COUP (2021 - Q2)

Good day, ladies and gentlemen, and welcome to the Coupa Software Second 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. As a reminder, this call is being recorded. I would now like to introduce your host for today's conference call, Mr. Steven Horwitz, VP of Investor Relations. Mr. Horwitz, you may begin your conference. Steven H

Thank you. Good afternoon and welcome to Coupa Software second quarter conference call. Joining me today are Rob Bernshteyn, Coupa's CEO; and Todd Ford, Coupa's CFO. Our remarks today include forward-looking statements about guidance and future results of operations, strategies, market size, products, competitive position and potential growth opportunities. Our actual results may be materially different. Forward-looking statements involve risks and uncertainties and assumptions that are described in our most recently filed 10-Q. These forward-looking statements are based on our beliefs and assumptions today, and we disclaim any obligation to update any forward-looking statements. If this call is replayed after today, the information presented may not contain current or accurate information. We also present both GAAP and non-GAAP financial measures. A reconciliation of certain of these measures is included in today's earnings release, which you can find on our Investor Relations website. A replay of this call will also be available. Unless otherwise stated, growth comparisons are against the same period of the prior year. With that, I will now turn the call over to Rob.

All right. Well, thank you, Steven. Hello, everyone, and thank you for joining us. When we started this journey more than a decade ago, we had a very clear vision to forever change the way things were done in what was the procurement space and solve the broader challenges in how businesses manage their spending with the support of innovative and reimagined information technology solutions. We sought to achieve this by delivering 100% cloud-based comprehensive business spend management platform that would scale for virtually every company in the world, unlocking massive amounts of untapped value. Our platform would provide real time visibility, control, automation, spend compliance, and so much more. We set out to help our customers be more agile, to flourish in great times, and be more resilient in difficult times. And most importantly, we wanted these customers to be smarter together with something completely unprecedented in our industry, the concept of the community and the power of community intelligence. We have made some very significant strides towards fulfilling our objectives as evidenced by the nearly $2 trillion in cumulative spend under management that has now flowed through Coupa’s transactional core. Looking at our financials for this quarter, we once again delivered record revenue of $126 million, despite the global macroeconomic headwinds present today. It's important to note that while we are largely focused on growth, we're also focused on profitability and cash flows. To that end, Q2 was our ninth consecutive quarter of profitability on a non-GAAP basis. We also reached a new milestone this quarter having generated more than $100 million in adjusted free cash flow over the trailing 12 months.

