- Chief Executive Officer

Yeah. No, great, great, great question. Well, first, let me say, we have the largest pipeline we've ever had going into Q2. I mean, there is no question about that. We're clearly seeing strong and increasing customer as well as prospect engagement. Our average recurring revenue per deal has gone up now every quarter -- virtually every quarter for 49 quarters and that includes obviously a wide mix of mid-market customer and a lot of mid-market customer volume that's part of that. Right? So it continues to be a healthy mix. And many of the largest deals that we were seeing kind of in the -- when COVID hit and maybe were slowed down are starting to either come to fruition or into those late stages of the pipeline. So, it feels quite healthy, but I have to say at the same time we're exiting the pandemic. We are on, what I would call, hardening firmament, but that firmament is not rock solid because of questions around the pandemic. So, we continue to be thoughtful in the way we plan and invest and run at what is just clearly an incredible market and incredible opportunity.

Todd Ford -- Chief Financial Officer

Yeah. The one thing I would add too when you look at the year-over-year compares for Q1, obviously, last year was pandemic or at least starting to come in at the end of Q1, but we also had a benefit last year of about $7 million to $8 million because two years ago had our strongest May ever and we billed 30 days in advance. So that is one thing that impacts the year-over-year compares as well that I'm not sure people remember.

Operator

Your next question comes from the line of Brad Sills from Bank of America Securities. Your line is open.

Brad Sills -- Bank of America Merrill Lynch -- Analyst

Oh, great. Thanks guys and congrats on a nice quarter. Congratulations Todd and Tony on your new roles. I wanted to ask about the spend under management metric. It looks like it had a nice sequential increase, $2.6 trillion, I think it was about $2.3 trillion last quarter. So, incremental about $300 billion. I think normally you see kind of a sequential downtick Q4 to Q1 on that metric. And so I guess my question is, is that the right math? Are we seeing a change there? And what's driving that? And what kind of a leading indicator is that metric for the business?

Rob Bernshteyn -- Chief Executive Officer

Sure. That's a great question. I think that's roughly the right math that you described, but yes, now at $2.6 trillion. It's -- when you zoom out, it is of course very strongly correlated to customer value, it's correlated to our ongoing growth from a revenue perspective, etc. But it has bumps here and there based on go-lives, staging of go-lives, existing customers expanding. So, to really understand that metric it's worth stepping back to look at maybe three to four quarter and annual arc to really understand how that's going and it's very, very healthy. It's a great sign of adoption. And it's really the one we share with all of you, but there are many more adoption and engagement measures we look at. And those two look very, very promising in terms of our ongoing development of the business.

Operator

Your next question comes from the line of Alex Zukin from Wolfe Research. Your line is open.

Alex Zukin -- Wolfe Research -- Analyst

Thank you. Hey, guys. Rob, maybe for you. When you think about the momentum in the business coming out, clearly we've talked about a pipeline now for some time, but are you starting to see the enablement of more strategic conversations around supply chain kind of start to drive up ARPU or conversations around expansion activity?

And then maybe for Tony, any chance we could get the RPO or CRPO numbers or just a general sense around the net expansion metrics so we can calibrate some of the bookings momentum?

Rob Bernshteyn -- Chief Executive Officer

So, Alex, thanks and congrats on your new role as well. So I could tell you that the conversations around supply chain design and planning, that I have personally had over the last six months really are at a different level than we've historically had as a company, which I find to be incredibly promising. I mean, there is not one executive I've talked to that isn't thinking about how to simply apply information technology to the problem of effectively plan and design how they spend money and how to manage their supply chain, right. And what we are seeing as it pertains to our business is that division of having these capabilities operational procurement and supply chain design on the front end and the ability to drive sourcing events based on design plans is something that they really want, it's something that they're willing to pay us fairly for.

And if you look at, again, Q1, there are numerous deals that we closed frankly at fair higher price points due to their awareness of the current synergy and the anticipated integration synergy of our platform. And I'm really excited in particular about our September release, which is dedicated to suite synergy that's going to unlock even more of that on the ground for our customers.

Tony Tiscornia -- Chief Accounting Officer

Thanks, Alex. And on RPO, tomorrow we'll file our 10-Q and the number that we will be disclosing there is $973 million of RPO exiting Q1. From a gross renewal and dollar based expansion perspective, our results this quarter were pretty much exactly the same as last quarter. So flat quarter-over-quarter, typical historical range.

Operator

Your next question comes from the line of Matt VanVliet from BTIG. Your line is open.

