Q3 2021 Coupa Software Inc Earnings Call

Hi.

And.

[music].

And Paul.

Good day, ladies and gentlemen, and welcome to the keep the software third.

The quarter fiscal year 2021 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 and he would like to ask the question you May Press Star one on your touched and Pat and any time, Inc.

Anyone should require assistance during the conference. Please press star zero on your touch and pad at any time.

As a reminder of 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. Hurwitz you may begin your conference. Thank you.

Good afternoon, and welcome to Cuba software third quarter Conference call. Joining me today on Robert theme, the CEO and Todd Board with CFO remarks and include forward looking statements about guidance and future results of operations strategy, the market size products competitive position and potential growth opportunities. Our actual results may be materially different.

On the 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 assumption of 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 the record.

Affiliation of certain of these measures is included in today's earnings release, which you can find on on Investor Relations website. A replay of this call will also be available on our Investor Relations website.

Unless otherwise stated growth comparisons are against the same period of the prior year and with that I will now turn the call over the Rob Rob. Thanks, Stephen So everyone and thank you for joining us the Celgar on had a great Thanksgiving and just everyone is staying safe.

Hi, its coupon through the police the share of that we're continuing to execute against our massive market opportunity, we're doing so with consistent tenacity.

And on unrestrained passion for delivering what we believe is indisputable values and service for our customers.

Customers and prospects and looking at group is comprehensive business and management platform to ensure that they are creating increased the agility resilience and of course profitability.

To that end, we saw improved Q3 trends despite the persistent pandemic situations.

Ill continued meaningful growth and our sales pipeline, we delivered multiple global marquee customer wins and go lives, our corporate and mid market businesses are scaling and our cumulative spend under management is now well over 1.2 trillion 1.12, 0.1 trillion dollars excuse me on.

All of that translates well to our recent financial results specifically looking at Q3, we delivered a record 133 million and revenue our 11th consecutive quarter of non-GAAP profitability.

And 30% plus calculated billings growth.

So with that let me dive into some deeper highlights from the quarter.

Let's begin with some customer go lives.

No the corporate social responsibility is important to the coupe the community and we are uniquely positioned to help customers on this area with that as a backdrop. This quarter. Let me share. Some go lives that highlight humanitarian companies focused on corporate social responsibility and showcase how we're working together.

Let's start with World Vision recently went live with inventory management.

Well vision is responding to the COVID-19 of the emergency by providing aid and the central supplies to tens of millions of people in the U.S. and abroad user.

Using Cooper World Vision had centralized its inventory model to support disaster relief efforts around the world.

Norbert Sue partnership leader for global impact share, we now have full visibility into our three global inventory warehouses and a more efficient ordering process. Our disaster management team can see what's available across all three locations. So they could deliver and order quickly order supplies like ERP and have it delivered.

Communities and children, where it's needed most.

The World Vision is doing incredible work and my colleagues and I are proud to support them.

In terms of company size, one of the world's largest shipping companies responsible for delivering P. P E and ventilators during the pandemic went live this quarter in record time this.

This is one of the fastest deployments of we've ever done for a fortune 50 company.

And some of the savings impact nasty number three on a global 100 list of the most sustainable companies also recently on live with Cooper and.

And their first ever RFP auction of at the achieved 17% savings on IP related subscriptions and services.

This well exceeded their 10 per cent target.

And in terms of speed, new horizons, and Australian non profit that helps of customers achieve greater well being went live and truly accelerated fashion or the eight and Cooper.

Jointly we got it done in less than 10 weeks.

Of course these are just a few examples.

Now, let's turn to the two supporting diversity and inclusion where we're also making an impact.

Today, we have more than 30 unique the uniquely designed configurations settings, and our platform to support diversity for our customers spend management programs.

Customers can easily find and engage with the minority owned businesses on our platform and leverage the power of community intelligence to make selections that form lasting business relationships.

You'll recall that the letter Oh and coupon doesn't just represent the our open technical architecture. It also represents our openness to everyone. When the inclusion of the guiding light.

To that and were recently published the micro site on Coupe of dotcom, highlighting our own diversity and inclusion principles, including how we strive to attract underrepresented minorities and we educate our current work force on these principles and how we advocate to provide support to our diverse communities.

Now, let's talk about our pipeline generation as well as our recent sales on.

Our early stage pipeline continues to grow rapidly and those small thanks to our developing customer community the.

The help scale their efforts, we're using larger group virtual events to engage the entire community like our recent smarter together Webinars series then.

Then we follow up with smaller curated events, where current customers from similar industries and geographies share best practices and showcase the successes of their coupe of deployments.

Because of the community and the customer advocacy flywheel comes to life at these events when new friends get with existing friends and we become friends.

The success of our virtual go to market initiatives and committed events is clearly evidenced by the fact that we saw more user groups training sessions click throughs on email campaigns and downloading of content by customer prospects in Q3, and we saw in Q1 and Q2 combined.

What these prospects and customers are finding is the cooper's values the service platform better position them to be resilient during difficult economic conditions, while simultaneously preparing them to be highly agile as things improve.

Now.

In terms of sales in Q3, we saw improved conditions in the U.S. and Europe as well as in emerging markets.

Before I welcome our long list of new customers, let me call out to which I believe showcase how we're extending our market leadership position.

The first of these is Walmart.

One of our largest customers using cooper source to pay.

The alongside the Amazon, we're now providing our comprehensive platform the scene Cooper to the two largest companies on the Fortune 100 list.

The second customer new customer to call out is the United States House of Representatives.

As we continue our pursuit and the federal sector. It's it's wins like this that will propel our growth.

Let's now walk in many other organizations the joined the keep the community during the quarter, including 80, B. companies axle Nobel Casey's General stores DHL global elevate textile Js International Global logic I capital network.

Immuno of on over Therapeutics.

Pilot freight services safety culture, Sam's Mark to roll, the United Safety, and survivability, United Care, Queensland University of Bristol well built.

Zoom and Phil and many others we.

We are excited that these and many other customers have joined our thriving community.

Now to close out sales. We also saw strong growth in emerging markets and in fact business and Latin America Asia Pacific, Japan, The Middle East and Africa, essentially doubled over the last 12 months.

In terms of business updates, let's start with our federal business as.

As I mentioned, a moment ago. The U.S. House of Representatives has recently joined the cubic and Mindy adopting the coupe of platform as part of the houses initiative to modernize all administrative systems once.

Once they go live Cooper will be used by every person in Congress and buy their staff as well.

By law, we can't disclose which additional federal opportunities are currently in front of us, but we can't confirm there was a robust broad pipeline across several federal agencies.

During the quarter. We also graduated into the next stage of fed ramp, which is the federal government standard for cloud based solutions. We are now fed ramp ready moderate which signifies the way of past all the vigorous tests and are ready for a federal sponsor were excited about the inroads, we are making and federal.

Let's now of touch base on community intelligence community. The intelligence represents perhaps the greatest barrier to entry for our business over the longer term.

Given the significant interest we're seeing from some of the largest financial services institutions in the world who are looking to re platform themselves for the digital futures let.

Let me share what's possible with Cubicin media intelligence at our existing customer Barclays.

Barclays is one of the largest banks and the world serving millions of businesses and individuals globally.

With the financial disruptions from cover the 19 Barclays has played a leadership role in helping businesses and individuals whether the storm.

With Cuba community intelligence, and real time performance benchmarks against peers Barclays head of sourcing fill Thomas and Barclays procurement transformation lead Sonya Panoro, we're able to optimize their electronic invoicing and approval cycle times.

Leveraging community prescriptions, the P. and Cooper Barclays targeted suppliers that the coupe of community already identified as the electronic and voice enabled this allowed them to increase electronic invoicing by 26%.

With commodity intelligence sales the optimize their workflow to reduce approval cycle times by an amazing 73%.

This is just the one customer example of the power of community intelligence, we're seeing in action.

And other exciting aspect of our developing business is coupe of pay dirt.

During the quarter, we continued to strengthen our coupe of pay partner Eco system with the addition of American Express now supporting virtual card payments in the United States.

These and the many other partnerships we've launched are helping us build the foundation for Coupe of pay success over the long term.

And the near term, we're proving to be especially important in today's work from home environment, where customers need better ways to pay suppliers virtually.

As the overall offering expense so too does the customer base. It took nearly two years to reach the 100 customer milestone for coupe of pay and I shared with you in June and now that number has grown to over 150 and just the last two quarters.

In addition, with new customers, we are seeing a coupe of pay attach rate of approximately 30% the.

This growth comes despite the headwinds of a difficult market environment and the fact that our most recent offering and invoice payments has only been available for a few quarters.

In terms of invoice payments couch base, a leader in no SQL databases recently switched to coupe of pay from a legacy payments provider.

While using its legacy solution.

Cash based needed to toggle between multiple systems, which created room for error and complicated reconciliation processes with.

With Coupe of pay cash base now makes their invoice payments from the Coupe of platform in one seamless integrated experience that provides the financial organization with increased visibility into their payments greater data accessibility and the streamlined approval process.

As many of your goal director of accounting for cash based put it theres now one source of true.

In addition to the value of having one platform cash based leverages, our ease of use configurability and flexibility essentially our user centricity or the you and Cooper there.

They are now processing approximately 90% of their payments through group of pay and our plan and to take advantage of our cross border payments and virtual credit cards soon.

Now, let's move on to M&A.

Immediately after the end of Q3, we announced our acquisition of Lama soft and AI powered supply chain design and planning software company.

This acquisition represents our continued expansion of our direct spend capabilities and is very much in line with our declared vision of comprehensively managing all business spend.

Supply chains are being rewired globally today, it's all about agility and the ability to design transact learn and optimize very quickly.

Combining lama sauce day, driven platform with Coopers two plus trillion dollars of community powered spend data create the synergy that can build on itself.

Introducing that amount of new timely and relevant data to what is already considered the supply chain design and planning platform of choice.

Will help customers make optimize the supply chain decisions.

Those smarter decisions will drive additional direct spend through our platform, which will in turn yield additional valuable data.

This cycle will allow our newly integrated supply chain design and planning technology to continually improve and yields greater and greater value for all our customers.

And of course this deal is very consistent with our stated M&A strategy of adding technology components, the maximize and enhance the value of our organic transactional core engine and augmenting this engine with key advanced power applications that optimize the value of these transactions.

As always and making this decision we considered culture first week.

We considered buy versus build and we considered whether it could be integrated into our platform and several product releases.

I could not be more excited to welcome our colleagues from mom and stuff to Kupol.

Now, let's move on to the Coupe of business spend index or be as Ais.

Before getting into the Q4 outlook I'd like to once again reiterate that the b aside data is not necessarily indicative of the trends, we're seeing and our own coupe of business.

The coupon Q4 of the OSI indicates that business and sentiment is continuing to recover from its sharp drop in Q1 as companies grow increasingly more comfortable operating and the new normal.

