Coupa Software, Inc. (COUP) Q3 2022 Earnings Call Transcript

Coupa Software, Inc. (NASDAQ: COUP) Q3 2022 earnings call dated Dec. 06, 2021

Corporate Participants:

Steven Horwitz — Investor Relations

Rob Bernshteyn — Chief Executive Officer

Tony Tiscornia — Chief Financial Officer

Analysts:

Stan Zlotsky — Morgan Stanley — Analyst

Michael Turrin — Wells Fargo — Analyst

Matt VanVliet — BTIG — Analyst

Alex Zukin — Wolfe Research — Analyst

Siti Panigrahi — Mizuho — Analyst

Brad Sills — Bank of America — Analyst

Peter Levine — Evercore — Analyst

Ryan MacDonald — Needham — Analyst

Steve Koenig — SMBC Nikko — Analyst

Taylor McGinnis — UBS — Analyst

Terry Tillman — Truist — Analyst

Clarke Jeffries — Piper Sandler — Analyst

Bob Napoli — William Blair — Analyst

Richard Cowen — RBC — Analyst

Aaron Kimson — JMP Securities — Analyst

Presentation:

Operator

Good day, ladies and gentlemen, and welcome to the Coupa Software Third Quarter Fiscal Year 2021 [Phonetic] Earnings Release Conference Call. [Operator Instructions] As a reminder, this call is being recorded.

I would now like to introduce your host tor today, Mr. Steven Horwitz. Please begin, sir.

Steven Horwitz — Investor Relations

Thank you. Good afternoon and welcome to Coupa Software’s third quarter conference call. Joining me today are Rob Bernshteyn, Coupa’s CEO; and Tony Tiscornia, 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.

Rob Bernshteyn — Chief Executive Officer

Thanks, Steven. Welcome, everyone, and thanks once again for joining us. Let me start with a few financial highlights from our 51st quarter of execution as a business. We had strong performance, including 38% calculated billings growth and $186 million of total revenue. We also delivered a record profitability of $0.30 per share, representing 67% growth over last year and a $28 million of adjusted free cash flows for Q3, bringing us to $130 million on a trailing 12-month basis.

During the quarter, we continued to see strength in the enterprise segment with respect to large, strategic multi-year deals. We’re also firing on all cylinders in our mid-market segment with incredible growth and a very strong deal size momentum and we are seeing an increased level of prospect engagement, including a significant desire to return to in-person meetings, which we believe to be a very positive trend.

These results are all being driven by a massive push for digital transformation of the back office, resulting in widespread adoption of our comprehensive Business Spend Management platform by customers of all sizes and across many industries.

Companies that develop a sound strategy for this transformation and put in the work to see it implemented are seeing their status escalate. To capitalize on the digital transformation of the back office, we have a winning strategy based on the three waves of capturing all spend, optimizing every dollar through a suite synergy, and then amplifying community value.

The first wave of capturing all spend is centered on our robust transactional core. Simply put, we believe that we have the best solution in the game, a fully cloud-based scalable, transactional core that processes tens of millions of daily transactions while maintaining an easy-to-use intuitive interface. This enables our customers to quickly drive meaningful adoption of the platform across their organizations even when operating with many siloed ERPs.

One example is Jabil, a Global Fortune 500 company focused on manufacturing solutions with more than $29 billion in revenue, 206,000 employees and 100 plus plants across 30 plus countries, and in particular concentration in Asia. Jabil needed one platform to integrate with their many ERPs. They migrated from an older legacy platform to Coupa and have now processed billions of dollars in spend through our platform over the past three years, including 96% of their 1.4 plus million POs issued to over 27,000 active suppliers. Most importantly, they now have visibility into and control over their business spending.

Now another key component of our transaction, of course, Coupa Pay, where we continue to see strong uptake with our highest attach rate ever on new deals this quarter. One of the key drivers for the Coupa Pay acceleration phase we discussed during Analyst Day was for us to further strengthen our partner ecosystem. To that end, we signed a partnership agreement this quarter with a major global financial services firm to expand the ability of our European and Asia Pacific customers to make fast, seamless and secure payments via virtual cards. New and expanded partnerships are one of the areas of focus as we build to maximize our payment solution for our customers.