Matt VanVliet -- BTIG -- Analyst

Yeah. Thanks for taking the question and congrats on the new roles, guys. As you look at kind of the back half of the year here from a pipeline perspective and projecting out what business travel and maybe T&E budgets overall will look like, I guess, how much upside is there potentially from seeing a little bit more of a earlier return than you're currently anticipating?

And are you getting any commentary from customers that want to do an implementation kind of all at once and would like to wait and see when their T&E budgets are coming back to include that in a broader BSM upgrade cycle?

Rob Bernshteyn -- Chief Executive Officer

Well, we're definitely seeing a dynamic of accelerated digital transformation where customers are looking to do not only multi-modules in tandem, but in many cases, frankly utilizing Coupa and the savings we can deliver for them from our transactional spend to actually pay for some of the other initiatives that span beyond business spend management. But certainly in the travel area, look, we anticipate obviously an increase in business travel in the second half of the -- toward the tail end of the year and we're particularly excited about the new T&E offering we're going to be taking to market by the end of the year and we hope to capitalize on that, not only this year, but obviously in coming years, for sure.

Operator

Your next question comes from the line of Joseph Vafi from Canaccord. Your line is open.

Joseph Vafi -- Canaccord Genuity -- Analyst

Hey, guys. Good afternoon. Congrats to Tony and Todd. And, I guess, Rob, so you don't feel left out, congrats on the quarter. But I -- Rob, I think I heard in your [Indecipherable] it sounded kind of like a pretty big statement and I don't want to hold your feet to the fire. It did sounded like you said you expect ultimately that almost all your customers would adopt the Pay module. And I was wondering, what your thoughts are behind that statement? Thanks.

Rob Bernshteyn -- Chief Executive Officer

Sure, sure. Well, look, I mean, first of all, if we just look back, as I mentioned, over 30% attach rate in just Q1 is very promising. Secondarily what's promising is the interest in all areas that we've already taken to market around Coupa Pay. Right? So, virtual credit cards, we're seeing really good adoption of that, particularly in enterprise. It was the first capability in Pay we launched. Dynamic discounting is being uplifted by our customers and then we also, of course, have the core of Coupa Pay, which is invoice payments, where we're seeing good adoption in mid-market and moving up to larger companies as we continue to develop that offering. So, our hope is that every customer is going to use every one of our modules that we have today and the ones we'll develop in the future as part of our integrated Business Spend Management platform and that's what we're working on day in and day out.

Operator

Your next question comes from the line of Daniel Jester from Citi. Your line is open.

Daniel Jester -- Citi -- Analyst

Yeah, great. Thanks. Congrats and thanks for taking my question. I just wanted to see if you could expand on your comments about supply chain fragility, maybe this is off of Alex question a bit as well. I guess, first, is this indirect or direct procurement at which folks are focused on? And then secondly, for the customers that you're speaking to, who is leading this transformation within the organization? Is this being run out of a procurement office or if it's -- or is it coming out of finance or operations? And I ask because if it's being led in other parts of the organization, how do you make sure that Coupa is at the table as these teams build or rebuild their supply chains? Thanks.

Todd Ford -- Chief Financial Officer

Those are great questions. I mean, first of all, it's -- we're seeing it both in direct and indirect and in the intersection of direct and indirect. I mean, the most obvious example in indirect is PPE equipment obviously and a host of other areas, category spend, and we're definitely seeing that obviously on the direct side the need to create different scenarios for supply chain design to react to very quickly shifting needs for different suppliers given the lack of access to existing ones. So, we're seeing it on both sides.

In terms of the buying center, it still tends to be within the CFO or certainly touches the CFO and very often begins to touch the head of supply chain for an organization or head of operations. So we're having those conversations. But what's most exciting is that we're seeing these more and more sponsored by CEOs realize that the unpacking of the back-office is under way and the tools and capabilities they have in their back-office are really, really subpar based on their digital transformation agenda. So not only be able to go in there and offer a key component of digital transformation, but also being able to save them a lot of money quickly so they can actually pay for more of it is really a double win that we're seeing them take advantage of and we're in front of it.

Operator

Your next question comes from the line of Peter Levine from Evercore ISI. Your line is open.

Peter Levine -- Evercore ISI -- Analyst

Great. Thanks for taking my questions and I will echo the congrats to both Tony and Todd. So, I guess, Rob to touch upon your prepared remarks on LLamasoft, the [Phonetic] decision for some of these customers to not transition and perhaps stick with license, what are you doing now to kind of encourage or incentivize these customers to switch? And then second, what's the opportunity, I guess, to leverage the partner ecosystem to perhaps maybe accelerate the cloud transition? Thank you.