However, despite the positive adjustments made by companies in most major sectors. Our analysis shows the confidence in the economy is still low and is likely to remain below trend for at least the next three to six months.

Sector data indicates that the health and life sciences industry share the largest quarter over quarter improvement, while financial services retail and high Tech showed some modest improvement sales.

Expense sentiment for manufacturing, though continues to decline.

For a closer look at our Q4 be OSI, where we share more data on each of these trends I invite you to visit spend the index dotcom.

Now, let's talk about our people I'd like to start by recognizing a few of my colleagues that have made outstanding contributions in alignment with our core values.

Let's start with the Neal Moore, who was recently recognized by his peers for exemplifying our number one value of ensuring customer success. So.

The Neil of accessible on top of issues and always aiming to provide better service is always positive and consistently exceeds expectations.

Simon Devane was recognized for focusing on results.

He is both the leader and a great team player Simon is well known for the ability to rise the new challenges and share his deep knowledge and expertise with members of our community.

And finally, Michael Shanker was recognized for embodying our core value of striving for excellence Mike.

Mike's colleagues noted the d. as the most genuine approach towards inclusion and collaboration simply put it makes an already strong team 10 times stronger condo.

Congratulations and thank you to us and Neil Simon and Mike.

Recently, we also made a number of key leadership promotions.

Hey, let me highlight the promotion of our very on Rob Glenn The executive Vice President of global sales.

Well, Rob was responsible for approximately 70% of our sales footprint. He will officially be taking over 100% of the effort from Steve winner on February Onest 2021.

Steve will nonetheless be available for Cooper during 2021 as he moves into the retirement let.

Let me say, the Steve and I have been planning for Bobs promotion for a number of years as we jointly supported Rob's professional growth and Cuba watch and take on challenge off the challenge and deliver.

In tandem I'm extremely grateful to Steve the the incredible teamwork and camaraderie, we've shared of the years and I wish him on wonderful retirement.

So in closing we are currently well into our 40 eightth quarter of execution.

We continue to focus on delivering unprecedented value as a service and for each and every one of the customers and our growing community and thus winning the business spend management market and the process.

The success is going to bring us together and we are on the road to that success.

With that let me now hand, the call over to our Chief Financial Officer, Todd Ford, who will review, our Q3 financial results and provide our outlook for the third quarter and updated fiscal 2021 Todd.

Thanks, Robert and good afternoon, everyone. This represents our fourth earnings call during the call the 19 pandemic.

On quite a journey and as we've continued to build a great business. During these uncertain times and then a remote working environment.

As we enter a covert back in March on hypothesis was that we would face significant headwinds and Q2 and Q3 and that things were generally begin to open up in Q4 in.

And this environment Q2 results were very strong and the momentum continued into Q3 the.

Especially given Q3 is the historically weaker quarter for us.

The Q3 results exceeded the high end of the range of potential outcomes, we analyze them and providing Q3 guidance. The strong results were driven by fantastic execution on our go to market team.

As we look to Q4.

It stays on through all over again right now I feel the similar way to high did when we provided guidance on our last earnings call.

Were entering the quarter with the significantly stronger pipeline and this time last year.

Both on a gross dollar basis and in terms of what we consider later stage qualified pipeline.

So we are excited about our new business prospects for the quarter and momentum and our business. Our enthusiasm is tempered by the uncertainty of the COVID-19 situation and the reality of that the pandemic is out of the tipping point, which makes it difficult to predict the timing of when deals will close.

And as we look to F Y 22, the progress made with vaccines, coupled with the resiliency of our business provides a favorable setup going into next year.

With that as the backdrop.

Lets get into some details.

Today I'll cover our Q3 results on.

Our outlook for Q4 and.

And details regarding the financial impact of the long the Haas acquisition.

Please note since the acquisition closed in Q4.

And I'm a soft results are not included in our Q3 results, but are included in our Q4 guidance.

Let's begin with Q3 results.

So for the revenue grew 31% year over year to $133 million.

Subscription revenue for Q3 was $118 million also of 31 per cent compared to Q3 of last year, comprising 89% of total revenue.

Calculated billings for Q3 were $140 million on.

33% year over year increase compared to the 21% year over year increase we saw and Q2.

For the trailing 12 months.

Calculated billings were $553 million up from $416 million a year ago.

Also representing a 33% increase.

Total deferred revenue at the end of Q3 was $256 million.

Up from $193 million at the end of Q3 last year the.

The year over year increase of 33%.

Looking at margins and the results of operations, our third quarter non-GAAP gross margin was 72.5% above our guidance of 70% to 71%.

The Bowen integration will soon be complete and all material respects. So any gross margin drag from both on should become immaterial as we enter next year.

However, with respect the longest off this acquisition closed on the first business day of Q4 and due to its size. We expect the will create a meaningful drag on gross margins for at least the next two to three quarters.

Which is reflected in our guidance, which I'll provide more color on and a few moments.

As a reminder, after completing the acquisition, we typically see a drag on gross margin for the first several quarters, primarily due to one the immediately post acquisition, we carry the full board and food burden of the acquired businesses cost, but don't recognize 100% of the revenue because of the write down of deferred revenue and the purchase of <unk>.

Moving.

And to the take several quarters to complete the full business integration to the point, where we can take advantage of expense related synergies.

Looking at Q3 operating expenses, we continue to a sort of reinvest in our business and higher employee is the math amid the pandemic and we also had our first full quarter of bell on expenses.

Despite this the scale and leverage in our model once again showed through and our strong operating margin and adjusted free cash flow results.

For the quarter, we delivered non-GAAP operating income of $14 million or 11% of total revenue.

As well as non-GAAP net income of $13 million per 18 cents per share on 73.8 million diluted shares.

I'd also like to note the GE and the expenses in Q3 included more than $2 million of consulting services related to the Lama soft acquisition right. Once again closed in Q4.

Moving on to cash and cash flows the strength of our business mission critical nature of our platform and quality of our customer base continues to evidence itself and our cash flow result.

Q3, operating cash flow were $19 million and adjusted free cash flow were $17 million or 13% of total revenue.

These results included a cash outflow of approximately $13 million for prepayments, we made to our primary hosting provider to optimize the long term hosting costs.

For the trailing 12 month operating cash flows were $80 million or 16% of total revenue.

And the adjusted free cash flow, where $96 million or 20% of total revenues.

As a reminder, we define adjusted free cash flow as operating cash flows less purchases of property and equipment cost repayments of convertible senior notes the attributable to debt discount.

Cash at quarter end was $1.35 billion up from $1.34 billion last quarter.

We paid $6 million per cash and Q3 to settle obligations from our first convert our 2023 notes.

Now, let's turn the guidance.

With respect the guidance there are several moving parts and the substance for you to consider.

First as we previously noted due to the ongoing pandemic, many customers and prospects continue to operate with caution, making it difficult to predict the timing of when deals will close.

Also from a compare perspective recall that Q4 of last year with our last pre pandemic quarter, and we had a record quarter across the board.

The fourth quarter and full year guidance, we are providing today incorporates our current assumptions with respect to the uncertain effects of the challenging macro neighbor macro economic environment based on information available to us at this time around new business renewal.

The renewals timing of collections and various other inputs.

Variations from these assumptions may cause our results to differ.

Also our guidance once again assumes no billings and revenue contribution in Q4 from Coupe of travel Sabre formally opt out.

And as you may recall and during the year, we expect the 20 plus million dollars and billings and revenue contribution from group of travel favour.

But since the pandemic hit hard and mid March we have essentially recognized no revenue from that business. Since then.

And finally, our guidance today includes our current expectations for a full quarter of low on a soft.

And the coming the weeks, we plan to file the required eight K.A. FCC filing.

Related to the acquisition.

From that you will be able to approximate that lama soft as the Standalone company prior to the acquisition.

Had revenue of just over $100 million per day per year.

And as part of the standard purchase accounting, we do and every acquisition.

Well I'm a software acquired deferred revenue will be written down significantly.

It will take approximately one year for the impact of the circuit to flow through and for us to return to the pre acquisition Lama soft revenue run rate.

Gross and operating margin will also be impacted by the impacted by this as well because for one year, we will incur 100% of the costs, but won't get the full benefit of all of the revenue.

With that as the backdrop, we expect total revenue for the fourth quarter to be $145 million to $146 million.

This includes and expected contribution of approximately $13 million from on the soft.

Before providing the breakdown between subscription and professional services and other revenue let me first share some color on Lama software revenue profile leading.

Leading up to the acquisition the majority of on US off of recent new customer business was for hosted SaaS arrangements.

However from a legacy customer perspective, while the Sop did have a sizeable cohort of on Prem license arrangements, which are subject to different revenue rec and niche recognition treatment and hsas.

On Prem license revenue is recognized upfront at the time of sale, including for renewals.

Well the soft revenue is recognized ratably over the subscription term.

Going forward, we plan to sell the hosted SaaS solution to new customers and see the coupon the installed base customers when sold as an add on not the on Prem.

For the Lama software install base customers with on Prem licenses, we intend to transition the majority of them to the cloud over the next several quarters.

From a PML geography perspective, we report on Prem license revenue and our professional services and other revenue line price.

Prior to launch the soft we had very little of license revenue.

With that as the backdrop, we expect Q4 subscription revenue of $124.5 million to $125.5 million, which includes approximately $5.5 million from on the soft.

We expect professional services and other revenue of approximately $20.5 million.

Including approximately $7.5 million.

From mom and pop.

Per calculated billings on a trailing 12 month basis, we expect the exit Q4, and a year over year growth rate of approximately 27%.

For Q4, and that's why 21, we expect the Lama Sop calculated billings contribution of approximately 22, the $24 million.

Moving down the income statement.

We expect the Q4 non-GAAP gross margin of 67% to 68%.

A non-GAAP operating loss.

The $6 million to $8 million and a non-GAAP net loss of $7 million to $9 million. This.

This results in a non-GAAP not net loss per share of 11 to 13 cents on approximately 72 million weighted average basic and diluted shares for the quarter.

Our non-GAAP other income and expense guidance contemplates the potential currency fluctuations and tax liabilities as well of lower interest rates on our cash and cash interest expense of one eight and three 8% on the notes from our second and third convertible debt offerings respectively.

Also after continuing to generate meaningful cash flows on.

The strong collections in Q3, we expect adjusted free cash flow for Q4 to be breakeven to slightly positive.

For the fiscal year, ending January 30, Onest 2021, we expect total revenues of $523 million to $524 million.

This includes subscription revenue of $460 million to $461 million and.

The professional services and other revenue of approximately $63 million.

We expect the and non-GAAP gross margin for the year of approximately 71% and.

Net operating and net income for the year of $34 million to $36 million.

Resulting in a non-GAAP net income per share of 47 cents to 49 cents on approximately 72.5 million weighted average diluted shares for the quarter.

