Q1 2022 Coupa Software Inc Earnings Call
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Good day, ladies and gentlemen, and welcome to the the software first 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 the question answer session. If you'd like to ask the question you May Press star 1 on your touched on pad at any time.
If anyone should require assistance during the conference. Please press the star zero on your touched on 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. Harris, you May begin your conference.
Thank you good afternoon, and welcome to Cooper Software's first quarter Conference call. Joining me today are Rob Bernstein CEO, Todd Ford concludes the President finance and operations and Tony <unk> CFO. Our remarks today include forward looking statements about guidance on future results of operation strategy, the market size products competitive positioning.
Potential growth opportunities our actual results may be materially different forward looking statements involve risks and uncertainties in the assumptions that are described in our most recently filed 10-Q. The forward looking statements are based on our beliefs and assumptions of today and we disclaim any obligation to update any forward looking statements. If this call is replayed. After today of the information presented may not contain current or accurate information. We also present both.
GAAP and non-GAAP financial measures a reconciliation of certain of these measures is included in today's earnings release, which you can find on our Investor Relations website. A replay of this call will also be available unless otherwise stated growth comparisons are against the same period of the prior year. As a reminder, we will be conducting an analyst day on July 15th starting at 9 am Pacific noon, eastern and will be doing so in the <unk>.
<unk> setting the registration site will be up on the Coupe of web site, starting July 1 with that I will now turn the call over to Rob Rob.
Thanks, Stephen Hello, everyone and thank you for joining us today.
We delivered another very strong quarter, thanks to the increasing importance of business spend management for leaders across all industries and strong execution by our team.
As the organizations get on with the work of building back better they are increasing increasingly turning to us as the trusted partner.
Our financial performance reflects this dynamic.
For this quarter, we delivered $167 million in revenue, 46% calculated billings growth and our <unk> consecutive quarter of non-GAAP profitability. We also continue to see meaningful growth in our sales pipeline.
Today, our cumulative spend under management is now nearly 2.6 trillion.
And we believe the success. We've had is validating not just our performance but of our broader vision of business spend management as a critical category onto itself let.
Let me explain what I mean by that.
We see the BSM category as a constellation of intersecting needs for the back offices of global companies at their core those needs revolve around strategy and spend whether it's how you optimize supply chain design and planning, how you run sourcing and procurement or how you manage payments cash flows and liquidity.
As you know, we bolster our platform with both organic development and acquisitions over the past several years the have allowed us to integrate these and many more areas of strategy and spend into 1 seamless platform.
If you think about our company as the car. The BSM category is the engine and Cooper is the platform that drives it.
It is often heard category winners don't build solutions that customers want the build solutions that customers may not yet know they need and that's what we're hearing from many of our customers is that they didn't fully realize just how much they needed to get control of their business spend before facing the unpredictability of.
For the last 15 months.
Many of our prospective customers were comfortable with the status quo, where business spend management decisions were managed the silos now they get it they see the decisions around strategy and spend need to be made comprehensively in real time and without barriers getting on the way.
Yes.
At <unk>, we see it as our responsibility to give them a platform to act with speed and agility and we believe there are a number of megatrends that are increasing the demand for our platform and will help drive our growth for years to come let me highlight just a couple.
The first of all of those Megatrends as supply chain for agility. The current semiconductor chip shortage offers an example of why supply chain of procurement can't be dealt with in silos I frequently talk to Ceos, who tell me that they are looking at how to redefine their approach in ways that will allow them to balance efficiency and resiliency. So they <unk>.
Never get caught flat footed again.
And while the pandemic played an outsized role in supply chain disruption, we know that other trends would likely drive more uncertainty over the long term.
Whether it was the winter storm that collapsed, the Texas power grid or the sandstorm debt Lodge the ship in the Suez Canal climate events will continue to create unpredictability on supply chains, and so will geopolitical issues.
China has made some very aggressive moves of late for example, and I think you could count on 1 hand, the number of global companies, who supply chains don't include China had to navigate those unknowns is a huge challenge that will be with us for a long time.
Supply chain for jewelry means the supply chain strategy and planning are going to be an increasingly integral part of business spend management.
This requires the solution that fully integrates traditional procurement with supply chain data in 1 platform provides customers with the agility to navigate an ever changing environment.
The other Mega trends, we see in the near term is the ongoing pandemic environment over the last several months, we've seen the extraordinary success of vaccination campaigns in several countries.
However, there's still remain many less advanced countries, who possibly won't have enough vaccine supply through the end of 2022.
This creates a breeding ground for the virus, which which raises the possibility of variance that could circumvent vaccine and I know this is something that our customers are trying to navigate on a day to day basis, especially with respect to their supply chain and procurement issues.
But there are other important knock on effects of the pandemic too.
1 of which is the expectation that we will continue to operate in the low interest rate environment through 2022, and that creates the challenges and opportunities when managing corporate liquidity and asset allocation cheap money certainly helps companies facilitate investment over the long term, but with the bond market that doesn't offer much yield companies are being pushed to re imagine what it means the carrier.
Cash on the balance sheet and how to effectively maximize dollars across a closed loop of spend and the increasingly relying on our software to strategize and manage this.
These megatrends of driving a renewed awareness within companies that have not prioritized their back office investments now it is front of mind and we are poised to take advantage of that.