Thanks, Rob. And good afternoon, everyone. While the world has changed, we're all adapting to the new normal, our strategy at Coupa has not changed. We continue to manage our business to 30% annual revenue growth, disciplined sales and marketing investment, and demonstrating leverage and our operating model as we continue to grow, specifically operating and cash flow margin. As we continue to grow our business and extend our market leadership position, we'll do so from a position of operational and financial strength with a focus on resiliency over the long-term. Now, getting into some of the details starting with Q2 results. Total revenue for Q2 grew 32% year-over-year to $125.9 million, subscription revenue for Q2 was $111.6 million, up 34% compared to Q2 of last year, comprising 89% of total revenue, professional services and other revenue was $14.3 million. Calculated billings for Q2 were $130.5 million, up from $107.7 million in Q2 of last year, representing a 21% year-over-year increase. For the trailing 12 months, calculated billings were $518.5 million, up from $378.8 million in the previous trailing 12-month period, representing a 37% increase. Total deferred revenue at the end of Q2 was $249 million, up from $244.5 million at the end of Q1 and up from $188.9 million at the end of Q2 of last year, a year-over-year increase of 32%. When considering our billing results, I'd like to remind you of the comments from last quarter on a difficult compare that existed going into the quarter. There were two events from Q2 of last year that impacted the year-over-year compare for billings this year. Specifically, one, some of the new customer billings which were billed in Q2 of last year, were billed in Q1 of this year for the terms of the contract; and two, a onetime spike in billings related to the Exari acquisition that we completed in Q2 of last year. The impact to Q2 billings from these two events was approximately $15 million from a year-over-year compare perspective. Let's now turn to margins and results of operations. Our second quarter non-GAAP gross margin was 72.1%, which was above our guidance of 70% to 71%, but down from Q1. The sequential decrease was primarily due to the impact of our acquisition of BELLIN, now Coupa Treasury Management. We typically see a drag in gross margin for the first few quarters after completing quarter after completing an acquisition, due to immediately post acquisition, we carry the full burden of the acquired business’s costs, but don't recognize 100% of the revenues, because of the write-down of deferred revenue in the purchase accounting and also, it typically takes a few quarters to complete the full business integration to the point where we can take advantage of expense-related synergies, such as the benefit of combining supplier purchases. We expect to see an impact on margins this quarter and for part of Q4, normalizing for the most part by the end of the year. Consistent with our long-term strategy and disciplined approach, we continue to make investments in our business, including hiring new employees. Even so, we were yet again able to demonstrate the scale and leverage in our operating margin and adjusted free cash flow results. For the quarter, we delivered non-GAAP operating income of $12.3 million, as well as non-GAAP net income of $15.2 million or $0.21 per share on 73 million diluted shares. I'd also like to note that we booked a general reserve of $2 million in Q2, reflecting the uncertainty in today's macroeconomic environment. Moving to cash and cash flows. Entering Q2 cash collection expectations were difficult to predict due to the extended COVID-19 pandemic environment, but the strength of our business was clearly evident in our Q2 cash flows results. GAAP operating cash flows for Q2 were $23.4 million and we delivered record adjusted free cash flow this quarter of $35.7 million or 28% of total revenue. We define adjusted free cash flows as operating cash flows less purchases of property and equipment, plus repayments of convertible senior notes attributable to discount -- that discount. For the trailer 12 months, GAAP operating cash flows were $86.9 million, or 19% of total revenues. For adjusted free cash flows, as Rob noted, we delivered $100.4 million, or 22% of total revenues for the trailing 12 months, a new financial milestone for the Company. Our strong cash flow performance speaks to the quality of our customer base, the mission-critical nature of our platform, and ultimately, the value we're delivering to our customers. Cash at quarter-end was $1.34 billion, up from $706 million last quarter. The main driver of the increase was the issuance of our 2026 convertible notes of $1.38 billion, including the exercise of the green shoot. This was offset by $193 million paid for our capped call at an up 125 premium and $484 million paid towards obligations from our first convert, our 2023 notes. At the end of Q2, we still have approximately $16 million of principal remaining from our 2023 notes. We also used $84 million of cash this quarter towards the acquisition of BELLIN and ConnXus. Now, let's turn to guidance. With respect to guidance, our operating thesis is similar to last quarter, and that we expect the macroeconomic environment will remain challenging for at least Q3 and into Q4, with the possibility of things beginning to open up more broadly, starting early in the New Year. From a go-to-market perspective, we entered Q3 with a significantly stronger pipeline than the same time last year, both on a gross dollar basis and in terms of what we considered later stage, qualified pipeline. Not surprisingly, however, many customers and prospects continue to operate with caution, especially those in industries highly affected by the pandemic, making it difficult to predict the timing of when deals will close. The third quarter and full year 2021 guidance we're providing today incorporates our current assumptions with respect to the uncertain effects of the challenging macroeconomic environment based on information available to us at this time around new business, renewals, timing of collections and various other inputs. Variations from these assumptions may cause our results to differ. Our guidance also assumes no billings or revenue contribution from Coupa Travel Sabre, formerly Yapta, for the remainder of the year. As you may recall, entering the year, we expected approximately $20 million in billings and revenue contribution from Coupa Travel Sabre. With this as the backdrop, we expect total Q3 revenue of $123 million to $124 million. This includes subscription revenue of $112 million to $113 million and professional services revenue of approximately $11 million. We expect a Q2 non-GAAP gross margin of 70% to 71% and GAAP income from operations of $4.5 million to $5 million. This results in non-GAAP net income per share of $0.02 to $0.03 on approximately 74 million weighted average diluted shares for the quarter. For non-GAAP net income per share, please keep in mind that other income and expense or quote unquote, below the line expenses are affected by the drop in interest rates over the last two quarters. Our non-GAAP other income and expense guidance also contemplates potential currency fluctuations and tax liabilities as well as additional cash interest on our latest convert at 0.375%. On the OpEx side in Q2, we incurred about half of a typical quarter's expense from acquisition of BELLIN. We will of course have a full quarter of BELLIN expenses in Q3. Also, after generating a record $36 million of adjusted free cash flows this quarter, we expect adjusted free cash flows for Q3 to be breakeven or slightly positive. For the fiscal year ending January 31, 2021, we expect total revenues of $496.5 million to $498.5 million. This includes subscription revenue of $446 million to $448 million and professional services and other revenue of approximately $50.5 million. We expect non-GAAP gross margin for the year of 71% to 72%. We also expect non-GAAP operating income for the year of approximately $33.5 million to $35.5 million, non-GAAP earnings per share of approximately $0.43 to $0.45, based upon an estimated 73 million averaged diluted shares for the year. We expect adjusted free cash flows to be up year-over-year on an absolute basis. To conclude, we are still living in unique and uncertain times. As we focus on the safety of our employees and the long-term prospects of our business, we will continue to execute on our strategy, which is founded on growth, financial discipline and operational efficiency, backed by a strong balance sheet to emerge stronger than ever when we all return to some level of efficiency. Now, we'd be happy to take your questions. Operator?

