Coupa Software (COUP) just put another quarter of solid revenue growth in the books. Expanding on existing customer relationships and winning new contracts, it's adding to a base of subscription revenue at a rapid pace. But for shareholders who bought in over the past year, the stock has gone sideways. Investors are wondering why. On a Fool Live episode recorded on June 16, Fool contributors Brian Stoffel and Toby Bordelon discuss what's happening with the business and the resulting stock performance.
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Brian Stoffel: I'm going to start us off, and we're going to talk about Coupa Software. Ticker symbol is C-O-U-P. Just a quick reminder, if you're not familiar with this, this is a software-as-a-service company. Basically, the elevator pitch is they help companies get a handle on their finances, and they do some other things to really help with that that are important. They connect you with companies to do procurement. But that's the general thesis.
They reported earnings, and their total revenue for the first quarter was up 40%. The more important is their subscription revenue because that other revenue is usually associated with helping companies get things running. Their subscription revenue was a little bit less, at 32%. The number of customers they have that are spending over $100,000 a year with them was up 33%. They have over 1,000 now. Their free cash flow more than doubled for the quarter and over the last year.
Here is a really important thing. Their calculated billings is up 39%. There are lots of exceptions to this rule, but usually, calculated billings or remaining performance obligations, when that is higher than the subscription revenue growth, usually, that means there's even more growth baked into the pipeline. That's a good thing.
Shares fell just after earnings last week, but they completely recovered those losses by the end of the week. For the second quarter, subscription revenue is expected to be up 28%, and for the full year, up 26%. When I did this math a couple of days ago, the company traded for about 28 times sales.
Toby Bordelon: Cool. That all sounds great, Brian. I'm looking at the stock chart here. I just checked. It looks like, over the past year, the stock has barely moved. I think year over year, we're down about 3%. I look at the numbers you talked about from this last earnings and what they're forecasting. Look, 32% year-over-year growth for subscribers, 40% revenue. That's fantastic. What's the disconnect? This doesn't make any sense to me. This company should be doing great. Why is a stock not delivering just like the business seems to be doing?
Stoffel: Sure. Well, I think there's two things. One is that while that is outstanding revenue growth, when it's compared to some of the other SaaS players, it could be viewed as a little bit slower. But I think if we just back up a little bit, you're correct. In the last year, it hasn't really moved. You see, here's where it is now and here's where it was about a year ago.
But if we look at this, what you can see here is that it's still almost quadrupled in the last three years. But really, if you look at it, this follows the pathway that most SaaS companies have gone on the last couple of days. It's been a little bit different, but everything was up and to the right until February. I think it was Feb. 15. I bet you that's what that date is right there, is Feb. 15 and it's been down since. It's not something that is terribly concerning to me, but it's a great teaching point as to why we always say three-year minimum in our investing time horizon.
I think to answer your question, consistency. If they can just consistently keep producing the type of results that they have been, it will be reflected in the stock price.
Bordelon: Yeah, sounds good. Sounds great. Thank you.