We will per bought provide of quite 22 guidance on our next call, but as you roll your models Ford, we'd like to remind you that we recognize revenue based on the number of days in the quarter and since there are fewer days in Q1 due to February steady state subscription revenues are lower in Q1 compared to Q4.

That concludes our prepared remarks, as we move to Q and a please be mindful of that we have a long queue of folks waiting to ask questions in order to accommodate the please limit yourself to one question on.

With that we would be happy to take your questions operator.

Thank you Mr. Ford, ladies and gentlemen, and you'll have a cottage and the please press star one on your touched and all the time as a reminder, you will be allowed one question per caller.

<unk>.

Your first question comes from the line of the Chris Merwin with Goldman Sachs.

Hi, Thanks, so much for taking my question and I wanted to ask about Lama softness is obviously, a very significant acquisition of both financially and strategically and just hoping you could talk a bit about how the integration work has been going so far and when we might expect to see that fully completed and then also from the sales perspective, and how is the feedback been so far on it and then and now how should we think.

Good thinking about the impact of this acquisition to the deal sizes and time. Thank you.

Sure. Thanks for the question. So the integration work is well underway as with every acquisition and Weve done to date, we look at it from of people process and technology perspective, and we monitor that very closely and I would expect by the next earnings call. We will the very very far along particularly and people and people and process and we will.

The able to recognize some of the key tax tax synergies as well as the impact is very very meaningful year and many of the conversations Ive had personally as well as members of my team of had with the bulk joint customers as well as customers on both sides and it has a clear understanding of the synergy that we can unlock.

Walk between the what loan the soft came to the table with and what what Cooper has and we absolutely anticipate that to be a contributor to continued growth and a our per deal. The we pad for virtually a and virtually every quarter of the last 47 quarters.

Your next question comes from the line of standard Blocky with Morgan Stanley.

Perfect. Thank you so much good afternoon, gentlemen, and congratulation on the varies from quarter on maybe from my and you mentioned on the very impressive number of the 150 group of paying customers and 30.

30% of the pay attach rate to no new logos and maybe just dig into that the attach rate a little bit is the 30 percentage of attach on just the logo basis, it and attach on a on the spend and.

That's flowing through the system.

And just the overall on uncouple the pay you know that it's obviously, there's a lot of [laughter] disruption that's happening and this in the world right now and we know how are your customers thinking about a couple of pay and how we can integrate with the euro on Lama soft deal. Thank you sure.

Sure a standard was all in and a lot of questions. There. Let me just attack it from the way and the what are herded. So yes that is in terms of logos in terms of 30% attach rate I will tell you that amongst the customers that have signed on with us their adoption rate is accelerating and when you kind of step back and look at all of the modules. We've launched over the the knit night less you know the.

Decade, plus of of building. This company. This is a you know our fastest growing new module without a doubt and were taken of mist and methodical approach to running transactions to the platform folks are adopting the solution, they're seeing it as a.

A reason to streamline the whole bunch of processes that is still a the often either paper based on the phone based and and require them to be in the office to conduct or requiring them to go into a multitude of different systems to kick off batch payment runs as one example, so really good continued progress on the you know we couldn't be more excited about it.

Hey standard and the other thing I would add to that is that you know the the impact to our pricing from coupe of pay is still well beyond and you know 20% uplift work group of pays included versus those deals where people pay is not.

Your next question comes from the line of Alex Zukin with RBC capital markets.

Hey, guys. Thanks for taking the question I guess, maybe Rob for you when you think about your pipeline Bill.

And the current environment and what you're seeing now as and hopefully were coming through the.

The the end of the at least 2020 I don't know about the end of the pandemic are we on a point, where you know you're seeing the the new prioritization spend management decisions, you know kind of move up the priority sack and and help us.

Kind of calibrate as we think about growth on the other side of the pandemic, particularly with things like Cooper pay with your ability to now sell into the direct spend and managed direct spend areas or give us a sense for what the your prioritization of growth.

Drivers is as you as you think about the catalyst for growth for next year share. Thanks outs, while I can tell you certainly looking at the last two quarters. When we think about the order of taking on digital transformation and some of the larger company is what we are offering and certainly making watch on its way higher and the priority list of the that's that's seen.

In our and our financials. That's also seen you know in the conversations on having with CIO is and and chief digital officers and others of these organizations and one of the wonderful things about the of the the unlock synergy between the will be unlocking the scene Lama soft and and two of the is the fact that allowing us off was largely selling to chief supply chain officers and share.

If a digital officers of which is and it's sort of an overlap in terms of the constituent that we were touching along the way.

In terms of Q4 look it's hard to say when some of the some of the deals land will going into very tough, obviously environment with the winter and cobot, but I can tell you gave me into the next year undoubtedly a the synergy of these two offerings and their priority of of managing all of your business spending on one place directors.

Line, and modeling and simulation as well as overall transactional spend and something companies would be Oh would be a short served if they weren't putting higher and higher on there on the list of areas to attack and and we can help on went out and the big way.

Your next question comes from the line and she Pentagon eat with Mizuho.

Hi, sorry, I was on me and this is Michael Burger on for a city upon and growing congrats on a great quarter of out of the.

Okay.

And the hospital part of how are you thinking about the recovery as we go into the next year I know, you're being a little bit a cautious and the Q4 about how and how one of the vaccine the impact or the.

Business.

Well, that's a very hard and a question and answer or without making predictions that the that I, probably can't make a without knowing how things work out in the next four months with with the the the points you just laid out but I can tell you. What we're doing is making a stronger and stronger every week every month every quarter of customer see income.

Ratable valuable offering they're paying us more and more on an annual subscription basis. The customers that we have are renewing and looking to add on more business without us actually pushing sales and airway and actually absorbing a lot of our additional offerings and is a great deal of value and thinking about supply chains at this moment and thinking about optimized ways to run your business on.

We get back to it to a new normal so we're putting our best foot forward quarter in <unk> and a quarter out and that's coming out in what you see and the financials, but more importantly, the setting us up for a really really incredible future in terms of unlocking the potential of business spend management and a huge total addressable market globally.

[noise] Your next question.

[noise] I ask the on this is actually Nick on for Terry Thanks for taking the question.

So I guess and in terms of your power apps and what are you. Most excited about from a growth respective of the next few years and just a follow up how much of the thought about farming worse and hunting new logos on driving adoption of these powerhouse. Thanks sure no. Thanks and the question. So we are largely hunting a and we continue to do so because when we landed on an account we deliver value.

Very very quickly to our customers and then they choose overtime to add on more and more capabilities. As you know, we started and procurement and and procurement does not represent the majority of what we offer our customers today. So that's a very exciting and development what I'm. Most excited about is not one individual module sales certain quarters, when one module leads or other.

Waters of the different module leads the certain industries on one module leads the southern company sizes way of different module leads what I'm. Most excited about is the synergy amongst these modules. How we go from all the way from someone in the organization thinking that they need to request some good or service all the way to the works.

Well the ordering the receiving the ability the invoice and <unk> of from the supplier of the management of the supplier experience all the way through managing the inventory and on hand inventory and reordering times and updating the contracts with employers of managing the money and organization and the expense processes, all the way back to the AI and.

Items that are being used within a lot of Sop tapas design and plan the way, we're going to spend money and plan our supply chain. So it's unlocking the power of all of these things working together for companies they actually orchestrate in a world of business by management and that's something that has never been delivered.

In our industry and it's something that we're laser focused on terms of building the people of the processes and technologies to make that a reality.

Your next question comes from the line of catch the I Quito with Oppenheimer.

Yes, congrats on the quarter and thank you for taking my question I. Just wanted a question on lot of the software digging in on to their revenue model, a little bit and set a they.

They have the healthy portion of legacy license revenue and you just let us know what that mix of of that 100 million and.

Coming in from long the Sop and then how should we be thinking about that transition to SaaS for those customers and is there any sort of of expected revenue uplift on the transition to SaaS from a legacy of legacy plus maintenance model. Thank you.

The kind of <unk>, Yeah, let me give you a few data points on the the revenue breakout and and house, even transition and the past six months and then a few comments on professional services as well if you look at last year of their last fiscal year approximately 46%.

So the revenue was licenses.

32% was subscription.

And 22% was professional services and once again that last year.

If you look at the first six months of this year and the licensing the has gone down from 46% to 24%.

Subscription revenue has gone up from 32% last year to 45% and.

And then professional services is roughly 30, 31%.

And on professional services, the two things I would call out there overtime, we do expect it as the percentage to be more in line with our historical norm price.

Prior to Coupa are they didnt have aside and relationships that we do so some of the dot will be transitioned to outsized, but you know the vast majority of that prior to the launch of Lama AI and are they would build you know AI and machine learning and model on the customer specific basis, and that's been part of ties.

As a non recurring revenue stream as well so the the proserv amount, you'll see a lot of that move into a subscription you know over the coming quarters, but the units its transition and actually fairly quickly from on.

On Prem to subscription south.

Oh and add to that I think it's important because some of the questions have been around synergy that you know whether it's delivered initially on price and then moving to cloud the real value here is first of all and 150 data scientists that we now have as part of Coupe of working on one IP data model with and algorithm library of that is.

Very very robust and that's going to allow us to take their supply chain simulation and their demand and planning capabilities. There on build your own app environment, right and merge that with the transactional community intelligence. We have all the data we have on order cycle times restocking patterns time to the liver ordering trends to help customers actually pre day.

Net the way that their supply chain is going to function help them forecast with the high degree of accuracy, what is going to be happening within the way they spend a the organizational money and that's going to help them in the big ways that will be seen on their financials when should they do restocking when should the renegotiate the drive their margins what are the <unk>.

Landed cost of the any items that the purchase how do the optimize the order quantities Hadley figure out optimal transportation routes and mitigate supplier risk and so much more so the value here is really in the data model of the IP and the people and the delivery model and topology. So that will be mitigated over time will the merged over time and to a 100 per se.

Cloud based and Barb.

Your next question comes on the line of my culture and with Wells Fargo.

Hey, there. Thanks, Thanks, and good afternoon, I'm I just want to yeah, maybe maybe one for Todd on just the the margin impacts and and how you think about growth and first profitability from here, obviously, you're layering more capabilities on to the platform and with long of a soft maybe add a little bigger scale than what we're used to.

Once once we're through just kind of the near term accounting impacts of some of the things that you've called out how should we just think about the general resources required is is the extension of something in the supply chain planning how natural is that given the sort of resources that you have today, how natural of a a sort of a tangible.

So we added selling motion is there are there or are there more things you need just to kind of help add scale and and and the CFO type conversation and to the per view of of what you're working towards here.

Yeah, and I saw it and at the highest level and we look at your acquisitions from multi of several factors and dimensions and one of them is definitely synergies and you know, it's Rob kind of went into from a product synergy there there's actually a lot of synergies on the the go to market at the engineering and and obviously, we can drive a lot of synergies on the the back office.

Functions and and we act very sort of way on that so you know, we're not hey, let's wait six to nine months to figure that out of we actually do that as part of the.