As we have illustrated in the past our total addressable market is massive and we intend to own the lion's share of that market. We're the only platform that gives companies a single source of truth across all spend decisions to maximize the effectiveness of the actions they take.
And this is why we are seen as the leader proudly in business spend management.
You can see evidence of this leader ship position on our most recent quarter just a few examples our customer community continues to grow as we welcomed dozens of new companies, we unveiled more than 100, new features for our customers on our latest platform release and we saw continued momentum in our key growth driver Coupe of PE.
Let me now touch on each of these points first by sharing a couple of customer stories the.
The first story is that of ally financial a digital financial services company.
They have recently gone live on Cooper to drive Digitization across AP sourcing.
Vendor management and supplier diversity.
It is eliminating custom coding and moving fully to SaaS and configure ration based management for lower total cost of ownership and increased the agility.
With Cooper Allied chose a holistic approach the spend management with the goals of improving operational efficiency visibility for reporting analytics automation and enhanced spend control to date ally has already processed nearly $2 billion of spend through Cooper.
And the other story is that of saga, which provides products and services for life. After 50 from insurance to travel.
Prior to Cooper Saga had an onerous manual supplier payments process that is prone to errors long invoice cycle times and compliance issues. The workflow for each was administered completely on paper.
After attempting to implement an AP automation solution a few years. Prior so August finance director of realized that he needed to take a more complete approach to addressing their finance transformation. So we broadened the scope to include the entire procure to pay process.
Sorry, guys use of Coupe of PE has made payments run more efficiently reducing approval times from hours to minutes.
<unk> also realized the benefit of implementing coupe of pay at the same time as the core of PDP platform, which served to simplify the integration there payments can now be administered digitally and thus remotely versus having paper based approval processes and paper checks.
After implementing <unk> comprehensive platform saga was able to realize significant operational efficiencies they were able to reduce head count reduce invoice cycle times and increased control and compliance.
Now the team has greater confidence in the data and Arizona longer keep them up at night.
Now, let's talk about how we continue to deliver on the promise of creating value as a service through our 3 major platform updates per year, Let me highlight a few examples.
To help our customer expense model, we enhanced our business value dashboards to help customers promote operational spending habits. They can now configure their community intelligence metrics to those most relevant for their business.
This also helps them quantify the value of that Cooper is delivered by showcasing realized savings and prescribing actions for potential savings in the future.
We've also built platform enhancements that can help companies meet their critical ESG goals, our supplier diversity dashboard provides detailed information on diversity activity spending and contracting to help drive spend with underrepresented minority suppliers for.
From our perspective, the matters a great deal of how we manage our own ESG goals and fundamental to that work is leveraging our platform to help our customers manage theirs.
Moving on to Coupe of pay we saw another quarter of increased momentum as we've said in the past. We're early on in the pay journey, but we are encouraged by the greater than 30% attach rate on new deals we saw in Q1 and for.
<unk>, though still working with small numbers, we ran more payment volume in the first 4 months of 2021 than we did all of the previous year.
We expect that over the long term most of our customers will utilize coupe of pay as their main payment solution.
Now it truly was another strong performance in what was our 49th consecutive quarter of execution. As you know none of these accomplishments would have been possible without our extraordinary team.
And I want to call out a select group of my colleagues, who exemplify our 3 core values.
Let me start with Miriam Gonzales, whom bodies on number 1 core value ensuring customer success volume focuses on what customers truly need and she does so while managed making sure that the customers heard while calmly and assertively steering them towards the best usage of Coopers platform.
For our second core value focusing on results Nicole Romley was recognized by our peers. Our colleagues commented on our ability to anticipate what the sales team needs to be effective and get in front of problems before they arise.
Finally, Sophie and whole raws demonstrated our third core values striving for excellence Sophie is of Great example of the success that can be achieved in a remote.
<unk> work environment, having joined the company after the beginning of the pandemic. She was able to quickly for its deep relationships with their colleagues, while delivering meaningful results from products to processes to communication.
Before finishing up I invite you to our Cooper smarter together virtual event that will be hosted that we'll be hosting on June 15th. It takes at least 2 like minded to make things go right, which is why it will also feature of Accenture CEO, Julie Sweet and our special guests from Achaea Procter <unk>.
Gamble and Ferguson.
We all know the digital transformation is accelerating.
During the event, we will discuss how Cooper's business for management platform provides a new model for this transformation will cover a host of timely topics, including sustainability and the application of community intelligence and making us all smarter together I.
I invite you to join us.
To close from a broader perspective, it's clear that demand for our offerings will continue to grow at a rapid pace. The mega trends I spoke about are certainly not going away in fact, they are becoming more pronounced.
We see ample opportunity to solve a myriad of problems and our expanding market company.
Companies are depending on us to meet the moment and the meet the moment we will.
Never bet against Us.
Given our position we of the clear opportunity to extend our leadership in the marketplace and when the BSM category over the long term, we will do so by continuing to focus on our strategic vision areas spelled out in the letters of our name Cooper <unk>.
Prehensile of open user centric prescriptive and accelerated.
And we will do so by executing relentlessly.
Before I turn the call over let me congratulate Todd Ford on his promotion to President Finance and operations.
