Cloud Stocks: Analyzing Coupa’s LLamasoft Acquisition
I’m publishing this series to discuss a topic that I follow closely — cloud stocks, trends, strategy, acquisitions, and more. I like fundamentals-focused business building, and outline the principles of fundamentals-focused business building in my free Bootstrapping course.
The pandemic conditions have forced all organizations — big and small — to look at their expenses more closely. Organizations are reaching out to business spend management services providers to create efficient financial models. San Mateo-based Coupa (Nasdaq: COUP) is benefiting from its cloud-based model that helps these organizations manage spend. It is also adding AI capabilities to its portfolio to stay ahead of the curve.
Coupa’s Financials
Revenues for the first quarter of the year grew 31% to $133.0 million, ahead of the market’s estimates by 7%. GAAP net loss of $60.8 million was significantly higher than previous year’s net loss of $26.3 million. On an adjusted basis, net income was $0.18 per share, compared to a net income of $0.20 per share a year ago and analyst estimates of $0.04 per share.
By segment, subscription services revenues increased 31% to $118.1 million and professional services revenues grew 28.2% to $14.9 million.
For the second quarter, the company expects revenues of $145-$146 million with non-GAAP net loss of $0.11-$0.13 per share. It expects to end the year with revenues of $523-$524 million with net income of $0.47-$0.49 per share. The market was looking for Q2 revenues of $129.31 million with an EPS of $0.02 and revenues of $498.31 million for the year with an EPS of $0.46.
Coupa’s Product Upgrades
During the quarter, Coupa strengthened its relationship with American Express to bring virtual card payments to the US. The expanded relationship will allow US-based customers to now use American Express virtual Cards as a payment option with Coupa Pay, its business-to-business (B2B) payments solution. American Express already had a Virtual Cards payment solution available in the UK and Australia. The new service simplifies complex and inefficient payment processes for businesses around the world. The expansion will help meet the demand of customers who need a virtual way to pay suppliers and ensure their business continues to be operational. The solution comes with additional benefits such as extended pre-approvals for card spend, enhanced security when paying suppliers, increased visibility into the full payment process, streamlined payments, and the ability to use the card’s payment cycle to better manage working capital for buyers.
Coupa’s LLamasoft Acquisition
Last month, Coupa announced the acquisition of LLamasoft, a leader in AI-powered supply chain design and planning for a purchase price of approximately $1.5 billion. Ann Arbor-based LLamasoft is known for its AI-powered supply chain services. It is used by several enterprise customers, including Boeing, Danone S.A., Home Depot, and Nestle. Released earlier this year, LLamasoft’s llama.ai delivers AI-powered decision making across the supply chain to support unlimited number of use cases. It allows organizations to create purpose-built applications that leverage an end-to-end decision data model and employ a library of proven supply chain algorithms. These applications are able to run what-if scenarios and surface valuable insights before organizations make key business decisions. Coupa plans to leverage the acquisition to strengthen its supply chain capabilities, thus allowing businesses to drive greater value through Business Spend Management.
Prior to the acquisition, LLamasoft had raised $56.1 million in funding from investors including TPG, Goldman Sachs, Augment Ventures, and MK Capital. Its last round of funding was held in 2017 at an undisclosed valuation. In 2015, the company was valued in the range of $100-$500 million. LLamasoft was one of the high growth companies that Sonali Vijayavargiya of Augment Ventures had spoken about with me earlier this year.
Coupa’s stock is trading at $304.72 with a market capitalization of $21.99 billion. The stock hit a 52-week high of $366.90 in December last year and a 52-week low of $99.01 in March.
Disclosure: All investors should make their own assessments based on their own research, informed interpretations, and risk appetite. This article expresses my own opinions based on my own research of product-market fit, channel execution, and other factors. My primary interest is in product strategy. While this may have bearing on stock movements, my writings tend to focus on long-term implications. The information presented is illustrative and educational, but should not be regarded as a complete analysis nor recommendation to buy or sell the securities mentioned herein. I am not a registered investment adviser and I am not receiving compensation for this article.
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Photo credit: Coupa Software/Flickr.com.
