Prospectus Summary
PROSPECTUS SUMMARY This summary highlights certain information contained or incorporated by reference elsewhere in this prospectus. This summary is not complete and does not contain all of the information you should consider in making your investment decision. You should read the entire prospectus and the information incorporated by reference in this prospectus carefully before making an investment in our common stock. You should carefully consider, among other things, our consolidated financial statements and the related notes incorporated by reference and the section titled “Risk Factors” included elsewhere in this prospectus. Except as otherwise indicated herein or as the context otherwise requires, references in this prospectus to “Coupa,” “the company,” “we,” “us,” and “our” refer to Coupa Software Incorporated. Unless otherwise indicated, all data is as of or through January 31, 2017.Overview
We are a leading provider of spend management solutions, with a unified, cloud-based spend management platform that connects more than 530 organizations with more than 2 million suppliers globally. Our platform provides greater visibility into and control over how companies spend money. Using our platform, businesses are able to achieve real, measurable value and savings that drive their profitability. From our inception, our customers have used our platform to bring more than $360 billion of cumulative spend under management, which we estimate has resulted in more than $12 billion of customer savings to date, based on applying certain savings rates derived from industry benchmarks.
Our cloud-based platform has been designed for the modern global workforce that is mobile and expects real-time results, flexibility and agility from software solutions. We empower employees to acquire the goods and services they need to do their jobs by applying a distinctive user-centric approach that provides a mobile-enabled consumer Internet-like experience, drives widespread adoption of our platform and, therefore, significantly increases spend under management. We refer to the process companies use to purchase goods and services as spend management and to the money that they manage with this process as spend under management. Increased user adoption and spend under management drive better visibility and control of a company’s spend, resulting in greater savings and increased compliance.
Economic conditions, intense competition and the global regulatory environment are forcing businesses to find new ways to drive operational efficiencies, track processes, reduce costs, fund business growth and enhance profitability and cash flow. Therefore, managing spend has increasingly become a major strategic business imperative to help businesses achieve cost savings. Indirect spend, which refers to goods and services that support a company’s operations as opposed to direct spend that flows into the products a company manufactures, is particularly difficult to manage due to inefficient employee spending behavior and disparate systems that obstruct spend visibility.
We offer a unified, cloud-based spend management platform that is tightly integrated and delivers a broad range of capabilities that would otherwise require the purchase and use of multiple disparate point applications. The core of our platform consists of procurement, invoicing and expense management modules that form our transactional engine and capture a company’s spend. In addition, our platform offers supporting modules, including sourcing, analytics, contract management, supplier management, inventory management and storefront, that help companies further manage their spend. Moreover, through our Coupa Open Business Network, suppliers of all sizes can easily interact with buyers electronically, thus significantly reducing paper, improving operating efficiencies and reducing costs.
We have a strong results-driven and customer success-focused culture. Our focus is on delivering quantifiable business value to our customers by helping them maximize spend under management to achieve real, measurable value and savings. With a rapid time to deployment, typically ranging from a few weeks to several months, and an easy to use interface that shields users from complexity, our customers can achieve widespread user adoption quickly and generate savings within a short timeframe, thus benefitting from a rapid return on investment.
We benefit from powerful network effects. As more businesses subscribe to our platform, the collective spend under management on our platform grows. Greater aggregate spend under management on our platform attracts more suppliers, which in turn attracts more businesses that want to take advantage of the goods and services available through our platform, thereby creating powerful network effects. In addition, as more businesses and employees use our platform, the amount of spend under management continues to increase. This leads to more value and savings for customers and improves our ability to attract more businesses. The resulting increase in sales enables us to further invest in our platform and to improve our functionality and user interface to continue to attract more businesses and suppliers to our platform, which enhances the network effects that benefit all parties.
We have developed a rich partner ecosystem of systems integrators, implementation partners, resellers and technology partners. We work closely with several global systems integrators, including KPMG, Deloitte, Accenture, IBM, PwC and Wipro, that help us scale our business, extend our global reach and drive increased market penetration. We expect the number of our partner-led implementations to continue to increase over time, as well as sales referrals from our partners.