Travel and expense is also an integral part of our transactional core. We’ve been thoughtfully investing in this area with the aspiration to provide our customers with the industry’s most comprehensive end-to-end T&E solution, including a bookings engine, optimized pricing and direct integration with Coupa Pay for reimbursements. We are planning to release this solution soon.

Now let’s serve onto the second wave of our winning strategy, where we’re looking to optimize with suite synergy. Our platform capabilities are helping customers unlock more value from the more than $3 trillion of spend they have cumulatively processed through the platform. Let me share a couple of examples with you.

The first example is that of a leader in the beauty and personal care industry that manufactures cosmetics in 14 nations across South and Central America, generating more than $1 billion in annual revenue. They’re using Coupa supply chain design and planning to optimize their inventory, improve service to their customers and save money. Their supply chain is very complex with factories in four countries, 250 plus new products being introduced every year and a rapidly changing demand environment. To probably forecast, they need to understand how much inventory to build the trade-offs between service levels and inventory holding costs and which factories should produce which new products. Using the Coupa supply chain design and planning solution, this organization improved their overall service levels while driving a 25% reduction of total inventory, 35% reduction of their safety stock and saved millions of dollars in the process.

The second suite synergy example I’d like to share with you highlights a multibillion-dollar frozen food delivery company that is among the first Coupa community members to take advantage of the synergistic integration between our supply chain design and strategic sourcing capabilities. First, the customer used Coupa supply chain design capabilities to evaluate and optimize multi-stop routes for their more than $100 million of annual logistics spend across almost 300 different carriers. Then the design simulations were put into action. The simulations were driven downstream to strategic sourcing, capturing one-way direct lane full truckload costs and per mile costs for a subset of dedicated carriers. This resulted in lower costs and increased asset utilization. This is a great example of maximizing value through the combined capabilities of our supply chain design and our strategic sourcing solutions.

Now let’s drop in on the final and third wave of our winning strategy, amplifying community value, more specifically, amplifying the value of the data and the collective community through prescriptive insights and community interactions. First, let me give you a sense of just how much data our customer base is generating. As I noted a moment ago, we have now surpassed $3 trillion in cumulative spend under management with $1 trillion coming in the last year. This equates to over $80 billion per month, more than $2.7 billion per day and well over $100 million during this earnings call alone. More importantly, our customers have saved tens of billions of dollars over the years. And as our community of customers has grown, so has our ability to increase average deal sizes fairly.

When we started this journey over a decade ago, we were closing deals in the tens, in the thousands and tens of thousands of dollars. Today, our largest deals are in the mid-seven figures annually and we see a path to doing eight-figure deals. And it’s not just with our enterprise customers. As I mentioned last quarter, we closed our first seven figure deal in the mid-market as well.

With proven measurable impact and a rapidly growing dataset converging to drive higher annual subscription fees, let’s dive deeper into the data. Our customers have taken advantage of thousands of prescriptive insights derived from our Community.AI initiative this quarter alone. These prescriptions are ranked and displayed based on the total estimated impact that actions will have on the business, empowering customers to make the right choices to optimize business results. But the vision, the vision is far broader. The power of our community comes not just from data, but also from the exponential brainpower that exists across our robust customer community, which lives directly within our core platform.

One customer shared with us that prior to Coupa, every four months their team would spend more than 60 hours reading software documentation and performing regression sets to gain insights. To optimize this process, they leveraged Coupa’s user community and identified a fellow customer who have automated testing. Conversations with the customer and their IT team led to an internal development project, which allowed them to reduce cycle times by 80%. They continue to use the online community often, conducting research and trading insights on industry best practices within the community.

With prescriptive insights and community interactions delivering measurable value, expanding the size of the community and the available functionality greatly benefits our customers.

Further, building on the power of community from customers to partners. Last quarter, we launched our Coupa app marketplace. We already have nearly 100 apps that are enabled or in the process of being enabled for our customers. Within these apps, there are two ways our customers are extracting value. The first is through pre-built integrations that make our customers investments in other enterprise software more valuable. The second is where they have gained access to new functionality, such as tax engines, supplier collaborations, ESG and corporate responsibility and many more. Let me share an example of one of the new applications in our app marketplace, an integrated tax engine that focuses on customer taxes for supplier transactions.