Todd as an integral member of our executive leadership, the leadership team and plays a key role in guiding the growth of our business and our operations I am excited about our continued journey to build the 1 of the world's best Enterprise cloud software companies let.
Let me also congratulate Tony Discordia on his promotion to Chief Financial Officer of Cooper.
Having been with us for over 8 years his impact on our business has been immeasurable and he has been a foundational member of all of our capital market activities.
With that let me hand, the call over to Todd.
Thanks, Rob and good afternoon, everyone as Rob noted, we began fiscal 'twenty 2 by delivering strong results for the first quarter.
Although the global business and economic environment is not yet back to pre pandemic norms with many employees in the global economy is still working remotely and business travel still largely on hold we continue to see signs of improvement in Q1, and we expect this trend to continue during the year tranche.
Transforming business spend management has become a critically important objective for leaders, who realize they need to build long term agility and resiliency in the organization the.
The significant investments we made during the pandemic and our clear leadership position in BSM. We've is uniquely positioned to partner with these customers for success.
Let's now review our Q1 results Q1 was the strong quarter across the board.
Calculated billings were $149 million of 46% year over year, driven by continued steady improvement from a go to market perspective coming out of the pandemic combined with strong execution from both of our enterprise and mid market teams.
The billings contribution from Lam of soft for Q1 was approximately $18.5 million. This $18.5 million represents all on the soft billings for the quarter, including new business and professional services.
Total revenue for Q1 was $167 million up 40% year over year subscription revenue was $140 million up 33% year over year given.
Given the impact from the pandemic last year revenue growth will naturally lag billings growth.
Turning to gross margin, our first quarter non-GAAP gross margin of 69% well above our guidance of $65 to 66%, but still below historical norms of 70 plus percent as we continue to focus on synergies for Malone the soft acquisition.
As we noted last quarter given the size of of walnuts out we expect the experienced meaningful gross margin pressure for approximately all of fiscal 'twenty 2.
Now, let's look at our Q1 results of operations, our first quarter non-GAAP operating income was $7 million or for percent of total revenue non-GAAP net income was $5 million for <unk> per share on approximately 77 million diluted shares.
Cash at quarter end was $600 million.
A slight decrease from $606 million at the end of last quarter.
During the quarter, we paid approximately $45 million in net cash for the acquisition of powder, which was an all cash deal.
This was almost completely offset by cash generated from the business.
Q1, operating cash flow was $32 million and adjusted free cash flows were $30 million.
We also generated approximately $13 million of cash from financing activities.
In summary of Q1 was the strong quarter across the board and.
In fact, while Q1 is typically a seasonally lighter quarter, our new business more than doubled compared to the same period last year.
We continue to pursue winning this market is sort of way where the strategy of disciplined growth.
Looking at the rule of 40 on a trailing 12 month basis and in Q1, we delivered 58%.
As previously stated we define the rule of 40 as revenue growth rate plus adjusted free cash flow margin.
With Q1 in the books and as we look forward to the future. Let me briefly review some of our recent organizational changes.
As Rob noted in his prepared remarks, I'm excited to be taken on the new position of President and finance and operations.
In this capacity my role will expand to other strategic areas of the business, including but not limited to coupe of international operations and could prevent errors, which was announced last week.
Part of my responsibility will also of course be the sport Tony in his new role of CFO.
Most of you on the call know, Tony quite well, having interacted with them frequently coopers IPO in 2016.
Now it is with great pleasure that I pass the call over to Tony interest cornea CFO of Cooper software, who will provide guidance congratulations Tony take it away.
Thank you for the kind of introduction Todd <unk>.
Graduations to you on your new role as well.
Look forward to continuing our work together on many fronts.
For those on the call I've worked closely with you with many of you over the last 5 years and I look forward to our continued interactions in my new capacity of CFO for those of you I have not spoken with I look forward of meeting you soon.
With that let's turn to guidance.
Let me begin by laying out some of the background for our Q2 and full year outlook.
First as Todd noted earlier and as evidenced by our Q1 results. The economic environment is continuing to improve and head towards post pandemic normalcy.
However, with many with many employees in the global economy is still working remotely the <unk>.
Continued absence of business travel and the uncertainty posed by the potential variance, we're clearly not other woods quite yet and many customers and prospects continue to operate with some level of caution.
While we expect it to be a few more quarters before returning to historical norms.
Happy to see things trending positively.
As Rob noted, we entered Q2 with our largest pipeline ever.
<unk> as well for the balance of this year.
Net our guidance once again assumes no billings or revenue contribution for Q2 for the full year for Cooper travel Saver we.
We anticipate the business travel should begin to recover in the back half of the year.
Moving on to <unk> supply chain design and planning.
As you know our strategy is to align the legacy <unk> business model with Coopers optimizing.
Optimizing for long term success. This is undoubtedly the right strategy for our business, but we will continue to create near term headwinds and our financial results until the transition is complete.
Success in executing on this plan will cause supply chain revenue to be lower for all of fiscal 'twenty, 2 and most of fiscal 'twenty 3.
As a reminder, there are 3 items, causing this impact number 1.
Converting term license contracts for SaaS number 2 transitioning professional services work to partners and number 3 the impact of the 50% opening deferred revenue haircut from Q4.