Thank you, Mr. Ford. And your first question comes from the line of Bob Napoli from William Blair.

Thank you. Good afternoon. I was hoping to get an update on Coupa Pay. It is obvious question, just if you could give any trends on attach rates or the reception by certain clients, but some update on Coupa Pay would be helpful.

Sure. Well, we continue to see some really good data there as an observable sort of impact in terms of Coupa Pay. For one, without doubt, we continue to build a very rich pipeline in the market. Secondarily, we are closing quite a few deals, and I would say if you look at many of the solutions that we've rolled out over the course of the last decade plus, Coupa Pay of all of those solutions has probably taken on the fastest ramp in terms of new customers and in terms of go lives, and that's really my third point around go lives. You see these customers not only going live but you see them getting measurable value. They're clearly moving away from paper-based or disjointed processes to more streamlined centralized processes, and they're more than willing to stand up as references on our behalf in the marketplace. So, it feels like a very promising continued trajectory, and we can be more excited about it.

Thank you.

And your next question comes from the line of Josh Beck with KeyBanc.

Thanks for the question, I had myself on mute there. I just kind of would like to understand a little bit about how you're thinking about the recovery as we go through the year. I think, on the last call you had kind of expected Q4 to start to see signs of recovery. This quarter certainly seems like it came in better than you had anticipated, if you look at the billings number or the spend under management number. But, at the same time, I think you said that you were pushing back a little bit to the first half of next year when you were starting to factor in that broader macro recoveries. So, maybe just provide a little bit of color on what some of the positive surprise you saw in the quarter, and how that juxtaposes with pushing out the recovery timing just a bit on the macro front?

Sure, sure. I appreciate the question. I think, the broader context is worth sharing with everyone on the call, and for those of you that have known us for some time, you know that we're playing to win in this category without any question whatsoever. And to that end, we've continued to develop a really rich and robust and very sizeable pipeline, and we continue to have incredible engagement within that pipeline. So, that is not a pipeline that is moving out. It's a pipeline that is actively engaged with us and building business cases for approval and driving that through their organizations. To that end, we've also continued thoughtfully hiring to make sure that we can support that pipeline to fulfill demand as it drops. And what as you well know is a really large total addressable market. And I would say that the environment we're in right now, to your question, is really bringing even more attention to spend practices. There are near-term spend practices that need to be addressed very quickly, kind of higher ROI areas like sourcing and risk. There's also the need to really set up companies for the future of how they do business spending. Now specifically, I would tell you that the fidelity, as it pertains to precision on any deal close timing, is probably not as high as it might have been historically. Having said that, we continue to close a robust book of business, while building up this pipeline to attack in Q3, Q4, throughout next year as we build this Company into something very, very meaningful and special in the world of information technology, enterprise software, and business.