M&A transaction and partnership with the the acquired EE and this cash and it's very similar you know just yeah, I would even though it's a much bigger and some of the other acquisitions, but if you look at balance right a couple of quarters margins and the returned up and that and the 72.

33% and in this case it is a is it their order of magnitude, but the the timing to get there shouldn't be any different and through the three quarters and.

You should.

See the the leverage and our financial model continue and and that's still on the path to the the long term targets that we highlighted at our last analyst day. So from a resource perspective, I think it's a one plus one equals three and in the areas, where we can drive synergy were a sort of when moving on the.

Your next question comes from the line of <unk> and lead with BTI G.

[noise] and again, thanks for taking the question Congratulations I guess thinking about the question about overall, the attach rates and and some of the power EPS I was asked earlier, but from a little bit different angle.

Obviously, a lot of uncertainty on the market and just curious what you're seeing with deal sizes, maybe total modules per deal I'm, just kind of what you're seeing I know historically the blended much larger but are customers trying to take on a little bit more of a land and expand and this environment or are you still seeing the demand for automation and.

Maybe even outpacing on what budgets look like and sort of factoring and those different elements there.

Well I would say what we saw early on when the pandemic hit it was it was a lack of interest and doing bigger and more transformational initiatives out the gate and so we wound up picking up no more smaller and she point the types of deals and we had anticipated, but if you look at the last quarter or we've seen a really in many ways the returned back.

Back to thinking about this in a much more of broad context, and I think customers is the having real vision lock with us around having all of these price. He is working with one and of in one integrated fashion around one day to model of from one company that that has reached the high lease strong references of measurable success the live.

Average that's developed best practices for deploying these solutions with the host of the systems integrators of trained nearly 5000 people around the world to to implement Coupa. So we're starting to return back to what we always knew is is the is the right vision, which is.

More and more of these capabilities upfront transformational type projects and that's evidenced in you know in your question around a our per deal that continues to go up.

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

Great. Thank you for taking my question congrats on the good quarter. The curious if you can dig deeper into the federal business, maybe talk about how large the better opportunity is you know what are you, replacing the if anything and of anything unique worth calling out in terms of sales cycles go to market approach I think it would be great. Thank you.

Sure well first of all of the challenge of federal as we all know is that starting out the sales cycles tend to be quite long and there's a whole host of things like fed ramp and more of the you need to do the gain credibility and trust of of of both the civilian side as well as Ah and agents leaves the like the department of defense and other so we have a robust pipeline now.

Built up on both sides of the of the house and we also are gaining quite a bit of of momentum here with lots of soft and then a lot of the things that the up many of these the agencies of struggling with do pertain to the design and planning of their supply chains and a in a highly agile world something that the you know Joe.

It is something that the they sort of the desire. So what we're replacing very often is either some kind of static solutions that are very very difficult to to turn into it and agile environment or walking into the farm, where they just don't have you know robust sales.

Additions for our supply chain simulation for easy to use simple of indirect spend the procurement and and invoicing and so across the board. We think there's a big big opportunity here and we're just scratching the surface of it they'll thankful that we have developed the robust pipeline are tough and begins the ticket to the next level.

Your next question comes from the line of and you take us by the West the ban Burke.

Thanks for taking my question I just had one on coupe of pay it's been a few quarters you have the quite a set of customers now using it and just wondering as you get the received any feedback and because of the pricing tears and how do they feel a and works for them at this stage and you potentially see any.

The changes coming and.

And so otherwise.

Yeah. Thanks for the question you know we continue to fine tune that was still not and the the degree the of numbers, where we can get to a place where we can say what percent we want to be part of the our our versus exactly what percent would be sort of share at or at risk, but I can tell you. There is a very strong appetite amongst its customer base for.

All of our corporate they products from the car to to our accelerate to invoice management and the uptake and adoption is very strong so as we get to get into higher numbers more and more throughput will be and would be be able to fine tune a fine tune on pricing, but we haven't gotten she strong pushback in any.

The way and in fact, there's a real interest in helping us fine tune that amongst our customer community. So we're going to continue along that path.

Your next question comes from the line of the Steve kind of <unk> S and the the C and D count.

Okay, great. Thanks, guys and taking my question and it's another one on Lama software can you help us understand like so to what degree Islam us on quite a changed your spend mix between and indirect and direct procurement and maybe just digging down.

And then if they did a pretty big acquisition, and maybe a year and a half the dog. This opex analytics can you explain how that fits and the Lama soft mix and the you know the.

Okay, the scientists and and that revenue or was it more pro services that what's been product on so maybe just a little bit better I'm on the software congrats.

Yeah sure that acquisition brought a whole host of capabilities around demand planning and and you're exactly right a whole host of data scientists to help folks of companies that lot of soft served get better and better at forecasting of future the literally creating a digital replica of the physical world and side their platform.

On the help companies understand what's actually happening in their supply chain right to answer the simple questions you know.

Of the U.S simple example of the you know we're not traveling as much so if you're of Coca Cola and their demand for for beverages at the airport. These days probably not so how can you re route or some of your supply chain to account for that how did you meet the revenue goals based on you know goods availability and general right or how do you begin to run what if scenarios with high degrees.

The fidelity of you avoid you know out of stock and certain categories and in a very dynamic environment. You know we have a lot of customers now jointly that are going from you know international single sourcing the need to get into domestic markets and figure out multi sourcing strategies, where they still optimize time to delivery optimize on hand.

The inventory optimize the way they make their sourcing choices and beyond.

So this is very very significant for us and to your point about.

A mix of direct and indirect as you know for for probably two and a half years, we've been taking on more and more direct spend through our invoice management capability through our inventory management capability and so this is the continued.

Evolution in that area, but whats the super powerful again is the ability of take real transactional data, both direct and indirect and feed that back into the design and planning process. So the you can not only on a simulate a bit of version of more precise version in the digital environment, but you could be better.

Our AD prescribing optimized way to set up your spend processes and predict and prescribe as we say with the letter P and coupon. So the the opportunity here is really really exciting I think we'll be first the market really in the world and bring in these types of things together for the benefit of some of the largest companies and the world.

Today.

Your next question comes from the line of Ryan Macdonald and Needham and cash.

Hi, Thanks for taking my question I guess, the quick follow ups of the earlier Federal question can you talk about what potential there is now given the breadth of the platform and and the growing the fed ramp status for a potential government wide deals some are and what we saw with concur several years ago and then on Lama. So can you just talk about the process of how you're thinking about providing support for the on premise of.

Customers.

And what assumptions you might be making for true. Thanks.

Well, so I think it's early to talk about the governor on why the of the you know deal we don't have something that and flights at the moment of each of their very transparent, but on the opportunities obviously very very meaningful both on the direct supply chain design and planning side as well as on the the and the indirect transactional and side so the.

Petunias is definitely there and as we gain more and more of these supporting and sort of stamps of approval like fed ramp and beyond with the that opportunity auto auto growth of ought to grow meaningfully.

Yeah, and then on the the Lama Soc you know with the respect the on Prime and the cloud Yeah. As you can see on the last six months the the transition to the cloud has been a pretty rapid much faster than you would see another historical companies I think thats the because of the debt.

The value of brings and the way that it's deployed and once again be and abstraction layer of the of an ERP and similar to our strategy from day, one and I think if you wrap that around you are number one.

On a core value of ensuring customer success, we're going to make these people successful and you know while we may take a conservative mindset towards renewal rates and our goal is to keep 100% of them and and certainly how about high renewal rates and perhaps maybe what was the historical run rate. So you know what.

Well, obviously get more details on that in history as time goes by but I think we're positioned with the strength of group and also the strength of of Lama software and this was a very.

Strong company with deep leadership across the board and.

And I'm very confident that we're going to create some great results there.

Your next question comes from the line of the Brad Sills with the L.A. Securities.

Oh, Great Hey, guys. Thanks, so much for taking my question and another question on Coupe of pay and a nice result, there on the on the net adds there of the of the new adds there.

You mentioned the M. ex partnership for V card, you talked about the customer running cross border.

And others, the accelerate option and there as well can you talk about some of these add on services to the base offering what's the interest level up and there you know our customers of running the base offering in order to get to some of these other transaction services or are these kind of further down the line.

And the any color on the on the attach rate, there and maybe and volumes of being very helpful. I know, it's very early thank you sure. We've seen ballston. The interestingly we've seen both types of of permutations Weve seen some cases, where obviously a large portion of our customer base uses are no requisitioning capability, our purchase order capability receiving invoicing it's on.

The national and for them to go further downstream and to handling payments, but we've also seen it go the other way around where they see the value of all of the upstream capabilities everything from from from sourcing and contract management, but the actually begin with with pay and their deployments because they see the greatest opportunity for us.

Automation and streamlining of less errors.

In that area and then they go upstream from there. So it's always been our vision to have a set of capabilities that operates very much like a Swiss army knife, where you could begin with the tool that is most relevant to your company at the current time and then begin to utilize all the other capabilities as needed and that maturity model.

Is continuing to express itself and we see that obviously in a in the the mix of products our companies of our customers are continuing to the uptick.

And your last question comes on the line of Joe So sat back and with Canaccord.

Hey, guys [laughter] [noise].

Hey, guys. Good afternoon, and thanks for squeezing the and just let me really interested to hear you know if we kind of rewind the clock a couple of years ago. The Oh, a high value of crop. The youre talking about you know just what's your and that's you're on new perspective of Cooper customer on.

You know a couple of years ago, you were focused on a supplier and not work that was providing discounts on work flow benefits and now you look at the kind of totality of the solution.

Oh, the Calamos Oscar.

Now on to all of these other add on Syncera weighed on kind of think about.

Oh, the ROI has changed and I know, it's a little bit more subjects and then perhaps it used to be but it will be interesting. Thank you oh. Thank.

Thanks for the question well does the wonderful things that ROI as the only grown with every acquisition that weve integrated into our platform as well as what we've done organically and if you just look at Lama South is one example, they've been realizing for customers you know tend to of 5% to 10% savings and areas from a sourcing to production improvements the.

On the transportation trumpet, the transportation optimization, better inventory management better handling management. So all of these capabilities all come back down to real measurable value real dollars and sense day, you could see on and income and on income statement and at the same time, they have huge strategic value right. They provide great of vis.

The ability to the business spending within the organization they mitigate supplier risk per the supplier network that day, you referenced the moment ago, and the and they bring companies into the digital world, where they seamlessly manage all of their business spending and one integrated digital platform and that's always been the vision for coop and one weve been execute.

Moving on now for well over 10 years.

[noise] [noise], thank you, ladies and gentlemen, and I like to turn the call back over to Mr., Steven Horwitz for any closing comments on it.

Thank you everyone for joining us and apologies to the number of question are still on the Q and look forward just talking to you again in March for our Q4 earnings reported thanks again guys.