In this ever-changing environment, it’s obviously imperative that our customers understand if they’re being charged the correct sales tax. The Vertex-built integration supports tax calculation on invoice validation, empowering our customers with more control and oversight by pairing tax automation with Coupa’s procurement transformation. And there are many other great examples like this from the app marketplace that help our customers unlock more value from our comprehensive business spend management platform.

Because our customers are unlocking such significant value, they love to share their experiences with their colleagues. To that end, we are thrilled to be bringing back our in-person community conference in April, Coupa Inspire. As in previous years, this event will include inspirational stories of BSM transformation from some of the most well-respected companies in the world, and offer attendees the opportunity to network with their peers as well as industry thought leaders and analysts. Inspire is the premier event in business spend management, has always been a dynamic, energetic forum for our customers to interact, exchange ideas and help new prospects behold the power of spend.

To summarize our three-wave strategy, we believe that we’ve brought to market the world’s best platform for capturing spend transactions. We’ve developed ways to optimize value for the spend with suite synergy. And those two waves have helped us grow our user community and a treasure trove of data fueling the third wave, where our community can come together to unlock exponential value that would otherwise simply not be possible.

This three-way strategy grounds our vision of becoming the industry’s most comprehensive, open, user-centric, prescriptive and accelerated solution in the market. With these vision areas in mind, let me share a recent new customer win report that emphasizes why companies choose to partner with Coupa.

As has happened so often over the years, the CPO was offered a free subscription from a legacy provider. But we all know that there is no such thing as free. In fact, free can be quite costly. As he evaluated his choice of partner, he found that Coupa represented the lowest risk and highest likelihood for success. What’s more, the win report highlights the customer’s trust in us to keep their best interest in mind and their confidence that we will continue to have an industry-leading roadmap. To help seal the deal, his previous employer has also chosen Coupa, giving him undeniable certainty of value creation.

I chose to share this win report with you, because it really does hit on the key reasons we win: clear vision, strategy, shared values, history of execution and how tightly we partner with our customers to ensure their success. It also demonstrates an increasingly prevalent trend, a thriving community of decision makers choosing to work with us wherever they go based on proven success. It’s these reasons why across all industries, companies of all sizes continue to select Coupa and stay with us year-in and year out.

Adding these and so many other great organizations to our community is rewarding. However, this is still just the beginning. We have a massive opportunity in front of us. And as much as we’re competing to win the BSM market as it currently exists, we’re also galvanizing market interest. Tens of thousands of companies are still leaving value on the table by not adopting a comprehensive approach to managing their business spending. To drive awareness, we recently invested in amplifying our brand during the World Series F1 racing, Premier League soccer and Bundesliga soccer.

The result of these efforts was hundreds of millions of impressions and a 5 times increase of traffic to coupa.com. We believe that great companies build great brands, and we are setting out to do just that. And we’re doing so grounded in our core values, as a company.

So as become our custom, let me share this quarter’s most valuable player award winners, who best exemplify our values, as voted by our colleagues across the world. I’ll start with Avijit Mukherji, who exemplifies our first core value of ensuring customer success. Avijit works tirelessly to ensure that our integration partners are delivering solutions with outside value for every Coupa customer. Next Niraj Parikh, was recognized for embodying our second core value, focusing on results. Niraj expanded the depth and breadth of our competitive analysis library. He also improved our reporting to demonstrate how business value engineering impacts sales successes. Finally, Ben Simmons epitomizes our third core value of striving for excellence. Ben is best in class in how he leads this team to excellence by fostering an environment where questions are encouraged and authenticity is welcomed.

Now before I close, I’d like to mention that Gartner has selected Coupa as the leader for our procure-to-pay offering for the sixth consecutive time. We don’t take this leadership designation lightly as we continue to assertively for our business.