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

I just had one for Rob. I think, you talked in your prepared remarks about – I know you acquired a tool for treasury management software, and I guess the question is twofold. Number one, should we see any major impacts to the financials? And number two, I know that there's an account receivable automation vendors out there that offer treasury management solutions. So, in the future, could we may be see you expand more into the accounts receivable automation space? I know there's a lot of TAM where you’re now, but just curious what you are thinking about the product or M&A pathway from here? Thanks.

Sure. Well, our thinking generally around mergers, around M&A or acquisitions that we would be considering is for it to fall into the strategy that every one of the acquisitions we've done before falls into. A core component that can unlock value of that transactional core or power applications like a BELLIN in Treasury Management that can get even more value out of that massive accelerating transactional flow. With BELLIN, it’s really a no brainer for us. I mean, cash management in real time is pretty important when you think about income of cash and spending of cash, obviously. Really helping our customers understand cash risk, really understand liquidity and where they are at any given point in time, understanding working capital management. These are the sort of ancillary spaces that the office of CFO has been interested in engaging with us for quite some time. And I would say the other component that was really powerful here is just to get a little bit deeper into bank-to-bank money transfer communications, the things we're doing with Coupa Pay will actually be enhanced with some of the components coming from BELLIN. So, we're likely to follow very much the same strategic approach to acquisitions, and this one clearly fell right in the sweet spot of that.

And on the financial contributions, Chris, we obviously spent $84 million for BELLIN and ConnXus in the quarter. 90% of that was approximately BELLIN. Obviously, the full impact of the expenses is in our guidance. And as you’ve seen with the acquisitions in the past, it will take time for the revenue to ramp to steady state. But as we look out to fiscal 2022, I'd expect $20 million to $25 million in revenue contribution from those two acquisitions, once again, primarily BELLIN being the majority of that. And then, I would also expect as Rob mentioned, additional positive impact to Coupa Pay than overall pricing of the BSM platform as we continue to see our average deal size increase quarter-on-quarter, which we continued to see this last quarter as well.

Your next question comes from the line of Alex Zukin with RBC Capital Markets.

Hi. This is Robert Simmons on for Alex. Thanks for taking the question. So, you had mentioned the customer is over 95% of transactions going through the platform. So, I’m wondering, if you tell us how that’s impacted your ASP, kind of pre-Pay and now with Pay?

Sure. So, I'm not sure that directly impacts it. The reality is, we charge based on value delivery. We don't have a sort of take rate model of some percentage of the electronic transaction model with just a few exceptions, Coupa Pay in some cases being that type of exception. When you think about the overall business, it’s largely a Value as a Service business where there's a fair recurring subscription revenue price point for value delivery. And to that end, this is our virtually - our 46th quarter, virtually every quarter going up in average subscription revenue per customer. So clearly, they're seeing more and more value being delivered for them on this platform and Coupa Pay is just an additional module that provides it.

And then, can you talk to your net retention rate, what are you seeing there?

Yes. If you look at the renewal rates, continue to remain strong and best-in-class. Nothing that I would call out related to COVID or otherwise. One of the things I would say though, as Rob mentioned, we've seen significant positive trends in upsell with our current customers, and multiple areas, whether it's Coupa Risk Assess, Coupa Sourcing, Coupa Pay and other. And one of the things that's important to note and we saw a little bit of impact of this in Q2. When we do these power app add-ons, in many cases, we don't realize the benefits of a full year billing to the customer on our calculated billings results, because the first billing installment for the add-on modules is often coterminous with the customer’s either annual anniversary or renewal date, meaning that we only build the customer for a partial year upfront. So, while no impact necessarily revenue, does impact billings for partial payments. And it's likely we'll see some benefit from this dynamic in Q4 where a significant amount of our deals are billed and transacted.