With these considerations as the backdrop, let's get into the numbers.
We expect total Q2 revenue to be $162 million to $163 million.
This includes subscription revenue of $142 million to $143 million and professional services revenue of approximately $20 million for.
For calculated billings on a trailing 12 month basis, we expect the exit Q2 at a year over year growth rate of approximately 39%.
We expect the Q2 non-GAAP gross margin of approximately 66%.
The lower Q2 gross margin is attributed to several items, including our expectation that we will have success converting supply chain turn licenses to SaaS and professional services arrangements to partners as well as continued effort his efforts on synergy alignment.
We expect the Q2 non-GAAP operating loss of $2 million to $3 million and of non-GAAP net loss of $4 million to $5 million, resulting in a non-GAAP net loss per share of 5% to 7 on.
On $73.5 million weighted average basic and diluted shares for the quarter.
We expect Q2 adjusted free cash flows of approximately $5 million.
For the fiscal year ended January 31.2022.
We expect total revenue of $681 million to $684 million.
This includes subscription revenue of $591 million to $594 million.
And professional services and other revenue of approximately $90 million.
This full year guidance reflects our sort of assumption that we will be successful in converting legacy lamassoure term license contracts the SaaS.
The interesting dynamic is that to the extent, we're not successful with these conversions on our revenues will be higher.
Moving down the income statement for fiscal 'twenty 2.
We expect the non-GAAP gross margin of 66% to 67% of.
Non-GAAP operating loss of 2% to $7 million and of non-GAAP net loss of $10 million to $15 million, resulting in a non-GAAP net loss per share of 14% to 20.
On 74 million weighted average basic and diluted shares for the year.
We reiterate our expectation that adjusted free cash flows will be up on an absolute dollar basis year over year for fiscal 'twenty 2.
That concludes our prepared remarks, we'd now be happy to take your questions operator.
Thank you Mr discounting of ladies.
Ladies and gentlemen, if you have a question of please press star 1 on your touched on the phone please limit yourself to 1 question.
Your first question comes from the line of Stan <unk> from Morgan Stanley. Your line is open.
Perfect.
Thank you so much guys and congratulations to both Todd and Tony on the new role New your new roles very well deserved for both of the gentlemen.
Question from our end can you just walk us through the outperformance that you saw in the quarter from Lama soft obviously very strong result, there 18.5 million contribution versus the a little under 10, I think that you guys for guidance for the year I mean for the quarter.
What drove that and is it fair to say that some of that outperformance came from licenses components of Lam of soft and Thats why that drove the the.
The big build in billings beat in the quarter and maybe the guide for the year is not going up as much as a result.
Sure Sam.
Good to hear from you. So let me just take a step back and kind of look at alarm of soft on a broader context I think what we're seeing proudly.
Our overall strategy on our M&A component of that strategy is working and is working on really really well we.
We are able to really we've been able to really create a machine here for integrating acquisitions from all areas of people process on technology and Coupe of supply chain design and planning is certainly no exception of that.
I will tell you looking forward can you just look at our at our pipeline I mean, we of nearly 2 dozen opportunities that are going in both directions as part of our cross sell efforts. So there's clearly a great interest in a unified business spend management suite now when we look at Q1.
There are numerous deals that closed in close at higher price points due to that synergy and that included our overall platform as well as coupe of supply chain design and planning as a part of that.
And Stan let me touch on the full year Guide, which you mentioned as part of your question. This is Tony.
So of course, Q1 was a really strong quarter to kick off here.
While we are seeing an increase of increasingly positive trend, we're still going to operate with cautious optimism, which is reflective of our DNA as the company. Most employees on the global economy are still working remotely on a business travel really hasnt restarted so theres not much face to face interaction between businesses and.
Another thing you mentioned that you called out is that we did have some several million dollars of Lama soft license revenue in Q1 that didn't convert to a subscription the.
The majority of the conversions, we tried to make the Q on more successful, but there was some.
As you know our full year model incorporates a pretty assertive assumption on making those conversion so to your point not having converted some of these in Q1 will to some degree reduced subscription revenue in the out quarters for the year.
Your next question comes from the line of Brian Peterson from Raymond James Your line is open.
I'll start by.
Congratulations to Robyn Tony Armstrong to Todd Anthony Keith I think some more coffee, but so Todd maybe maybe 1 for you just on on the venture side of things I am curious as you think about the swim lanes for BSM.
Is that opportunity you're going to focus more on kind of what's in the existing swim lane today, or maybe thinking about a broader platform and building out maybe adjacencies are forward looking.
Anything you can comment on there.
Hey, Brian Let me actually take that this is Rob. So the idea is absolutely adjacencies and not common swim lanes. We have this really core belief of coupe of that we want to focus on what is truly our core competencies and we're not trying to step into other places, where we can't leverage those core competencies, but at the same time, we're completely committed.
On to building a large business spend management ecosystem, we've been strengthening partnerships in periphery business spend management areas for quite a while and we plan to continue doing so on and this this vehicle of Cooper ventures that there'll be partnering with Todd on US is another way for us to broaden that reach and most of them.
Importantly, deliver more and more meaningful value to our customer community, which is what this is all of that.
Your next question comes from the line of Chris Merwin from Goldman Sachs. Your line is open.