Rob Bernshteyn -- Chief Executive Officer

Great questions. Well, first of all, we are having very strong success thus far, I would say, converting customers from their term licenses to SaaS, but we're doing that upon renewal. So, that's the time to do that. And the move is happening not -- it's not so much a stick, it's much more of a carrot. The offering -- the cloud offering is incredibly robust, it's incredibly configurable, it's incredibly easy to use and it takes advantage of the same core data model that they've been used to in their on-premise offering. So that's a really wonderful thing. And in terms of the partners, you bet. I was just on a call this morning with some of the most senior folks of one of the largest, if not the largest, systems integrator in the world talking about the army of systems integrators we're going to continuing to certify on utilizing this offering to address the supply chain design and planning opportunity. So, right on with that question.

Operator

Your next question comes from the line of Bob Napoli from William Blair. Your line is open.

Robert Napoli -- William Blair -- Analyst

Thank you and congratulations Todd and Tony. So if just going into the Investor Day just wanted to hear if you can give any updated thoughts on mid-term targets or you've had targets out there may have been a few very large acquisitions larger than you had historically. And so, maybe just a focus of the Investor Day. I know Coupa Pay is part of it. And then any thoughts around that you might introduce around medium or mid-term or long-term targets?

Tony Tiscornia -- Chief Accounting Officer

Certainly. One of the things we've prided ourselves on here at Coupa is being consistent and we fully intend to give mid-year and long-term targets updated as we have in our past two Analyst Days that we've done since going public. And as we noted, of course, there's been a lot of activity here, exciting on the business front. So, for Coupa Pay and other important aspects of the business, we will have a healthy list of updates for folks.

Operator

Your next question comes from the line of Ryan MacDonald from Needham. Your line is open.

Ryan MacDonald -- Needham -- Analyst

Hi. Thanks for taking my question and congrats everyone. Rob, wanted to ask you about sales productivity and how you're feeling about that, especially as things are reopening. You mentioned earlier in the call in your prepared remarks that business travel has obviously not quite come back yet. But as you're looking at your pipeline and what's flowing through and progressing through that pipeline, how are you starting to think about your sales reps and how you're going to offer, say, a hybrid approach between virtual and in-person to try to maybe push things through the pipeline more quickly? Thanks.

Rob Bernshteyn -- Chief Executive Officer

Sure. Well, number one -- without a doubt, the number one priority is the safety of our people and then the safety of any of the customers, the prospective customers we'd be visiting and that guides anything and everything we do. Secondarily is -- the second guiding principle is flexibility and the thoughtfulness of entrusting our colleagues to make the best business decisions for our business in balance with their needs. So we've already made some exceptions around business travel, but at the same time as the coming months progress, we will of course look to make those more flexible and actually begin a process of broader reentry for our colleagues here, likely to be something like roughly 25% or so during the summer and then getting to roughly 50% as we start to fall. All of that is, of course, pending what happens with the pandemic and, of course, in accordance with local regulations and local requirements around the pandemic. [Phonetic]

Operator

Your next question comes from the line of Andrew DeGasperi from Berenberg. Your line is open.

Andrew DeGasperi -- Berenberg Capital Markets -- Analyst

Thanks for taking my question. I wanted to ask one on competition. Specifically one of your competitors last week launched a network for businesses and they also made some enhancements to their travel and expense product. Just curious to know if you can -- you have any comments on that. And generally, are you seeing the competitive landscape becoming more intensifying at this stage or is it similar as it was in the past?

Rob Bernshteyn -- Chief Executive Officer

Yeah. I would say, as I've said since 2016 in our first earnings call, the only competition we have in this market is ourselves. There is a whole host of players trying to do a whole host of different things. We're pursuing a vision of helping companies optimize every dollar that they spend, helping them see the business spend management vision that we have aligned with it and get incredible value in working with us and we are incredibly proud of what we've been able achieve for now thousands of customers in that area and we think it's a green light ahead to push us hard as we can and as thoughtfully as we can into building our way into this huge TAM that we're embarking on. So, nothing has changed and nothing is really concerning us around the ecosystem that they talked about.

Operator

Your next question comes from the line of Steve Koenig from SMBC. Your line is open.

Steve Koenig -- SMBC Nikko Securities -- Analyst

Hi. Thank you very much. I rarely do this, but I'm going to actually ask a two-part question this time. First one is, did you guys -- I wasn't sure, did you reiterate the $30 million to $35 million in LLamasoft revenue contribution and $10 million [Indecipherable] for the year? And can you just provide us a little more color on -- I got the $18.5 million in billings from LLamasoft, but how did they do revenue-wise and also billings-wise relative to your expectations? And then if I may, I just wanted to ask one in for Rob. In placement of supply chain, are you seeing any sort of impact on your sales motions, positive or negative, any differential impact on verticals? And I'll stop there. Thanks very much, guys.