Ladies and gentlemen, we do you think you free joining and you may now disconnect and this concludes today's conference call.

[noise].

And [noise].

[noise].

[music].

[music].

Good day, ladies and gentlemen, and welcome to the people of software third quarter fiscal year 2021 earnings release conference call at.

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.

If he would like to ask a question you May press star one on your touched on pad at any time and.

If anyone should require assistance during the conference. Please press star zero on your touched and Pat at any time.

As a reminder of this call is being recorded I'd now like to introduce your host for today's conference call Mr., Steven Horwitz VP of Investor Relations Mr. Hurwitz you may begin your conference.

Good afternoon, and welcome to the software third quarter Conference call.

Joining me today on Robert.

And Todd Board.

Remarks and include forward looking statements.

Operations.

And size products competitive position.

Our actual results and may be materially different world and looking seems the bolt on and.

And assumptions that are described in our most recently filed 10-Q.

These statements are based on our beliefs and assumptions today, and we disclaim any obligation to update any forward looking statement.

And today the information because other may not getting kind of more accurate information, we will present, both GAAP and non-GAAP financial measure the reconciliation of certain.

Measures is included in today's earnings release, which you can find on the Investor Relations website. A replay of this call will also be available on our Investor Relations website.

Unless otherwise stated growth comparisons are against the same period of the prior year and with that I will now turn the call over the world.

Actually it and so everyone and thank you for joining us so part of her on had a great Thanksgiving I Trust everyone has this thing sales.

Okay and coupon so the police the share of that we're continuing to execute against our massive market opportunity and we're doing so with the consistent tenacity and on restrain passion for delivering what we believe is indisputable values and service for our customers.

Customers and prospects of looking to cut the comprehensive business and management platform and.

Sure the they're creating increased the agility resilience and of course and profitability.

So that and we saw on Q3 trends despite the persistent endemic situation.

Well continued meaningful growth and our sales pipeline, we delivered multiple global marketing customer wins and go lives, our corporate and mid market business is scaling and our cumulative spend under management is now well over 1.2 trillion 1.12, 0.1 trillion dollars excuse me on.

All of that translates well to our recent financial results.

Typically looking at Q3, we delivered a record 133 million and revenue our 11th consecutive quarter of non-GAAP profitability.

The 30% plus calculated billings growth.

And with that let me dive into some deeper highlights from the quarter.

Let's begin with some customer go line.

No the corporate social responsibility is important to the could the community and we are uniquely positioned to help customers and this area with that of the backdrop. This quarter. Let me share. Some go lives that highlights humanitarian companies focused on corporate social responsibility and showcase how we're working together.

Let's start with World Vision recently went live with inventory management.

Well vision is responding to the covenants and health emergency by providing aid and the essential supplies the tens of millions of people in the U.S. and abroad.

And Cooper World Vision have centralized inventory model to support disaster relief efforts around the world No.

Norbert Sue partnership leader for global impact share, we now have full visibility into our three global inventory warehouses and a more efficient ordering process, our disaster management team and see what's available across all three locations. So they can deliver and.

Order quickly order supply like ERP and have the delivered the communities and children, where it's needed most.

World Vision is doing incredible work and my colleagues and I are proud to support them.

In terms of company size, one of the world's largest shipping companies responsible for delivering PB and ventilators. During the pandemic went live this quarter in record time this.

This is one of the fastest deployments and we've ever done for a fortune 50 company.

In terms of savings impact next the number three on a global 100 list of the most sustainable companies also returned on on line.

In the first ever RFP option of that they achieved 17% savings on IP related subscriptions and services. This.

This well exceeded their 10% target.

And in terms of speed.

[music] Horizons, and Australian nonprofits and helps us customers achieve greater well being went live in truly accelerated fashion or the day into the.

Jointly we got it on in less than 10 weeks.

Of course these are just a few examples.

Now, let's turn to us to supporting diversity and inclusion where we're also making an impact.

Today, we have more than 30 unique.

Uniquely designed configurations settings, and our platform to support the firstly for our customers spend management programs.

Customers can easily find and engage with the minority owned businesses on our platform and leverage the power of community intelligence to make selections of form lasting business relationships.

You'll recall that the litter own Cooper Doesnt just represent the our open technical architecture. It also represents our openness to everyone with the inclusion of the guiding light.

To that end were recently published and micro site on two of the dotcom, highlighting our own diversity and inclusion principles, including how we strive to attract underrepresented minorities.

Decade, our current work force on these principles and how we advocate to provide support to our diverse communities.

Now, let's talk about our pipeline generation as well as our recent sales.

Our early stage pipeline continues to grow rapidly and no small thanks to our developing customer community.

To help scale their efforts, we are using larger group virtual events to engage the entire community like our recent smarter together Webinars series.

Then we follow up with smaller curated events, where current customers from similar industries and geographies share best practices and showcase the successes of the coupe of deployments.

Because of the community and the customer advocacy flywheel comes to light at.

At these events when new friends get with existing friends and we become friends.

The success of our virtual go to market initiatives and committed events is clearly evidenced by the fact that we saw more user groups training sessions click throughs on email campaigns and downloading of content by customer prospects in Q3, and we saw in Q1 and Q2 combined.

What these prospects and customers are finding is the cooper's values and service platform better positions and to be resilient during difficult economic conditions, while simultaneously preparing them to be highly agile as things improve.

Now and.

In terms of sales and.

Q3, we saw improved conditions in the us and Europe, as well as and emerging markets.

Before I welcome our long list of new customers, let me call out to which I believe showcase how we're extending our market leadership position.

The first of these is Walmart.

One of our largest customers using cooper source to pay and.

Alongside Amazon, we're now providing our comprehensive platform the scene Cooper.

The two largest companies on the Fortune 100 list.

The second customer new customer to call out is the United State House of Representatives.

As we continue our pursuit and the federal sector.

It's wins like this that will propel our growth.

Let's now welcome many other organizations and joined the keep the community during the quarter, including ATP companies axle Nobel Casey's General stores, DHL global elevate textiles, JF International Global logic of capital network.

Immuno of on over Therapeutics.

The freight services safety culture, Sam's Mark to ROE, United Safety, and survivability, United Care, Queensland University of Bristol well build.

Zoom and flow and many others.

We are excited that these and many of the customers have joined on thriving community.

Now the close out sales, we also saw strong growth in emerging markets and.

The business in Latin America, Asia Pacific, Japan, the Middle East and Africa, essentially doubled over the last 12 months.

In terms of business updates, let's start with our federal business.

As I mentioned, a moment ago. The use of house of Representatives has recently joined the kicked the can indeed.

Operating the crew the platform as part of the houses initiatives to modernize the all administrative systems.

Once the go live Cooper will be used by every person in Congress and buy their staff as well.

By law, we can't disclose which additional federal opportunities are currently in front of us, but we can't confirm there is a robust broad pipeline across several federal agencies.

During the quarter. We also graduated into the next stage of fed ramp which is the federal government standard for cloud based solutions. We are now set ramped ready moderate.

Signifies the we have passed all the vigorous tests and are ready for federal sponsor. We're excited about the inroads, we are making and federal.

Let's now touch base on community Intelligence community intelligence represents perhaps the greatest barrier to entry for our business over the longer term.

Given the significant interest we're seeing from some of the largest financial services institutions in the world. We're looking to re platform themselves for the digital features let.

Let me share what's possible to the committee intelligence at our existing customer Barclays.

Barclays is one of the largest banks and the world serving millions of businesses and individuals globally.

And the financial disruptions from COVID-19 Barclays has played a leadership role in helping businesses and individuals whether the storm with.

The cubic community intelligence and real time performance benchmarks against peers Barclays head of sourcing filters on us and Barclays procurement transformation lead Sonia and Aro, we're able to optimize their electronic invoicing and approval cycle times.

Leveraging community prescriptions, the P. and Cooper Barclays targeted suppliers that the coupe of community already identified as electronic and voice enabled this allowed them to increase electronic invoicing by 26%.

The committee intelligence sales to optimize their workflow to reduce approval cycle times by an amazing 73%.

This is just one customer example of the power of community intelligence, we're seeing and action.

And other exciting aspect of our developing businesses coupe of pay.

During the quarter, we continued to strengthen our couple of pay partner ecosystem with the addition of American Express now supporting virtual card payments in the United States.

Fees and the many other partnerships we've launched are helping us build the foundation for because the pay success over the long term and.

The near term.

Proving to be especially important in today's work from home environment, where customers need better ways to pay suppliers virtually.

As the overall operating expense so too does the customer base interest nearly two years to reach the 100 customer milestone for coupe of pay and I shared with you in June and now that number has grown to over 150 and just the last two quarters.

In addition, with new customers, we are seeing a coupe of pay attach rate of approximately 30%.

This growth comes despite the headwinds of a difficult market environment and the fact that our most recent offering and invoice payments and only been available for a few quarters.

In terms of invoice payments and cash base a leader in no SQL databases recently switched to the pay from the legacy payments provider.

While using its legacy solutions.

Cash based needed to toggle between multiple systems, which created room for error and complicated reconciliation processes.

The pay cash base now makes the invoice payments from the Coupe of platform in one seamless integrated experience.

It provides the financial organization with increased visibility into their payments greater data accessibility and the streamlined approval process.

As Manisha goal director of accounting for cash based put it theres now of one source of true.

In addition to the value of having one platform cash based leverages, our ease of use configurability and flexibility essentially our user centricity or the U.S and Cooper there.

And now processing approximately 90% of their payments to coupe of pay and are planning to take advantage of our cross border payments and virtual credit cards soon.

Now, let's move on to M&A.

Immediately after the end of Q3, we announced our acquisition of on the shelf and.

Hi, power supply chain design and planning software company.

This acquisition represents our continued expansion of our direct expense capabilities and is very much in line with our declared vision of comprehensively managing all business spend.

Supply chains are being required globally today, it's all about the agility and the ability to design transact learn and optimize very quickly.

Combining lama saw day, driven platform with Coupe of two plus trillion dollars of community powered spend data create the synergy that can build on itself.

Introducing that amount of new timely and relevant data and what is already considered the supply chain design and planning platform of choice.

Will help customers make optimized supply chain decisions the.

Smarter decisions will drive additional direct spend through our platform, which will in turn yielded additional valuable data.

This cycle will allow our newly integrated supply chain design and plan and technology to continually improve and yields greater and greater value for all our customers.

And of course this deal is very consistent with our stated M&A strategy of adding technology components and maximize and enhance the value of our organic transactional core engine and augmenting this engine with key advanced power applications that optimize the value of these transactions.

As always and making this decision we considered culture.

We considered buy versus build.

And we considered whether it could be integrated into our platform and several products of leases.

I could not be more excited to welcome our colleagues from the model so the coupon.

Now, let's move on to the Coupe of business spend index or the EPS before.

Before getting into the Q4 outlook I'd like to once again reiterate that the BA side data is not necessarily indicative of the trends, we're seeing and our own because the.