Okay. Thanks, so much for taking my.
The question and let me pass along my congrats to both Todd and Tony as well.
I wanted to ask about the transaction monetization opportunity for Coupe of pay I think the last update we had there were around 200 customers.
The.
Let me share I understand the are they all paying transaction based monetization fees today and are you able to give us a rough sense for the size of that revenue stream relative to subscription.
Sure. Thanks, Let me first say that.
In the broadest terms when we look at Cooper pay we're definitely executing to the <unk>.
<unk> been wanting it to grow for some time on there's no question about that and Thats clearly seen.
First of all that it's the fastest growing new module the.
The way ever had as a company and we're now up to about roughly about 240 for the customers also mentioned in my prepared remarks that we had just in this last Q1 over a 30%.
Attach rate.
The <unk>.
And what we're seeing to your question is that customers are taking a thoughtful and methodical approach to ramping transactional spend.
The mix of both the recurring subscription and transactional spend spend continues to be maintain we look forward to sharing more about that.
With the growth that at our coming analyst day as well.
Your next question comes from the line of <unk> <unk> from Mizuho. Your line is open.
Oh, Hi, I guess city planning.
Yes, Thanks for taking my question and congratulations to both of you I wanted to ask you about the balance.
Shannon.
All sorts of soon have you been.
Offsetting the cross selling billings to your customer of in the U S and or be helpful. Right. How much was the contribution from balance this quarter.
Well I can tell you that without question. The treasury area is becoming more and more pronounced once like the broader areas of business by management on the customers trying to figure out how to best manage spend in this environment and we're seeing.
The customers joining us globally at different speeds and the different Pam, but joining us globally to address their treasury issues in that as well still feels very much in the early stages of of where we're going to be taken in coming years.
And this is Tony on the financial contribution question. So as you guys know we've had Berlin now.
Cooper Treasury for over a year and the financial contribution from that has been fairly consistent but it's we're not going to break that out at this point.
Your next question comes from the line of Michael <unk> from Wells Fargo Securities. Your line is open.
Hey, there thanks and good afternoon all.
The Echo my congrats on that just asked the question around the 2.
Todd and moving over to President <unk>.
Bringing Tony up the CFO I think we are familiar with the both of you for quite some time, but what does that help open up from an organizational perspective. It sounded like there was some commentary around international and maybe more focused efforts there, but would just be great to hear more around the rationale from an order perspective, and what that helps enable for Cooper.
Yes, it really enables me to spend.
Spend time executing on operational initiatives and tight partnership with Rob and the other leaders at Cooper. So international is certainly 1 area of could prevent errors, but there's many other strategic things that we're working on here that it frees me up to to really go move the needle from an operational perspective that drives the long term.
The value, but very much in partnership with Rob the executive team and the broader leadership team of Cooper as well.
Your next question comes from the line of Terry Tillman from true Securities. Your line is open.
Yeah can you hear me okay.
Yes, Todd.
Alright, yes, thanks for taking my question and I will also echo everyone else's the congratulatory comment the thought of Tony.
My question just related to I think I think that's.
If it was from Todd or Rob, maybe I need some coffee too, but it was of great comment about new business was doubled year over year, what I'm curious about then maybe we could bring Tony on to this as well you all gave guidance for how to think about TTM billings I believe what is the progression on new business bookings. So as you see it going into <unk>.
And the <unk> do you think it's kind of Youre still just kind of going along just the moderate improvement into Q3, Q and then there's more of a seasonal big uplift at any way to frame. How you could see this new business bookings part of the equation continue to improve thank you.
Thanks, sorry, well look I would say conditions in general continued to improve steadily trending positively here coming out hopefully fully coming out of out of the pandemic right.
And we're being really the continue to be really thoughtful in terms of our investments in our people and our platform while remaining disciplined as <unk>.
Come to come to expect price thoughtful growth disciplined approach mindful of cash flow on profitability, but at the same time attacking what is a really big total addressable market and I think 1 of the biggest themes that we're seeing is that true cloud is really starting to hit what I would call of critical mass as far.
As unpacking the back office when we got this company going over a decade ago that was 1 of the big hypothesis. We had is that we will be able to go into that back office begin to unpack the back office with the use cases, and then create a unified platform that really pulls them together in a way that's going to drive incredible value for customers in every area.
From supply chain for transactional spend.
And the treasury and other areas we touched on.
And I can tell you we feel that there is strong momentum coming out of this pandemic and we feel really well positioned going forward as you think about.
Of the coming quarters, and the coming years.
Your next question comes from the line of Ryan Brinkman from Piper Sandler Your line is open.
Thank you and good afternoon was hoping to drill down on the enterprise activity in the quarter. If I look at billings growth overall and billings ex Lama software you saw some moderation there again this quarter, but you did talk about kind.
Kind of of record pipeline. So could you provide additional color on the pipeline build in Q1 any signs that large deal pipeline is starting to come back yet with the reopening are you seeing any early signals that enterprise sales cycles could begin the shortened gear or.
Do we have to wait a couple of quarters.
Early leading the signals that things comes back.
Yeah, no great great Great question.
First let me say we of the largest pipeline we've ever had going into Q2 I mean, there is no question about that we're clearly seeing strong and increasing customer as well as prospect engagement.