We have achieved rapid growth in customer adoption, cumulative spend under management and transactions conducted through our platform. We have more than 1.5 million licensed users who have driven an expansion in spend under management over time. These licensed users represent the employees among our base of more than 530 total customers who are authorized to use our solutions. Our cumulative spend under management is highlighted below:
Cumulative spend under management does not directly correlate to our revenue or results of operations because we do not charge our customers based on actual usage of our platform. However, we believe that cumulative spend under management illustrates the adoption, scale and value of our platform, which we believe enhances our ability to maintain existing customers and attract new customers.
For our fiscal years ended January 31, 2017 and 2016, our revenues were $133.8 million and $83.7 million, respectively, and our net losses were $37.6 million and $46.2 million, respectively, as we focused on growing our business.
Our cloud-based spend management platform unites the three core aspects of spend management—procurement, invoicing and expense management—and has the ability to manage both indirect and direct spend. The total market for direct and indirect spend management is estimated at $16.8 billion in 2017, based on research by the following industry sources. International Data Corporation (IDC) estimates that the global market for procurement and invoicing applications that automate processes related to purchasing supplies, material and services will reach $4.5 billion in 2017 and will grow to $5.5 billion by 2020. According to Technavio market research sourced from ISI Securities EMIS, the global Software-as-a-Service(SaaS)-based market for expense management will reach $2.7 billion in 2017 and will grow to $3.2 billion in 2018. In addition, IDC estimates that the market for supply chain management application software, which includes software related to logistics, production planning and inventory management, will reach $9.6 billion in 2017 and grow to $11.5 billion by 2020.
To illustrate the economics of our customer relationships, we are providing a contribution margin analysis of the customers we acquired during the fiscal year ended January 31, 2013, which we will refer to as the 2013 Cohort. We selected the 2013 Cohort as a representative set of customers for this analysis to help investors understand the potential long-term value of our customer base, and we believe the 2013 Cohort is a fair representation of our overall customer base. We define contribution margin for a period as the subscription revenue from the customer cohort in such period less the estimated, allocated variable costs for the period associated with such revenues. The costs allocated to customers include personnel costs associated with the sales and marketing teams that acquire the customer, such as salaries, sales commissions and marketing program expenses. As the majority of our sales and marketing costs are related to the acquisition of new customers, these costs are mainly allocated to the newest cohort in a given period, with the exception of ongoing account management costs, which are estimated based on the number of account managers as a percentage of our total sales headcount. Costs allocated to customers also include the costs associated with use of our technology infrastructure and web hosting, as well as personnel costs associated with our operations and customer success teams that support the customer.
The support, technology infrastructure and web hosting expenses, in any particular period, are allocated based on the 2013 Cohort revenue as a percentage of the total subscription revenue in the period. We exclude all research and development and general and administrative expenses from this analysis because these expenses support the growth of our business generally.
We define contribution margin percentage as contribution margin divided by subscription revenue associated with such cohort in a given period. We have measured the 2013 Cohort with respect to contribution margin percentage. In the fiscal year ended January 31, 2013, we recognized $4.0 million in subscription revenue from the 2013 Cohort and incurred associated costs that resulted in a negative contribution margin percentage of (249%). Since we acquired this cohort through the course of the year, less than a full year’s subscription revenue is reflected in the fiscal year ended January 31, 2013. In the fiscal years ended January 31, 2014, 2015, 2016 and 2017 we realized $9.9 million, $10.0 million, $10.1 million and $11.6 million in subscription revenues from the 2013 Cohort with contribution margin percentages of 75%, 75%, 74% and 75%, respectively.
Corporate Information
We were incorporated in February 2006 in Delaware. Our principal executive offices are located at 1855 S. Grant Street, San Mateo, CA 94402, and our telephone number is (650) 931-3200. Our website address is www.coupa.com. The information on, or that can be accessed through, our website is not part of this prospectus. We have included our website address as an inactive textual reference only.