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

Maybe just one very quick one for me. Todd, I'm not sure if maybe I missed it during the prepared remarks. But, how are you thinking about billings for Q3, either as a point estimate or maybe on a trailing 12-month basis?

Yes. Thanks, Stan. So, given the current macroeconomic environment, we've continued to be very measured with our billings outlook. And if you look at the three components, professional services, renewals and new business, on the professional services front, we went into the quarter with a very strong pipeline, and we've also demonstrated the ability to take customers live remotely. As Rob mentioned in the remarks, 100% of our go-lives were done remotely. So, feel good about professional services. Renewals have continued to be strong, and we've seen even customers reaching in on the expansion that we have talked about. So, a lot of people expected impact from COVID, and we haven't seen that at all. And then on the new business front, I can give you a couple of comments quantitatively and qualitatively. So quantitatively, although you somewhat have to consider the lost small numbers, our new bookings in August were higher than last year. And in entering Q3, as I noted in my remarks, we had a substantially stronger pipeline for the second half of the year compared to that of last year both in terms of gross pipeline and later stage. But as Rob mentioned, it's also difficult to predict sales cycle’s time. And there's also some seasonality in Q3 historically, although there's some trends pointing to perhaps that won't be the case this quarter. And when we have seen deals push out, it's typically weeks or months and not quarters. And then on the qualitative side, we are seeing some green shoots, particularly in the level of engagement by our go-to-market teams being extremely high. And overall, I would say my confidence entering Q3 is stronger than that entering Q2. But given historical seasonality and just the macroeconomic environment and expecting to get back to normal hopefully sometime later this year, the point estimate I would use for calculated billings on a trailing 12-month basis would be 27%, exiting Q3. But once again, it's difficult to determine the order of magnitude just given all the factors I just covered.

And your next question comes from the line of Brad Sills with BofA.

I wanted to ask about some of the progress you've seen here with the Community Intelligence applications; you mentioned advantage of Risk Assess, Sourcing. It seems like those are picking up. We're hearing that from the channel as well. Is there a common theme here? Is it just that these offerings are now maturing, where you're building that analytics capability, really leveraging that data set in there, or is it just awareness growing of the benefits of these solutions? I suspect it's both. But any color on just what may be driving that? Thank you.

Yes. Thanks very much for the question. I think it's absolutely both. It's very hard to understand exactly how some of the tipping points develop. But clearly, there's a massive amount of data that's going into providing the Community Intelligence back to customers now. I think we've passed many thresholds of data volume that we require to make the individual insights that are prescribed or offered up to individual customers be a value. And we're getting to levels where that is becoming meaningful and valuable for them in making their decisions. I think there's also an incredible continued willingness amongst our community to share anonymized and sanitized data, so that builds up the likelihood that insights would be valuable. And then, it's the current times. And I think the current times are an important factor to consider here as well. Many of the conversations I'm having with folks -- CFOs and folks in the CFO's office are about the supply chain disruptions they're seeing, the risk that they're seeing amongst their supply base that they need, neighborhood watch type programs like we have built into Community Intelligence to help them mitigate that risk, their need to get advice and insight on how to go from perhaps single sourcing with certain suppliers to multi-sourcing, ideas or input around best practices for renegotiating certain categories of spend, how to prioritize where to renegotiate, where to start and how to move into a much more digital best practices way of doing things. So, there's a lot of factors that are coming into play, but all of them are producing exactly what I think you're hearing from our community, which is we're starting to get real meaningful value from Community Intelligence. And I could tell you, without any reservation, we're definitely just at the very tip of the iceberg in terms of what's possible in terms of making all of our customers smarter together.

And your next question comes from the line of Terry Tillman with Truist Securities. SEPTEMBER 08, 2020 / 8:30PM, COUP.OQ - Q2 2021 Coupa Software Inc Earnings Call

Yes. Thanks for taking my question. It's related to, Todd, what you just talked about a few questions ago as it related to billing. This concept of the add-on sales, what I'm curious about is, you called that out and how that could potentially impact 4Q. Could you maybe give us a little bit more perspective on how notable that could be? And is this add-on sales motion something that you've all been aggressively pursuing, or it's just kind of happening kind of organically or naturally given the times we're in?