Our average recurring revenue per deal has gone up now every quarter virtually every quarter for $40.49 quarters and that includes <unk>.
Obviously, a wide mix of mid market customer and a lot of lot of mid market customer volume. That's part of that right. So it continues to be a healthy mix and many of the the largest deals that we were seeing kind of in the.
When COVID-19 hit and maybe were slowed down are starting to either come to fruition oriented those late stages.
Of the pipeline.
So it feels it feels quite healthy, but I have to say at the same time, we're exiting the pandemic, we're on what I would call hardening.
Permanent.
But that for a moment does not rock solid because of on.
Questions around the pandemic. So we continue to be thoughtful in the way, we we plan on investing and run at what is just you know.
Clearly an incredible market an incredible opportunity.
The 1 thing I would add too when you look at the year over year compares for Q1.
Obviously last year was pandemic or at least the starting to come in at the end of Q1, but we also had a benefit last year of about $7 million to $8 million because 2 years ago. We had the strongest may ever and we built 30 days in advance.
That is 1 thing that impacts the the year over year comparisons while debt I'm not sure people remember.
Sure.
Your next question comes from the line of Rod sales from Bank of America Securities. Your line is open.
Oh, great. Thanks, guys and congrats on a nice quarter, congratulations Todd on Tony on your new roles.
Wanted to ask about the spend under management metric it looks like it had a nice sequential increase 2.6 trillion I think of about $2.3 last quarter, so incremental of about 300 billion.
Normally you see kind of of sequential downtick Q4 for Q1 of that metric and so I guess my question is is that the right math or are we seeing of Chi.
Change, there and what's driving that and what kind of a leading indicator is that metric for the business.
Sure that's of Great question, I think that's roughly the right math that you've described but yes.
Now at $2.6 trillion.
It's when you zoom out it is of course very strongly correlated to customer value, it's correlated strong ongoing growth.
From a revenue perspective et cetera, but it has bumps here and there based on go live staging of go lives.
Existing customers expanding so to really understand that metric it's worth.
Stepping back to look at maybe 3 to 4 quarter on annual arc to really understand how thats going on.
Very very healthy it says great signs of adoption and it's really the the 1 we share with all of you, but there are many more adoption of engagement measures. We look at and those those 2 look very very promising in terms of our ongoing development of the business.
Your next question comes from the line of Alex Zukin from Wolfe Research. Your line is open.
Thank you Hey, guys.
Rob maybe for you when you think about the momentum in the business coming out clearly we've talked about a pipeline now for some time, but are you starting to see the enablement of more strategic conversations around supply chain.
Kind of start to drive up our <unk> or conversations around expansion activity and then maybe for Tony.
Chance, we could get the RPM of our CRP on numbers or.
Just a general sense around the net expansion metrics. So we can calibrate some of the bookings momentum.
Yeah.
So Alex Thanks, and congrats on your on your new role as well so no I.
I can tell you that the conversations around supply chain design and planning that personally.
Last 6 months really at.
On a different level than we've historically had of the company, which I find to be credibly promising I mean, theres not 1 executive I've talked to that isn't thinking about how to simply apply information technology for the problem of effectively plan and design.
They spend money on and manage their supply chain right.
And what we are seeing as it pertains to our business is that the vision of having these capabilities operational procurement and supply chain design on the front end and the ability to drive.
Sourcing events of based on design plan something that they really want is something that they're willing to pay us fairly for and if you look at again Q1. There are numerous deals that we closed frankly of fare higher price points due to the their awareness of the current synergy and the anticipated integration synergy.
<unk> of our platform and I'm really excited in particular about our September release, which is dedicated to the suite synergy that's going to unlock even more of that on the ground for our customers.
Thanks, Alex and on RPM Tomorrow, we'll file our 10-Q and the number that will be disclosed on there is $973 million of <unk> exiting Q1.
From a gross renewal on dollar based expansion perspective, our results for this quarter were pretty much exactly the same as last quarter sort of flat quarter over quarter typical historical range.
Your next question comes from the line of Matt again, with the Vivek from BT Archie Your line is open.
Yes, thanks for taking the question and congrats on the new roles guys.
As you look at.
Kind of the back half of the year here from a pipeline perspective.
And projecting out what the business travel and maybe TNA budgets overall look like.
I guess, how much upside is there potentially.
From seeing a little bit more of a earlier return than you're currently anticipating and are you getting any commentary from from customers that wanted to do an implementation kind of all at once.
Like to wait and see when their <unk> budgets are coming back to include that in a broader BSM upgrade cycle.
We're definitely seeing of dynamic of accelerated digital transformation, where customers are looking to do not only multi modules in tandem, but in many cases, frankly, utilizing cooper and the savings we can deliver for them from our transactional spend to actually pay for some of the other initiatives that span beyond business spend management.
But certainly in the travel area outlook, we anticipate obviously an increase in business travel in the second half of the towards the tail end of the year and we're particularly excited about the new.
Teeny offering we're going to be taken the market by the end of the year and we hope to capitalize on that not only this year, but obviously in coming years for sure.
Your next question comes from the line of Joseph <unk> from Canaccord. Your line is open.
Hey, guys. Good afternoon, Congrats Tony and Todd and I guess, Rob for you don't feel left out congrats on on the quarter, but.