To that end, I’d like to celebrate that we welcomed our 3,000th colleague just this quarter. On the foundation of our differentiated culture, which is grounded in a deep commitment to our core values, we aspire to operate with the agility of 300 and the might of 30,000 people. This approach continues to help us attract top talent while investing in unlocking the personal and professional aspirations of our colleagues.

And speaking of talent, in the recent Great Place to Work survey results, well over 90% of our employees self-reported as ascribing to our core values. This is particularly promising given that roughly half of our current employees joined remotely during the pandemic. We are incredibly proud of the clear measurable value that we are delivering to our community. We are proud to play a leading role in this industry as we help transform how companies do business for the better.

And with that, let me now hand the call over to our Chief Financial Officer, Tony Tiscornia.

Tony Tiscornia — Chief Financial Officer

Thanks, Rob and good afternoon, everyone. I’m proud to report that we delivered strong financial results for the third quarter. We continue to see rich levels of engagement with customers and prospects as we partner with them to solve their pressing business spend management needs. This is reflected most notably in our new business performance, calculated billings growth and RPO growth. We also delivered strong gross margin, operating margin and cash flow results for the quarter.

With Q4 already well underway, we are focused on finishing the year with strong execution as we continue to invest for fiscal ’23 and beyond. Let’s now discuss the details of our third quarter financial results.

Calculated billings for Q3 were $193 million, up 38% year-over-year. Total revenue for the quarter was $186 million, up 40% year-over-year. Subscription revenue was $165 million, up 40% year-over-year. Q3 non-GAAP gross margin was 74%, which is in the range of our mid-term target of 74% to 75% as we continue to leverage our season playbook for the rapid, successful integration of acquisitions.

Non-GAAP operating income was $28 million or 15% of total revenue and non-GAAP net income was $24 million or $0.31 per share on approximately 77 million diluted shares. Q3 operating cash flows were $31 million and adjusted free cash flows were $28 million. Cash at quarter-end was $668 million, up from $634 million a quarter ago.

In terms of complementing growth with profitability, we delivered best-in-class Rule of 40 results of 61%. We continue to drive consistent and significant profitability, while investing for long-term durable growth.

This is a key element of our agile financial model, especially in a likely forthcoming rising interest rate environment. As a reminder, we define Rule of 40 as a trailing 12-month revenue growth rate plus the trailing 12 month adjusted free cash flow margin.

Now let me briefly touch on organic calculated billings and revenue. Q3 inorganic billings contribution from supply chain design and planning, formerly LLamasoft, landed slightly above our estimated range of $15 million to $17 million going into the quarter. It’s now been more than a year since we closed the acquisition and the business operations were integrated into core Coupa several quarters ago. In some cases, it’s difficult to segregate the inorganic contribution from organic. So this should be considered an estimate.

After making this adjustment, you’d arrive at an organic calculated billings growth in the mid 20s percentage wise on a year-over-year basis for Q3. With respect to revenue, the contribution from supply chain, design and planning was approximately $24 million total in Q3, including subscription revenue of $70 million. Professional services revenue of $5 million and software license revenue of $2 million.

The growth of our core business is healthy and strong. Let me share a few key data points. For the fiscal year-to-date, new business, including new customers and add-on business is up nearly 98%. The number of customers with annualized subscription revenue above $100,000 is more than 1,300 at the end of Q3, compared to 1,000 a year ago.

Also we ended Q3 with approximately 1.2 billion in total RPO, a 58% increase over last year. Our robust RPO growth is a function of the strong year-to-date new business growth I just noted. We continue to see robust engagement and partnership with customers and prospects for large enterprise deal. We are also growing increasingly excited about our mid-market opportunity, which represents nearly half of our $94 billion total addressable market.

As we continue to make significant investments in both enterprise and mid-market, we also look forward to continued traction in several of our other key growth levers, including payments, the federal sector, supply chain and other solutions across our platform as the next several years unfold. We are early in our trajectory in these three areas, but are pleased with our progress and we’ll continue to provide updates.

To summarize, new business and RPO growth in our core business is healthy and the work we are doing with respect to acquired solutions and contract migration will benefit our business and our stakeholders in the coming years.