And.

The coupon on Q4 of the OSI indicates that business and sentiment is continuing to recover from the sharp drop in Q1 as companies grow increasingly more comfortable operating and the new normal.

However, despite the positive adjustments made by companies in most major sectors. Our analysis shows the confidence in the economy is still low and is likely to remain below trend for at least the next three to six months.

Sector data indicates that the health and life Sciences industry showed the largest quarter over quarter improvement, while financial services retail and high Tech showed some modest improvement.

Expense sentiment from manufacturing, though continues to decline.

For a closer look at our Q4 be OSI, where we'll share more data on each of these trends I invite you to visit spend index dotcom.

Now, let's talk about our people I'd like to start by recognizing a few of my colleagues and have made outstanding contributions in alignment with our core values.

Let's start with Suneel Moore was recently recognized by his peers for exemplifying our number one value of ensuring customer success and.

Neal is accessible on top of issues and flow is aiming to provide better service is always positive and consistently exceeds expectations.

Simon Devane was recognized for focusing on results.

He has built the leader and a great team player.

Time and is well known for his ability to rise to new challenges and share his deep knowledge and expertise with members of our community.

And finally, Michael Shanker was recognized for embodying our core value of striving for excellence.

Mike's colleagues noted the.

As the most of genuine approach towards inclusion and collaboration since.

We put it makes and already strong team 10 times stronger.

Congratulations and thank you to the Nielsen and and Mike.

Recently, we also made a number of key leadership promotions.

Today, let me highlight the promotion of our very own Rob Glenn The executive Vice President of global sales.

Well, Rob was responsible for approximately 70% of our sales footprint you will officially be taking over 100% of the effort from Steve winner on February Onest 2021.

Steve will nonetheless, the available for Cooper during 2021 as the moves into retirement.

I'd say, the Steve and I have been planning for routes for motion for a number of years as we've jointly supported routes professional growth and Coupa watch and take on challenge on the challenge and deliver.

In tandem I am extremely grateful to Steve the the incredible teamwork and camaraderie, we've shared of the years and I wish him on wonderful retirement.

So in closing we are currently well into our 40 eightth quarter of execution.

We continue to focus on delivering unprecedented values and services for each and every one of the customers and our growing community and thus winning the business spend management market and the process.

The success is going to bring us together and we are on the road to that success.

With that let me now hand, the call over to our Chief Financial Officer, Todd Ford, who will review, our Q3 financial results and provide our outlook for the third quarter and updated fiscal 2021 Todd.

Thanks, Rob and good afternoon, everyone. The.

Represents our fourth earnings call during the curve and 19 pandemic threats and quite a journey and hence we've continued to build a great business. During these uncertain times and then a remote working environment as.

As we entered covert back in March and our hypothesis was that we would face significant headwinds and Q2 and Q3 and that things were generally begin to open up and Q4.

In this environment Q2 results were very strong and the momentum continued into Q3, especially given Q3 is historically weaker quarter for us.

The Q3 results exceeded the high end of the range of potential outcomes, we analyzed and providing Q3 guidance the.

Strong results were driven by fantastic execution by our go to market team.

As we look to Q4 its day.

Page on all over again right now I feel a similar way to high debt when we provided guidance on our last earnings call.

Were entering the quarter with the significantly stronger pipeline and this time last year.

Both on a gross dollar basis and in terms of what we consider later stage qualified pipeline though.

Though we are excited about our new business prospects for the quarter and momentum and our business. Our enthusiasm is tempered by the uncertainty of the COVID-19 situations and the reality is that the pandemic is at a tipping point, which makes it difficult to predict the timing of when deals will close.

As we look to ask why 22 of the progress made with vaccines, coupled with the resiliency of our business provides a favorable setup going into next year.

With that has the backdrop.

Lets get into some details.

Today I'll cover our Q3 results.

Our outlook for Q4.

And details regarding the financial impact of the loan the top acquisition.

Please note since the acquisition closed in Q4.

On the soft results are not included in our Q3 results.

The are included in our Q4 guidance.

Let's begin with Q3 results.

For the revenue grew 31% year over year to $133 million.

Subscription revenue for Q3 was $118 million also of 31% compared to Q3 of last year, comprising 89% of total revenue.

Calculated billings for Q3 were $140 million.

33% year over year increase compared to the 21% year over year increase we saw in Q2.

For the trailing 12 months.

Calculated billings were $553 million up from $416 million a year ago.

Also representing a 33% increase.

Total deferred revenue at the end of Q3 was $256 million.

Up from $193 million at the end of Q3 last year.

The year over year increase of 33%.

Looking at margins and results of operations, our third quarter non-GAAP gross margin was 72.5% of.

Of our guidance of 70% to 71%.

The Bowen integration will soon be complete and all material respects. So any gross margin drag from balance should become immaterial as we enter next year.

However, with respect the longest off this acquisition closed on the first business day of Q4 and due to its size. We expect it will create a meaningful drag on gross margins for at least the next two to three quarters.

Which is reflected in our guidance, which I'll provide more color on and a few moments.

As a reminder, after completing the acquisition, we typically see a drag on gross margin for the first several quarters price.

The merely due to one the immediately post acquisition, we carry the full board both burden of the acquired businesses cost the don't recognize 100% of the revenue because of the write down of deferred revenue in the purchase accounting.

And to the take several quarters to complete the flow business integration to the point, where we can take advantage of expense related synergies.

Looking at Q3 operating expenses, we continue to affirmatively invest in our business and higher employee of the math amid the pandemic and we also had our first full quarter of Bell and expenses.

Despite this the scale and leverage and our model once again showed through and our strong operating margin and adjusted free cash flow results.

For the quarter, we delivered non-GAAP operating income of $14 million or 11% of total revenue.

As well as non-GAAP net income of $13 million per 18 cents per share on 73.8 million diluted shares.

I'd also like to note that GE and the expenses in Q3.

The included more than $2 million of consulting services related to the Lama Frost acquisition now once again closed in Q4.

Moving on the cash and cash flows the strength of our business mission critical nature of our platform and quality of our customer base continues to have it as itself and our cash flow results.

Q3, operating cash flows were $19 million and adjusted free cash flows were $17 million or 13% of total revenue.

These results included a cash outflow of approximately $13 million per prepayments, we made to our primary hosting provider to optimize long term hosting costs.

For the trailing 12 month operating cash flows were $80 million or 16% of total revenues.

And the adjusted free cash flow were $96 million or 20% total revenues.

As a reminder, we define adjusted free cash flows and as operating cash flows less purchases of property and equipment plus repayments of convertible senior notes attributable to debt discount.

Cash at quarter end was $1.35 billion up from $1.34 billion last quarter.

The paid $6 million per cash and Q threes to settle obligations from our first convert.

Our 2023 notes.

Now, let's turn the guidance.

With respect to guidance there are several moving parts and the substance for you to consider.

First as we previously noted due to the ongoing pandemic, many customers and prospects continue to operate with caution, making it difficult to predict the timing of when deals will close.

Also from a compare perspective recall that Q4 of last year with our last the pre pandemic quarter, and we had a record quarter across the board the.

Fourth quarter and full year guidance, we are providing today incorporates our current assumptions with respect to the uncertain effects of the challenging macro need macro economic environment based on information available to us at this time around new business.

Renewal timing of collections and various other input.

Variations from these assumptions may cause our results to differ.

Also our guidance once again assumes no billings and revenue contribution in Q4 from Coupe of travel Sabre, formerly after.

And as you may recall and during the year, we expect the 20 plus million dollars and billings and revenue contribution from coupe of travel favour.

But since the pandemic hit hard and mid March we've essentially recognize the revenue from that business. Since then.

And finally, our guidance today includes our current expectations for a full quarter of Lama soft.

And the coming the way we plan to file the required 8-K, a SEC filings.

Related to the acquisition.

From that you will be able to approximate that lama soft as a standalone company prior to the acquisition.

Had revenue of just over $100 million per day per year.

As part of the standard purchase accounting, we do and every acquisition.

Well on the soft the acquired deferred revenue will be written down significantly.

It will take approximately one year for the impact of the circuit to flow through and for us to return to the pre acquisition Lama software revenue run rate.

Gross and operating margin will also be impacted by the impacted by this as well because for one year, we will incur 100% of the costs, but won't get the full benefit of all of the revenue.

With that as the backdrop, we expect total revenue for the fourth quarter to be $145 million to $146 million.

This includes and expect the contribution of approximately $13 million from on the soft.

Before providing the breakdown between subscription and professional services and other revenue let me first share some color on the software revenue profile leading.

Leading up to the acquisition the majority of on US off of recent new customer business with for hosted SaaS arrangements.

However from a legacy customer perspective.

On the top did have a sizeable cohort of the on per annum license arrangements, which are subject to different revenue rec and niche recognition treatments and sat.

On Prem license revenue is recognized upfront at the time of sales including for renewals.

While SaaS revenue is recognized ratably over the subscription term.

Going forward, we plan to sell the hosted SaaS solution to new customers.

And to the Coupa install base customers when sold as an add on not the on Prem.

For the long the Sop install base customers with the on Prem licenses, we intend to transition the majority of them to the cloud over the next several quarters.

From a PML geography perspective, we report on Prem license revenue and our professional services and other revenue line price.

Prior to launch the soft we had very little of license revenue.

With that as the backdrop, we expect Q4 subscription revenue of.

$124.5 million to $125.5 million, which includes approximately $5.5 million from on the soft.

We expect professional services and the other revenue of approximately $20.5 million.

Including approximately $7.5 million.

From on the soft.

Per calculated billings on a trailing 12 month basis.

We expect the exit Q4, and a year over year growth rate of approximately 27%.

For Q4, and Thats why 21, we expect lumps of calculated billings contribution of approximately 22, the $24 million.

Moving down the income statement.

We expect the Q4 non-GAAP gross margin of 67% to 68% and.

Non-GAAP operating loss net.

$6 million to $8 million and a non-GAAP net loss of.

$7 million to $9 million.

This results in a non-GAAP non-GAAP net loss per share and.

Of the 11 to 13 cents on approximately 72 million weighted average basic and diluted shares for the quarter of.

Our non-GAAP and other income and expense guidance contemplates the potential currency fluctuations and tax liabilities and as well as and lower interest rates on our cash and cash interest expense of one.

One eight and three ex percent on the notes from our second and third convertible debt offerings respectively.

Also after continuing to generate meaningful cash flow.

On the strong collections in Q3, we expect adjusted free cash flow as for Q4 to be breakeven to slightly positive.

For the fiscal year, ending January 31, 2021, we expect total revenues of $523 million to $524 million.

This includes subscription revenue of 460, the $461 million.

And professional services and other revenue of approximately $63 million.

We expect the and non-GAAP gross margin for the year of approximately 71% net operating and net income for the year.

$34 million to $36 million.