Rob I think I heard on your.
It sounded kind of like a pretty big statement on I don't want to.
All of your feet to the fire.
It sounded like you said you expect ultimately the almost all of your customer would.
Adopt the pull of module on I was wondering what your thoughts are behind that statement. Thanks.
Sure sure well look I mean first of all of we just look back as I mentioned in over 30%. The attach rate in just Q1 is very promising secondarily, what's promising is the interest in all areas that we've already taken the market around co per pay right. So of virtual credit cards, we're seeing really good adoption of that particularly in enterprise.
It was the first capability and pay we launched dynamic discounting.
<unk> is being uplifted by customers and then we also of course have the core of <unk>, which is invoice payments, where we're seeing good adoption in mid market and moving up.
To the larger companies as we continue to develop that offering so.
Our hope is that every customer is going to use every 1 of our modules that we have today and ones will develop in the future as part of the integrated business spend management.
Platform and and that's what we're working on day in and day out.
Your next question comes from the line of Daniel Jester from Citi. Your line is open.
Yes, great. Thanks, Congrats and thanks for taking my question.
Just wanted to see if you could expand on your comments about the supply chain for agility, maybe the spins off of the alexs question a bit as well I guess first.
Indirect or direct procurement at which folks are focused on and then secondly for the customers that you are speaking to who is leading the transformation within the organization of this being run out of the procurement office or fit or is it coming out of finance our operations and I asked because of its being led in other parts of the organization.
How do you make sure that Cooper is on the table as these teams build or rebuild their supply chain.
Those of great questions I mean first of all it's we're seeing it both in direct and indirect than in the intersection of direct and indirect.
The obvious example of indirect of PPE equipment will obviously.
And in a host of other areas of categories of spend and we're definitely seeing that other fee on the direct side the need to create.
The different scenarios for the supply chain designed to 2 to react very quickly shifting.
Needs for.
For different suppliers, given the lack of access to the existing ones.
So we're seeing it on both sides in terms of the buying center it still tends to be within the CFO of certainly touch of the CFO.
Often begins to touch the head of supply chain for an organization of our head of operations. So we're having those conversations but what's most exciting is that.
We're seeing these more and more sponsored by Ceos.
Realized that the unpacking of the back office is underway and the tools and capabilities. They have in the back office are really really sub par based on there.
The digital transformation agenda, so not only be able to go in there and offer a key component of digital transformation, but also being able to save them a lot of money quickly. So they can actually pay for more of it is really a double win that we're seeing them take advantage of and we're in front of it.
Your next question comes from the line of Peter Levine from Evercore ISI. Your line is open.
Great. Thanks for taking my questions.
The congrats on military Todd.
Yes, I guess, the Rob can touch upon your prepared remarks on a on the software.
The decision for some of these customers to not transmission and perhaps the quick license like what are you doing now to kind of encourage or incentivize. These customers to switch and then second whats the opportunity I guess to leverage the partner ecosystem to perhaps maybe accelerate the cloud transition. Thank you.
Great great questions well first of all.
We are having very strong success, thus far I would say converting customers.
From the term licenses to SaaS, but we're doing that upon renewal. So that's the time to do that and the move is happening not.
It's not so much a stick it's much more of a carrot the.
On the offering of the cloud offering is incredibly robust it's incredibly configurable, it's incredibly easy to use and it takes advantage of the same core data model that they've been used to in their on premise offerings. So that's a really wonderful thing and in terms of the partners you bet I was just on the call. This <unk>.
With some.
Some of the most senior focused on 1 of the largest if not the largest systems integrated on the world talking about the.
The army of of systems integrators, we're going to continue to certify.
On utilizing this offering to address the supply chain design and planning opportunity so right on with that question.
Your next question comes from the line of Bob Napoli from William Blair. Your line is open.
Alright, Thank you and congratulations Todd.
And so if you're just going into the.
The Investor Day, just wanted if you're going to give any updated thoughts on.
On mid term targets for <unk>.
Had targets out there maybe on a few very large acquisition the larger than you have historically and so maybe just the focus of the the Investor day, I know coupe of pay as part of it and then any thoughts around that you might introduce around.
Medium the midterm or long term targets.
Certainly 1 of the things we've prided ourselves on here at Cooper has been consistent and we fully intend to give mid year and long term targets updated as we have on our past. The 2 analyst day is that we've done since going public and as you noted of course has been a lot of activity here exciting on the business front. So for Cooper pay on other important aspects of the business.
We will have a healthy list of updates for both.
Your next question comes from the line of Ryan Macdonald from Needham Your line is open.
Alright, Thanks for taking my question and congrats everyone Rob.
Rob I wanted to ask you about sales productivity and how youre feeling about that especially as things are reopening you mentioned earlier on the call on your prepared remarks debt business travel is obviously not quite come back yet, but as youre looking at your pipeline and what's flowing through and progressing through that pipeline. How are you starting to think about.
The sales reps and how youre going to.
For say a hybrid approach between virtual and in person to try to maybe push things through the pipeline more quickly.
Sure well number 1 without a doubt the number 1 priority is the safety of all of our people and then the safety of any of the customers of prospective customers, we'd be visiting and debt.