With that, let’s now turn to guidance. With the recent news about the Omicron variant and new safety measures being put in place in various regions of the world, it’s possible, some customers and prospects will continue to operate with some level of caution. The potential impact is still unknown, but it could become a factor to consider as the world learns more in the coming weeks and months.

Now for guidance. We expect total Q4 revenue of $185 million to $186 million. This includes subscription revenue of $166 million to $167 million and professional services and other revenue of approximately $19 million. We expect Q4 calculated billings of approximately $290 million. As a reminder, when considering calculated billings guidance from an organic perspective, you should back out the one-time opening deferred revenue benefit of $14.8 million for LLamasoft from Q4 of last year. After making this adjustment, the resulting organic calculated billings guide would be in the mid-teens, percentage wise up from high-single digits last quarter. Additionally, you should also consider the $3 million to $4 million of expected year-over-year migration of legacy LLamasoft license revenue.

Moving down the income statement, we plan to continue investing in our business to capture the clear market opportunity. We expect that Q4 non-GAAP gross margin of 70% to 71%. We expect Q4 non-GAAP operating income of $8 million to $10 million and non-GAAP net income of $2 million to $4 million, resulting in non-GAAP net income of $0.03 to $0.05 on approximately 77 million diluted shares for the quarter. We expect Q4 adjusted free cash flows of approximately $10 million.

Moving on to the full year. We expect total revenue of $717 million to $718 million. This includes subscription revenue of $627 million to $628 million and professional services and other revenue of approximately $90 million.

We expect non-GAAP gross margin for the year of approximately 71% and a non-GAAP operating income for the year of $70 million to $72 million, resulting in non-GAAP net income per share of $0.66 to $0.69 on approximately 76.5 weighted average diluted shares for the quarter.

We will provide fiscal ’23 guidance on our next call but as you roll your models forward, we’d like to remind you that we recognize revenue based on the number of days in a quarter. And since there are fewer days in Q1 due to February, steady state subscription revenues are lower in Q1 compared to Q4. Also for Q1. As Rob mentioned, we will be hosting our in-person Inspire Conference in April in Las Vegas. We will also have some beginning of the year, sales-related events. These activities will increase opex on an apples-to-apples basis for Q1.

That concludes our prepared remarks. We’d now be happy to take your questions. Operator?

Questions and Answers:

Operator

Thank you. [Operator Instructions] Your first question is from Stan Zlotsky with Morgan Stanley.

Stan Zlotsky — Morgan Stanley — Analyst

Thank you so much, guys, and congratulations on a very good way to finish the quarter. From my end, maybe a quick question for Tony. Tony, you mentioned the potential impact from the variant and how people, your customers and prospects, are thinking about budgets. How did that impact the guidance that you put forward for Q4? And is there an extra layer of conservatism perhaps that you’re including in there to account for, for these new developments? Thank you.

Tony Tiscornia — Chief Financial Officer

Thanks, Stan. No, the Omicron variant did not factor heavily into my guidance for the quarter. Certainly, it’s something that we need to keep an eye on, of course, because the news is unfolding very fastly here. However, we haven’t really seen any sort of meaningful impact to our customer and prospect base as of yet. It’s just something that I wanted to call out. Should that become a much bigger issue, which all of us will be aware of from the news and the like, it’s something — something for everyone to keep in mind.

Stan Zlotsky — Morgan Stanley — Analyst

Got it. Thank you.

Operator

Your next question is from Michael Turrin with Wells Fargo.

Michael Turrin — Wells Fargo — Analyst

Hey, there. Thanks. Good afternoon. Appreciate you taking the question. I’ll keep it to one, maybe just two parts. Tony, just in terms of the Q3 revenue upside, there are more moving pieces in the model right now. The upside was maybe a little more limited than what we’ve seen in prior quarters. So is there any change to overall guidance framework or is it just some of the impacts that you laid out? And then just characterizing that and putting that in context with Q4 and, what’s generally a larger deal quarter that it’s often just tough to forecast a precision. Can you just walk through the puts and takes there as well? Thank you.