Yes. I would say, it's been more organic in nature and as customers are looking to drive value and get a very quick ROI and reduce risk, right? So, if you look at the sourcing tool, we've had customers literally save tens of millions of dollars within the first week, obviously a quick payback. And then, in the COVID-19 environment, you've got people especially with supply chains and risk and making sure their supply chain doesn't go out, go down and potential issues related to bankruptcy and that type of thing. And then, you've also seen some uptake in Coupa Pay, which is broader, but there are some slight benefits with respect to digital checks and that type of thing. So, when you look at the number of add-ons we had in Q2, and actually even Q1 to be frank, they were pretty significant. And what I -- is it more than $1 million? Yes. And is it less than $5 million? Probably so. So, somewhere in that range. I'm not going to give a specific point estimate. And a lot of that doesn't show up anywhere. Right? It would come up, meaning from a backlog perspective or deferred revenue, so. But, it should definitely be a net benefit in Q4 as people either go through their annual contracted cycle -- billing cycles and/or their renewals.

And your next question comes from the line of Daniel Jester with Citi.

So, the last couple of quarters, you talked about some customers that were using Coupa more for direct procurement. And I'm wondering, given some of your comments about sort of supply chains being reworked, what you're seeing on that front today.

Sure. Well, thanks for the question. That's absolutely the case, and that's seen in our pipeline. First of all, let's just touch on that. When you look at our global systems integrator partners, we have an open pipeline in the hundreds of millions of dollars. And a lot of that has to do, I think, with our proven referenceability in the market and the successes we've had, but also the conditions externally where there is real disruption happening, and procurement and CFOs really have a chance to lead. So, you look at capabilities like dynamic strategic sourcing with multi-factoral, AI-powered assessments of where to get the goods and services you need at the right price point for the right delivery through the right freight for a point in time challenge, I mean we have some of the largest companies in the world standardized on Coupa for making those decisions and a pipeline of folks who want to do the same. Similarly in the area of contract management, the ability to very quickly understand where contracts need to be renegotiated, dynamically engage with suppliers on that renegotiation process in the right priority order, taking into account the risk that those suppliers may have to their business, will they even be in business in the next quarter and year, and leveraging community insight to help them make those decisions. We see it in the treasury management area, as I discussed earlier around having liquidity and cash management properly sorted out within your company. We see it in inventory management and the levels that companies are willing to go to, to balance on-hand inventory with outstanding orders. We see it in the area of contingent workforce where we see companies pushing to a greater agility through contingent workforce management with many of the modules we deliver. So, I mean we're really in the heart of a very significant focus area for so many companies around the world, large, medium and somewhat aspiring or growing. And our job is to take it one customer at a time and drive value for each and every one of them in a way that's fair, thoughtful and is going to allow us to build a long-term market-leading business here.

And your next question comes from the line of Peter Levine with Evercore.

Maybe could you talk about how customers are thinking about Coupa, whether that be procurement, travel and expense or payments relative to other mission-critical systems in terms of prioritization around spend, especially in this environment? Because I mean, I think -- and to your results and your commentary, it seems like investor concerns that some of the back office would have been pushed off. It seems like, at least for Coupa and what you deliver, it seems like that's not the case. But curious to know how your customers think about your products in terms of prioritization. Thank you.

Sure. Well, look, I think the categories around business spend management and that business management is comprised of, has always been -- have always been on the priority list as part of the digital transformation set of initiatives. I wouldn't say that they were first. I think some -- to your point, the front office capabilities around CRM and other perhaps came earlier, but we were moving to an area where this was becoming more and more in the spotlight. And I think what has happened now, where there's just such disconnect -- such a disconnection that's happening around people understanding how subpar their processes are internally around procurement, paper-based invoice processing, complicated payments, difficulty in, not only managing expenses, but maintaining situations where fraud doesn't escalate, all of these areas in the business management are being seen in a much greater light, and -- or I should say, greater light is being put on to them. And we're in a phase right now that I would assess as one where companies are really trying to figure out how to develop their transformation agendas for the next two, three years for midsize companies and next decade for larger companies. And I really like where we stack up in the marketplace as it pertains to that. And I'm really excited about everything that our team and our partners are doing to make sure that we map our capabilities to those challenges in a way that is most likely, not only to build up a bigger customer base, but to ensure that they are going to get value with us forever and stay with us forever as we build this business.