The guide to anything and everything we do secondarily is the second guiding principle is flexibility and <unk> and the thoughtfulness of entrusting our colleagues to make the best business decisions for our business and balance with their needs. So we've already made.
Some exceptions around business travel.
But at the same time as the coming months.
Progress will of course booked.
Book to make those more flexible and actually began a process of.
The broader reentry for our colleagues here at <unk>.
Likely to be something like.
Roughly 25% or so during the summer and then getting to <unk>.
<unk>, 50% as we start to fall all of that of that of course pending.
What happens with the pandemic and of course in accordance with local regulations, the local requirements around around the debt.
Your next question comes from the line of Andrew de Gasperi from Bloomberg. Your line is open.
Okay.
Thanks for taking my question I wanted to ask 1 on competition.
Specifically 1 of your competitors last week.
Launched of networks for business Jets, and they also made some enhancements to the traveling expense product.
Just curious if you can you of any comments on that and generally are you seeing the competitive landscape I mean, good morning testifying at this stage or is it similar.
As it was in the past.
Yes, I would say as I've said since 2016 and on our first earnings call. The only competition. We have in this market as ourselves there's a whole host of players trying to do a whole host of different things. We're pursuing the vision of helping companies optimize every dollar that they spend helping them see the business spend management vision that we have.
<unk> aligned with it and get incredible value on working with us and we're incredibly proud of what we've been able to achieve for thousands of customers in that area and we think its a green light ahead to push as hard and in a software as we can and to building our way into the huge Tam.
And then 1 of embarking on so nothing has changed and nothing is really concerning us around the the ecosystem that day.
You talked about.
Your next question comes from the line of Steve Conine from NBC. Your line is open.
Hi, Thank you very much.
I rarely do this but I'm going to ask of you ask a 2 part question. This time.
First 1 is.
Did you guys I wasn't sort of did you reiterate the 30 of $35 million and Lama soft revenue contribution of $10 million processed for the year.
And can you just provide us a little more color on I got the $18.5 million in billings for want of soft, but how did they do Robert revenue wise and also of billings wise relative to your expectations and then if I may I just wanted to.
Todd toss 1 in for Rob.
In closing on the supply chain are you seeing any sort of impact on your sales motions positive or negative of any differential impact on verticals and I'll stop there. Thanks very much guidance.
Thanks can you just repeat did you say.
The different vertical and purchased the supply chain.
And your other question equations in placing that it's starting to tick up.
Are you seeing that reflected on your customer conversations.
Well, we're seeing that but much greater on that as we're seeing there. They are incredible awareness that where they were operating from the supply chain perspective was incredibly inefficient as compared to where they couldnt be agile.
Non agile.
Many customers who are doing in our supply chain designs and plans that were 2 to 3 years out without the ability to of course, correct based on changing dynamics and so theyre just revisiting that entire sector of their of their organization and saying how can we do this better than what they are discovering with no joke our analysts largely.
Using spreadsheets or really our data the approaches for this and we're being able to go in there and model for them.
The true digital twin of what could be with various different scenarios on applying AI that can take into account the third party as well as external data feeds to figure out how to create a supply chain for the future before any trucks on the road for any product gets produced before any bill of materials goes to sourcing.
They are awakened to the to the opportunity here and we're right there in front of loan with an incredible platform.
As mentioned earlier of developing ecosystem of systems integrators with best practices and advice that can use this platform.
To help them, we think we're in a really unique spot.
And let me touch on your question about the revenue contribution in the guidance.
Pertaining to coupe of supply chain.
So of course as Rob noted, we're working on when a big market and internally, we don't track acquired financed entity financial statements independently once they're integrated we.
Cooper is 1 integrated platform and we manage our financials that way as well.
As you noted we did provides the all in billings number for lumps of off for Q1 on our prepared remarks billings is really right now of the cleanest metric to share given the transition we're working on in the alarm on soft revenue model.
And really billings is typically the best indicator of where the business is going on.
I would add clearly our M&A strategy seems to be working as we increased the breadth and depth of our platform with the mix of organic development and M&A. Our average deal sizes continue to increase over time, and we position ourselves as the dominant leader in the market and with respect to revenue.
Guidance excuse me our guidance includes all of the things known to US at this time granted our guidance is based on a desired outcome, we're trying to achieve and we're making the sort of assumption that we will successfully and rapidly convert term licenses to SaaS and shift our professional services the partners, but there's a possibility of revenue comes in higher if it takes more time to.
To execute this transition, but yes were applying the same sort of assumption in our full year guidance.
And if you look at the guidance right.
<unk> revenue, we pass through and there was the more term licenses that went into the professional services and other so that obviously increases revenue Q1 by a few million dollars, but on the flip side of it reduces the subscription revenue in the out quarters.
And if you look at the professional services and other guide that is really as Tony just mentioned the desired outcome. So we don't want to put.
Higher numbers in that line, which from a guidance perspective, because quite frankly, we don't want them to convert the term licenses and we do want to push as much as we can to the the partners out there.
So that's why you're seeing from a guidance perspective for the year of that the professional services is basically flat.
Because of the outcome, we are actually trying to achieve which is in the best long term interest of shareholders.
At this time there are no further questions. This concludes the conference for today. Thank you. Thank you all for joining US you may now disconnect.
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Okay.
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