Rob Bernshteyn -- Chief Executive Officer

Thank you. Can you just repeat -- did you say different vertical approaches to supply chain? I didn't quite -- you -- I didn't hear all the questions.

Steve Koenig -- SMBC Nikko Securities -- Analyst

Inflation [Phonetic] that is starting to tick up. How are you seeing that reflected in your customer conversations?

Rob Bernshteyn -- Chief Executive Officer

We're seeing that, but much greater than that is we're seeing their incredible awareness that where they were operating from a supply chain perspective was incredibly inefficient as compared to where they could be. Agile -- non-agile, many customers who are doing supply chain designs and plans that were two to three years out without the ability to course correct based on changing dynamics. And so, they're just revisiting that entire sector of their organization and saying, how can we do this better? And what they're discovering, with no joke, are analysts largely using spreadsheets or really outdated approaches to this. And when we are able to go in there and model for them a literal digital twin of what could be with various different scenarios and applying AI that can take into account third party as well as external data feeds to figure out how to create a supply chain for the future before any truck gets on the road, before any product gets produced, before any billing materials goes to sourcing, they're awaking to the opportunity here. And we're right down in front of them with an incredible platform. And as mentioned earlier, a developing ecosystem of systems integrators with best practices and advice that can use this platform to help them, we think we're in a really unique spot.

Tony Tiscornia -- Chief Accounting Officer

And let me touch on your question about revenue contribution and the guidance pertaining to Coupa supply chain. So, of course, as Rob noted, we're working to win a big market and internally we don't track acquired finance -- entity financial statements independently once they're integrated. We sell Coupa as one integrated platform and we manage our financials that way as well. As you noted, we did provide the all-in billings number for LLamasoft for Q1 in our prepared remarks. Billings is really right now the cleanest metric to share, given the transition we're working on in the LLamasoft revenue model, and really billings is typically the best indicator of where the business is going. I'd add clearly our M&A strategy seems to be working as we increase the breadth and depth of our platform with a mix of organic development and M&A. Our average deal sizes continue to increase over time and we position ourselves as the dominant leader in the market. And with respect to revenue -- to guidance, excuse me, our guidance includes all the things known to us at this time, granted our guidance is based on a desired outcome we're trying to achieve and we're making an assertive assumption that we will successfully and rapidly convert term licenses to SaaS and shift professional services to partners, but there is a possibility if revenue comes in higher, if it takes more time to execute this transition. But, yes, we're applying the same assertive assumption in our full year guide.

Rob Bernshteyn -- Chief Executive Officer

Yeah. And if you look at the guidance, right, the subscription revenue we passed through there was some more interim [Phonetic] licenses that went into professional services and other. So that obviously increases revenue in Q1 by a few million dollars. But on the flip side, it reduces the subscription revenue in the out quarters. And if you look at the professional services in other guide, that is really as Tony just mentioned, the desired outcome. So, we don't want to put higher numbers in that line at least from a guidance perspective because quite frankly we don't want them to convert to term licenses and we do want to push as much as we can to the partners out there. So, that's why you've seen from a guidance perspective for the year that the professional services is basically flat because of the outcome we're actually trying to achieve, which is in the best long-term interest of shareholders.

Operator

[Operator Closing Remarks]

Duration: 57 minutes

Call participants:

Steven Horwitz -- Vice President, Investor Relations

Rob Bernshteyn -- Chief Executive Officer

Todd Ford -- Chief Financial Officer

Tony Tiscornia -- Chief Accounting Officer

Stan Zlotsky -- Morgan Stanley & Co. LLC -- Analyst

Brian Peterson -- Raymond James & Associates, Inc. -- Analyst

Christopher Merwin -- Goldman Sachs -- Analyst

Siti Panigrahi -- Mizuho -- Analyst

Michael Turrin -- Wells Fargo -- Analyst

Terry Tillman -- Truist Securities -- Analyst

Brent Bracelin -- Piper Sandler -- Analyst

Brad Sills -- Bank of America Merrill Lynch -- Analyst

Alex Zukin -- Wolfe Research -- Analyst

Matt VanVliet -- BTIG -- Analyst

Joseph Vafi -- Canaccord Genuity -- Analyst

Daniel Jester -- Citi -- Analyst

Peter Levine -- Evercore ISI -- Analyst

Robert Napoli -- William Blair -- Analyst

Ryan MacDonald -- Needham -- Analyst

Andrew DeGasperi -- Berenberg Capital Markets -- Analyst

Steve Koenig -- SMBC Nikko Securities -- Analyst

More COUP analysis

All earnings call transcripts