And your next question comes from the line of Siti Panigrahi with Mizuho.

Thanks for taking my question and thanks for all the color in terms of macro. Just wondering, what kind of performance you're seeing in the U.S. versus international? Any color on geography would be helpful.

One of the things with this business is we've tried for the last decade-plus to create a really robust portfolio effect for ourselves. And when I say portfolio effect, I mean, so when we get on calls like with our investor base, we will have -- we can say with great confidence that we have delivered the goods, if you will, delivered to the best of our ability to manage our, not only quarterly expectations, but to set ourselves up for a bright future. And that portfolio comes in a couple of dimensions. One is certainly geographic, as you mentioned. There are certain quarters where we have a greater impact from Asia or Europe or South America or United States. The other dimension is enterprise and mid-market and our corporate team. There are many quarters where we see a lot more volume, let's say, in the mid-market business, and there are some quarters where we have significant wails in the enterprise that get us to where we need to be. We also have an incredible portfolio effect in our product areas and modules. We have so many different modules. We began with one in procurement 11 years ago and now have nearly a dozen modules. So, any given quarter, we'll see different dynamics from any of those three dimensions. But ultimately, they get us to where we want to be, which is ensuring that every customer we close has a high likelihood of laying out measurable success criteria that we could deliver on, and this quarter was really no different at all.

And your next question comes from the line of Koji Ikeda with Oppenheimer.

I wanted to ask you a question about deal cycles. Thinking about some of your larger slipped deals from the first half or maybe organizations are thinking about longer sales cycles overall. Have those conversations changed at all, now that companies are becoming more comfortable in the norm for now environment? Are any of those elongated enterprise sales cycles coming back to something more recognizable pre-pandemic? Thank you.

That's a great question. Absolutely, they are. One of the things I shared, and it's exactly how I see it, the fidelity, the precision of when the actual timing of a deal will naturally come to closure and we could begin frankly the more interesting work, which is the implementation and the results realization, the referenceability and then coming back around. So, that precision is not where it has been pre-pandemic yet, but it is coming back. It has absolutely come back, as Todd shared about the kind of last months of the quarter. And look, due to the pandemic, the sales cycle times in some cases have extended, but they've extended in the near term, and we could see our way to them landing. And that is happening in tandem with incredible engagement across the entire pipeline and in tandem with the pipeline growing very, very rapidly at the same time. So, all that really spells for a really healthy medium, kind of longer term prospects on the business, while at the same time allows us to close dozens and dozens of deals, new deals as we've done just this past quarter.

And your next question comes from the line of Brian Peterson with Raymond James.

So, Rob, if you have to think about the value -- the customer value journey or call it a quest, if you had to put that through the lens of a hard dollar ROI, I'm curious how do you stack rank the value of Coupa Pay specifically relative to some other parts of the platform? Do you think that time-to-value looks materially different?

That's a great question, and I'm not going to be able to give a distinct answer because it really does depend on the maturity of the company and the use cases where they are more mature versus not. We face certain companies that have incredible processes, let's say around procurement, preordering, everything is clean and done really well. But, when you look at their expense process, it's completely fragmented or vice versa. They have some incumbent solution for expense management that seems to be okay, but their pre-approval percentage is horrible. Their on-contract spend is horrible. Their invoice processing is paper-based. As I mentioned with inventory, they might not even be tracking inventory. So, our goal here has always been to be really like a Swiss army knife. I mean, you can use any component first, wherever the pain is greatest, wherever the organizational momentum is closest to beginning a business management transformation. And then, as you start to gain value and working with us in this Value as a Service model, we'll turn on other capabilities. Now that's not to say there aren't some customers we face who are doing almost 100% paper-based payments processes or completely disjointed logins to 15 or 16 different systems to run a monthly batch payment job, where clearly the value is much, much greater to begin there than maybe streamlining expense management, for example. So, it's very, very customer specific. And one of the things I'm quite proud of is that with our colleagues here, we've figured out a way to really be consultative with our prospective customers to -- with integrity and honesty, try to see where we can begin with them that can drive the most value for them and then build the experience and partnership with them over a long period of time.