Resulting in a non-GAAP net income per share of 47 cents to 49 cents on approximately 72.5 million weighted average diluted shares for the quarter.

We will provide the provide quite 22 guidance on an ex call, but as you roll your models Ford, we'd like to remind you that we recognize revenue based on the number of days in the quarter and since our pure days in Q1 due to February steady state subscription revenues are lower in Q1 compared to Q4.

That concludes our prepared remarks, as we move to Q on a please be mindful of that we have a long queue of folks waiting to ask questions in order to accommodate the <unk>. Please limit yourself to one question.

With that we would be happy to take your questions operator.

Thank you Mr., Robert Ladies and gentlemen, if you have a question of please press star one on your touch and Alison as on.

And are you will be allowed one question per caller.

Okay.

Your first question comes from the line of the Chris Merwin with Goldman Sachs.

Hi, Thanks, so much for taking my question.

I wanted to ask about Lama softness is obviously, a very significant acquisition of both financially and strategically and just hoping you could talk a bit about how the integration work has been going so far and when we might expect to see that fully completed and then also from the sales perspective, how is the feedbacks and so far on it and how should we think the thinking about the impact of this acquisition to the deal sizes.

And time thank you.

Sure. Thanks for the question. So the integration work is well underway as with every acquisition and Weve done to date, we look at it from of people process and technology perspective, we monitor the that very closely and I would expect by the next earnings call will the very very far along particularly and people on the.

People and process.

And we'll be able to recognize some of the key.

Tech SEC synergies as well as the impact is very very meaningful here and many of the conversations Ive had personally as well as members of my team of had with both joint customers as well as customers on both sides and it has a clear understanding of the synergy that we can unlock between what line the soft came.

The table with and what what could the has and we absolutely anticipate that to the contributor to continued growth and our per deal. The we've had for free.

Actually and virtually every quarter for the last.

47 quarters.

Your next question comes from the line of Stan Zlotsky with Morgan Stanley.

Perfect. Thank you so much.

Good afternoon, gentlemen, and congratulation on the varies from quarter on.

Moving from my end you mentioned on very impressive.

The number of 150 group of pay customers and.

30% of the pay attach rate to no new logos.

Maybe just dig into that.

The attach rate a little bit is the 30 percentage of attach on just the logo basis of the attach on on the spend.

And thats flowing through the system.

And just the overall on couple of pay.

Obviously, there's a lot of.

Disruption that's happening in this and the world right now how are your customers thinking about coupe of pay and how we can integrate with the euro olimus off deal. Thank you share.

Our standard at all and in a lot of questions and let me just the targets from the way and the what I heard it. So yes that is in terms of logos in terms of 30% and attach rate.

I will tell you that amongst the customers that have signed on with us their adoption rate is accelerating and you kind of step back and look at all of the modules. We've launched of the the net net last decade plus of of building. This company. This is.

Fastest growing new module without a doubt.

And were taken of mist and methodical approach to running transactions to the platform folks are adopting the solution. They are seeing it as.

And reason to streamline the whole bunch of processes that are still.

The off and either paper based on the phone based and.

Require them to be in the office to conduct or requiring them to go into a multitude of different systems to kick off batch payment runs as one example, so really good continued progress and we couldn't be more excited about it.

Based on it and the other thing I would add to that is that.

The the impact to our pricing from coupe of pay.

It's still well beyond the 20% uplift workgroup of pays include and versus those deals were to pay is not.

Your next question comes from the line of Alex Zukin with RBC capital markets.

Hey, guys. Thanks for taking the question.

I guess, maybe Rob for you when you think about your pipeline and bill and the.

The current environment and what you're seeing now as hopefully work we're coming through the.

At the end of at least 2020 and go by the end of the pandemic are we at a point, where you're seeing the new prioritization of spend management decisions kind of move up the priority stack and help us kind of.

The calibrate as we think about growth on the other side of this pandemic, particularly with things like Cooper per se with your ability to now sell it to the direct surpassed the advantage direct spend areas.

Give us a sense for what the your prioritization of growth.

Drivers is as you as you think about the catalyst for growth for next year share. Thanks. So all I can tell you certainly looking at the last two quarters. When we think about the order of of taking.

Taking on digital transformation and some of the larger companies, what we are offering and certainly making lots of its way higher and the priority list and thats debt scene.

In our in our financials. That's also seen in the conversations on having with Ceos, and and Chief digital officers and others of these organizations and one of the wonderful things about the the the unlock synergy between the will be and locking seen lama soft and because of the is the fact that a lot of us off was largely selling the chief supply chain officers and.

Chief digital officers of which is and as sort of an overlap in terms of the constituent that we were touching along the way and.

In terms of Q4 look it's hard to say when some of the some of the deals land will going into very tough, obviously environment with the winner and coated but I can tell you gave the into the next year undoubtedly the.

The synergy of these two offerings and their priority of managing all of your business spending on one place.

Direct design and modeling and simulation as well as overall transactional spend and something companies would be.

Would be.

Sure sure of that they weren't putting higher and higher on the on the list of areas to attack and and we can help on one down on the big way.

Your next question comes from the line of Panic Ronny, let mizuho.

Hi, sorry, I was on me and this is Michael Burger on for a city Panigrahi congrats on the great quarter of.

Yeah.

Oh, sorry.

Sort of the hospital part of how are you thinking about the recovery as we go into the next year I know, you're being a little bit cautious and the Q4 about.

How is the power of the vaccine the impacts the.

The business.

Well Thats, a very hard question to answer without making predictions that the that I, probably can't make without knowing how things work out and next four months with with the the points you just laid out but I can tell you what were doing is making a stronger and stronger every week every month every quarter of customer see Inc.

Credible volume will offering they're paying us more and more on an annual subscription basis. The customers that we have are renewing and looking to add on more business without us actually pushing sales and our weighted actually absorbing a lot of our additional offerings and is a great deal of value and thinking about supply chains at this moment and thinking about optimized ways to run your business.

When we get back to normal so we're putting our best foot forward quarter and quarter out and that's coming out in what you see in the financials, but more importantly, the setting us up for a really really incredible future in terms of unlocking the potential of business spend management and a huge total addressable market globally.

Thanks.

Our next question from the line and.

Great.

Lastly on this is actually Nick on per Terry Thanks for taking my question.

So I guess in terms of your power apps and what are you. Most excited about from a growth perspective of the next few years and.

Just a follow up how much of your thought about farming versus hunting, new logos and driving adoption of these powerhouse. Thanks sure no. Thanks and the question. So we are largely hunting and we continue to do so because when we land and the accounts, we deliver value very very quickly to our customers and then they choose overtime to add on more and more capabilities as you know we.

Starting on procurement and procurement does not represent the majority of what we offer our customers today. So that's a very exciting.

Development, what I'm. Most excited about is not one individual module sales certain quarters, when one module leads or other quarters of the different module leads and certain industries on one module leads the sort of company sizes with different module leads what I'm. Most excited about is the synergy amongst these modules how we go from all the way from someone.

The organization thinking that they need to request some good or service all the way to the workflow the ordering the receiving the ability to invoice.

On the supplier of the management the supplier experience all the way through managing the inventory and on hand inventory and reordering times and updating the contracts with the implies the managing the money and organization and the expense processes. All the way back to the AI and algorithms that are being used within line of soft tapas design and plan the way, we're going to spend money.

And plan our supply chain. So it's unlocking the power of all of these things working together for companies and they actually orchestrate.

World of business by management, and that's something that has never been delivered.

On our industry and it's something that we're laser focused on terms of building the people of the processes and technologies to make that a reality.

Your next question comes from the line of catching Akita with Oppenheimer.

Yes, congrats on the quarter and thank you for taking my question. Just wanted a question on lot of the software digging in on to the revenue model a little bit you said.

They have the healthy portion of legacy license revenue could you just let us know what that mix of of that $100 million.

Coming in from Lama Sop, and then how should we be thinking about that transition to SaaS for those customers is there any sort of of expected revenue uplift on the transition to SaaS from a legacy of legacy plus maintenance model. Thank you.

The currency and heavier few data points on the revenue breakout and how Steve and transitioned and the past six months and then a few comments on professional services as well if you look at last year, there last fiscal year price.

Some of the 46% of the revenue of licenses.

32% with subscription.

And 22% was professional services.

Once again that last year.

If you look at the first six months of this year the licensing the has gone down from 46% to 24%.

Subscription revenue has gone up from 32% last year to 45%.

And then professional services.

Roughly 30, 31%.

And on professional services, the two things I would call out there overtime, we do expect it as a percentage to be more in line with our historical norm price.

Our true path. They didnt have aside relationships that we do so some of the not will be transitioned to our size, but the vast majority of that prior to the launch of Lama Hey on.

They would build.

Hi, and machine learning and models on the customer specific basis, and that's the and product types as a recurring revenue stream as well so the the pro serve on Mount you'll see a lot of that move into subscriptions over the coming quarters.

And its transition and actually fairly quickly from.

On Prem to subscription south.

Oh and add to that I think it's important because some of the questions of in around synergy that.

Whether it's delivered initially on Prem and moving to cloud the real value here is first of all and 150 data scientists that we now have as part of Coupe of working on one IP data model with and algorithm library of that is very very robust and thats going to allow us to take their supply chain simulation their demand and planning.

Capabilities, there on build your own app environment, right and merge that with the transactional community intelligence. We have all the data we have on board of cycle times re stocking patterns time to the liver ordering trends to help customers actually predict the way that their supply chain is going to function help them forecast for the high degree of and.

Foresee what is going to be happening within the way they spend.

Organizational money and that's going to help them in the big ways that will be seen on their financials when should they do restocking when should the renegotiate to drive their margins what are the landed cost of the any items that they purchase how do the optimize the order quantities Hadley figure out optimal transportation routes and mitigate supplier risk and so much more so the.

Value here is really in the data model of the IP and the people and the delivery model and topology. So that will be mitigated over time will the merged over time into a 100% cloud based and barn.

Your next question comes from the line of Michael Jordan with Wells Fargo.

Hey, there thanks, Thanks, and good afternoon.

I just want to maybe maybe one for Todd on just the the margin impacts and how you think about growth and first profitability from here, obviously, you're layering more capabilities onto the platform and with Lama soft maybe add a little bigger scale. The what we're used to.

And once once we're through just kind of the near term accounting impacts of.

Some of the things that you've called out how should we just think about the general resources required is the extension of something in the supply chain planning how natural is that given the sort of resources that you have.

Today, how natural of a sort of a tangential we added selling motion is there or are there more things you need just to kind of help add scale and that CFO type conversation and to the per view of of what you're working towards here.

Yes, so at the highest level and we look at acquisitions from multi zone.

The factors and dimensions and one of them is definitely.

Synergies and as Rob kind of went into from a product synergy there there's actually a lot of synergies on the the go to market at the engineering.

And obviously, we can drive a lot of synergies on the the back office type functions and and we act very sort of way on that so we're not and lets wait six to nine months to figure that out we actually do that as part of the.