And your next question comes from the line of Ryan MacDonald with Needham.

One for you, Rob. As we look at the ConnXus acquisition, obviously much smaller of the two that you made during the quarter. But, there's an interesting core data set that you're really acquiring with that business. Could you talk about, one, how that's enhancing Community Intelligence; but two, how you might be able to use that core data set as a competitive advantage against some of your competitors moving forward? Thanks.

Yes, absolutely. And we're very excited about the new colleagues from ConnXus. And I feel like they're a completely integrated team. I haven't heard that name in a while because we're all Coupa colleagues now. But I'll tell you, that data set is very, very powerful. I mean, we have a very clear understanding now of supplier diversity. And we are in a position now -- and we've always focused on this. We're even in a better position now than ever to help our buyers, right, who are hundreds and hundreds and hundreds of companies around the world and millions of users make decisions in part about whom they spend money with on criteria such as are these minority-owned suppliers, are these diverse suppliers, are these inclusive suppliers. So, it's another set of criteria that we now have as part of our data set that we can not only expose one customer at a time, but they can give the keys to our community so they can leverage that, add to their data set, build that data set and help us in that regard. And that's just one example. There's a whole host of other use cases with which that data will be -- will continue to be valuable for us.

And your next question comes from the line of Joseph Vafi with Canaccord.

Thanks and great results, guys. I was just wondering, it may be a multipart answer, but could you try to frame the competitive landscape around Pay? I know there is a lot of momentum in kind of pure play AP solutions. There's payment embedded in a lot of mid-market ERPs. You have AR. You've got different players here. Just some thoughts on competitive landscape would be appreciated. Thanks.

Sure. Well, I think, you touched on it, right. There are incumbent solution providers. There are obviously some smaller kind of new entrants in the marketplace. We've done our homework initially probably two years ago when we started thinking about entering into the space. And ultimately, we haven't seen any of them really flex on us. I mean, we have seen the situation in a way where the greatest competition is ourselves. I mean, we have an opportunity to really reimagine the way companies manage business payments, taking them from a largely still paper-based world, a very dysfunctional, decentralized world and making it much, much easier, making it much more user-centric, which is of course the U in Coupa, making it much more open so they have choice amongst banking relationships, which is the O in Coupa, and we're really just getting going here. But I will tell you, great leading indicators. When I do see win reports, I do see a number of incumbents and early entrants that we've been lucky enough to be chosen over in selections, and I think that as well is still very early innings.

And your last question comes from the line of Pat Walravens with JMP Securities.

Hi. This is Mark on for Pat. Thank you so much for taking my question. So, just wondering with everybody working from home, how do you make Coupa a place people want to work in?

Sure. Well, it's not anything new for us. Our goal, our second core value here is focus on results. And so the fact that people are working from home, whether they're working in the office or they're working for a different plan, it doesn't matter to us. It's the result that we're focused on. So, we've always had a very flexible approach with our employees and our colleagues. We've always been highly decentralized as an organization. There's only a couple of hundred people here at our headquarters and thousands all over the world. And so we are on Zoom. We are connecting over the phone. We are engaging with customers in ways that we actually weren't able to probably at the pace we would have liked in the past. So, in general, I think, it's really a net positive for us in that regard. Having said that, there is some level of collegiality and physical presence that is lost, and we're doing all that we can to emulate that in this environment for now. Looking forward to a time when we could all be together at physical locations and engaging in day-to-day collaboration and banter and everything that comes with work life.

At this time, there are no further questions. This concludes the conference for today. We do thank you for joining us. And you may now disconnect.