M&A transaction and partnership with the the acquired E and this case and it's very similar yeah, just yeah I would even at the much bigger and some of the other acquisitions that feels like a balance right couple of quarters margin returns.

72.

The 3% and in this case it is a is it their order of magnitude, but the the timing and to get there shouldn't be any different and through the three quarters.

The.

See the the leverage and our financial model continue and that's still on the path to the the long term targets that we highlighted at our last analyst day. So from a resource perspective, I think it's a one plus one equals three and in the areas, where we can drive synergy, we're sort of and moving on the.

Your next question comes from the line of Matt and lead with BT, Inc.

Hi, guys. Thanks for taking the question congratulations I guess thinking about the question about overall attach rates and some of the power EPS I was asked earlier, but from a little bit different angle harvest.

Obviously, a lot of uncertainty on the market and just curious what you're seeing with deal sizes, maybe total modules per deal.

Just kind of what you're seeing I know historically you plan to much larger but are customers trying to take on a little bit more of the land and expand and this environment or are you still seeing the demand for automation and maybe even outpacing.

What budgets look like and sort of factoring and those different elements there.

Well I would say what we saw early on when the pandemic hit it was it was a lack of interest and doing bigger and more transformational initiatives out the gate and so we wound up picking up.

More smaller and she point types of deals and we had anticipated, but if you look at the last quarter. We've seen really in many ways of returned back to thinking about this and a much more of broad context, and I think customers of having real vision lock with us around having all of these processes working with one.

End of in one integrated fashion around one data model from one company debt that has high the strong references of measurable success delivered that's developed best practices for deploying these solutions with the host of.

Systems integrators and trained nearly 5000 people around the world to to implement Coupa. So we're starting to return back to what we always knew is the is the right vision, which is.

More and more of these capabilities upfront transformational type projects and that's evidenced in in your question around our per deal that continues to go on.

Yes.

Your next question comes from the line as Peter Levine with Evercore ISI.

Great. Thank you for taking my question congrats on the good quarter. So curious if you can take deeper into the federal business, maybe talk about how large the better opportunity is what are you, replacing the if anything and then anything unique worth calling out in terms of sales cycles go to market approach I think it with the great. Thank you.

Sure well first of all of the challenge of federal as we all know is that starting out the sales cycles tend to be quite long and there's a whole host of things like fed ramp and more of the need to do the gain credibility and trust of of of both the civilian side as well as and agents.

Agencies like the department of Defense and other so we have a robust pipeline now built up on both sides of the the of the house. We also are gaining quite a bit of momentum here with lots of soft and then a lot of the things that.

Many of these agencies and struggling with do per.

Pertain to the design and planning of their supply chains and in a highly agile the world something that the.

The realty something that they sort of the desire.

So what we're replacing very often is either some kind of static.

Solutions that are very very difficult to to turn into its and agile environment or walking into the farm, where they just don't have you know.

The bus solutions for supply chain simulation for easy to use simple of indirect spend the.

Procurement and and invoicing.

So across the board, we think there's a big opportunity here and we're just scratching the surface of it.

They'll thankful that weve built the robust pipeline.

And begin to tickets and ex level.

Your next question comes from the line of and you take us by which the bank.

Thanks for taking my question I, just had one on coupe of pay ex.

And actually quarters, you have the quite a set of customers now using it and just wondering as and you get of received any feedback and because of the pricing.

And how do they still and.

Works for them at this stage and you potentially see any changes coming.

The wise.

Yeah. Thanks for the question, we continue to fine tune that was still not and the degree the of numbers, where we can get to a place where we.

Can say what percent, we want to be part of the R.R. versus exactly what percent would be sort.

Sort of shared are at risk, but I can tell you. There is a very strong appetite amongst his customer base for all of our group of products for the card to accelerate.

To invoice management and the uptake and adoption is very strong so as we get to us to get into higher numbers more and more throughput will be and be able to fine tune.

Fine tune on pricing, but we haven't gotten strong pushback in any way and in fact, there is a real interest in helping us fine tune that amongst our customer community. So we're going to continue along that path.

Your next question comes from the line of the Steve Koenig with Us and the 18th and the account.

Okay, great. Thanks, guys and taking my question.

And it's another one on Lama thoughts.

Can you help us understand like.

So what degree Islam of soft place to share.

And your spend mix between.

Direct indirect procurement and maybe just digging down on that but they did a pretty big acquisition and maybe a year and a half the Gulf. This on Opex analytics can you explain how that fits and the Lama soft mix and.

The data scientists and.

And that revenue was up more pro services that what's been product. So maybe just a little bit better on lot of software and Greg.

Yes, sure that acquisition brought the whole host of capabilities around demand planning and and you're exactly right a whole host of data scientists to help so.

Thanks.

The company is that lot of soft serve gets better and better at forecasting of future the literally creating a digital replica of the physical world and inside their platform to help companies understand what's actually happening in their supply chain right to answer simple questions you know.

Of the simple example of what not traveling as much so few of Coca Cola as their demand for for beverages of the airport. These days probably not so how can you re route.

Some of your supply chain to account for that how do you meet the revenue goals based on goods availability and general right how.

How do you begin to run what if scenarios with high degrees of Fidelity, how do you avoid out of stock.

In certain categories and in a very dynamic environment. We have a lot of customers now jointly that are going from international single sourcing the need to get into domestic markets and figure out multi sourcing strategies, where they still optimize time to delivery optimize on hand inventory optimize the way they make their sourcing choices.

And beyond so this is very very significant for us and to your point about a mix of direct and indirect as you know for for probably two and a half years, we've been taken on more and more direct spend through our invoice management capability through our inventory management capability and so this is the continued Evan.

Evolution in that area, but what super powerful again is the ability to take real transactional data, both direct and indirect and feed debt back into the design and planning process. So the.

You can not only simulate a bit of version of more precise version in the digital environment, but you could be better AD prescribing optimized way to set up your spend processes and predict and prescribed but as we say with the letter P and coupon. So the opportunity here is really really exciting I think we'll be first of all.

Market really in the world and bringing on these types of things together for the benefit of some of the largest companies and the world.

Today.

Your next question comes from the line of Ryan Macdonald with Needham and cash.

Hi, Thanks for taking my question I guess two quick follow ups of the earlier Federal question can you talk about what potential there is now given the breadth of the platform and and the growing said Ram status for a potential government wide yield summary of what we saw with concur several years ago and then on Lama. So can you just talk about the process of how you're thinking about providing support for the on premise.

Customers.

And what assumptions you might be making for churn. Thanks.

Well, so I think it's early to talk about of governor on wide.

Deal, we don't have something that and flights at the moment to be two of their very transparent, but the opportunities obviously very very meaningful both on the direct.

Supply chain design and planning side as well as on the the and the indirect transactional side. So the opportunity is definitely there and as we gain more and more of these.

Supporting.

The the stamp of approval like fed ramp and beyond with that opportunity auto.

Auto auto growth on a grow meaningfully.

Yeah, and then on the Lama Soc with the respect the on Prem and the cloud as you can see on the last six months the the transition to the cloud has been.

Pretty rapid much faster than you would see and other historical companies I think thats the because of the debt.

Value of brings and the way that it's deployed and once again be and abstraction layer of of an ERP similar to our strategy from day, one and I think if you wrap that around.

Our number one.

Core value of ensuring customer success, we're going to make these people successful and.

While we may take a conservative.

Mindset towards renewal rates and our goal is to keep 100% of them and and certainly.

How about high renewal rates and perhaps maybe what with the historical run rates. So.

One of obviously get more details on that and history as time goes by but I think we're positioned with the strength of coop and also the strength of of Lama software and this was a very strong company with deep leadership across the board and.

Im very confident that we're going to create some great results there.

Your next question comes from the line of that Brad sales with the Securities Inc.

Okay, Great Hey, guys. Thanks, so much for taking my question. Another question on Coupe of pay.

The nice result, there on the on the net adds there on the on the new adds there.

You mentioned the Amex partnership for Vicari, you talked about the customer running cross border and.

The other is the accelerate option and there as well can you talk about some of these add on services to the base offering what's the interest level and there are customers of running the base offering in order to get to some of these other transaction services.

Or are these kind of further down the line.

And any color on on the attach rate, there and maybe and volumes of being very helpful. I know, it's very early thank you sure we've seen false and interestingly, we've seen both types of permutations weve seen some cases, where obviously a large portion of our customer base uses our requisitioning capability, our purchase order capability receiving invoicing it's on.

The national of for them to go further downstream and too.

Handling payments, but we've also seen it go the other way around where they see the value of all of the upstream capabilities everything from the from from sourcing and.

Contract management, but the actually begin with pay in their deployments because they see the greatest opportunity for.

Automation and streamlining of less errors.

In that area and then they go upstream from there. So it's always been our vision to have a set of capabilities that operates very much like the Swiss army knife, where you can begin with the tool that is most relevant to your company at the current time and then begin to utilize all the other capabilities.

As needed and that maturity model.

Continuing to to express itself and we see that obviously and in the the mix of products our companies our customers are continuing to the uptick.

And your last question comes from the line of cash so sat back and with Canaccord.

Hey, guys.

Hey, guys. Good afternoon, and thanks for squeezing the and just call me really interested to hear what your.

The kind of rewind the clock a couple of years ago, the ROI value prop that youre talking about and I'll just ask your most of your new prospective coupe of customer on.

You know couple of years ago Youre focused on.

Supplier and that work that was providing discounts and work flow benefits and now you look at the kind of totality of the solution.

Hello Lama software.

The bell on to all of these other add ons and is there a way to kind of think.

Think about.

Oh, the ROI has changed and I know, it's a little bit more subjective.

Perhaps it used to be but the interest thank you.

Thanks for the question well the wonderful things that ROI is the only grown with every acquisition that weve integrated into our platform as well as what we've done organically and if you just look at Lama soft as one example, they've been realizing for customers tend to of 5% to 10% savings and the areas from sourcing to of production improvements of the.

Transportation travel and transportation optimization, better inventory management better handling management. So all of these capabilities all come back down to real measurable value real dollars and cents they could see on and income on.

On the income statement at the same time, they have huge strategic value right. They provide great of visibility to the business spending within the organization. They mitigate supply of risk per the supplier network that you referenced the moment ago and the and they bring companies into the digital world, where the seamlessly manage all of their business spending and one in.

Integrated digital platform and that's always been the vision for coop and one we've been executing on now for well over 10 years.

Okay.

Thank you, ladies and gentlemen, and now I'd like to turn the call back over to Mr., Steven Horwitz for any closing comments. Thank.

Thank you everyone for joining us and apologies to the number of question are still on the Q.

And we'll look forward just talking to you again in March for our Q4 earnings reported thanks again guys.

Ladies and gentlemen, we do thank you for joining and you may now disconnect and this concludes today's conference call.