Tony Tiscornia — Chief Financial Officer

Sure, sure. Thanks, Michael. So with respect to the revenue beat, really all comes down to linearity in the quarter. In Q2, which we noted at the time, we had very favorable linearity from the timing of deal closure during the quarter. In Q3, although we did have a very strong business quarter, the linearity during the quarter was not quite as favorable as Q2. We also experienced a bit of the traditional Q3 seasonality that you see in Europe with the European holiday season. So that’s certainly part of the equation as well. And with respect to Q4 guidance, our approach is very, very consistent based on the numbers we have.

Michael Turrin — Wells Fargo — Analyst

Okay. So just, I mean in terms of characterizing another — there have just been puts and takes of the prior years with just thinking about large deal activity and commentary around just pipeline versus closure. Is there anything you can add just to characterize the shape of what you’re seeing there? And then I’ll hop off. Thank you.

Tony Tiscornia — Chief Financial Officer

Sure. As we’ve noted in the last several quarters, we’ve seen increasing fidelity with regard to predictability with deals, closure rates and engagement with customers and prospects, and that’s continuing into Q4. As you noted, Q4 is one of our biggest quarters of the year. Every year, it’s our largest quarter of the year. So we expect that to continue.

Michael Turrin — Wells Fargo — Analyst

Thank you.

Operator

Your next question is from Matt VanVliet with BTIG.

Matt VanVliet — BTIG — Analyst

Yes, thanks for taking the question, I guess, following up on the last question, a little bit and what you’ve talked about in the past of continuing to grow the size of the landing deals. And Rob, you mentioned a customer that has 96% of their POS on the system. So are you still seeing that same appetite? Are you seeing large enterprise customers wanting to go in and really make these wholesale digital transformational type of projects getting in? Or are you starting to hear more customers wanting to maybe take a more modularized approach as they kind of ease their way into this and just how that’s affecting the pipeline? Thanks.

Rob Bernshteyn — Chief Executive Officer

Sure. Thanks. Thanks for that question. You know when COVID hit, obviously, we saw a large enterprise customers, yes either slowed down their broader transformation initiatives or take a more marginalized approach. We’re actually seeing the opposite dynamic happening now, which is the willingness to engage back to the kind of more meaningful sales cycles we were in the heart of before COVID hit, which is broad based full-scale business spend management transformation and what’s really compelling as I’m sure, I think you would know from our value proposition is very often, the thinking particularly in working with our systems integrators on these digital transformation initiatives for their clients is that the savings and value that can be generated from a relatively fast time-to-value deployment of Coupa could actually be reinvested in the broader digital transformation they’re doing across all areas of CRM, HCM, data storage and manipulation collaboration, all the other key areas.

Many of the other key areas they thinking about. So there’s almost a double win there that we’re on the cusp of capitalizing on in coming quarters and years.

Matt VanVliet — BTIG — Analyst

Okay, great. Thank you.

Operator

Your next question is from Alex Zukin with Wolfe Research.

Alex Zukin — Wolfe Research — Analyst

Hey, guys. Thanks for taking the question. Rob maybe for you just along the lines of the last question. Does it feel like we’ve, if you look at it from an aggregate bookings perspective, clearly the momentum is improving. The deals are kind of getting back on track. You’re talking about a re-acceleration of momentum. Are we troughed from a bookings perspective and a revenue perspective and now it’s kind of — I don’t want to say smooth sailing. But you can see line of sight to back to pre-COVID levels. You can see elevated momentum in the pipeline, but you can see the right things on the horizon and we’re close at hand. And then if you think about Tony from a conservatism parameters in the guide, you mentioned the tough comps. But what are you kind of baking in that we should think about in terms of the actual momentum and seems like are you baking in most of the deals getting signed at the end of the quarter better linearity, some puts and takes there would be super helpful?

Rob Bernshteyn — Chief Executive Officer

Yes. Thanks. I mean, you asked a lot there, I think at the core you’re really digging — rightfully digging into our feelings around the real health of the business. So let’s dissect that a little bit in the context of everything that we’re doing at Coupa, right. If you look at the kind of take away some of the obvious areas like seasonality, obviously there’s a seasonality component to this. We’re obviously in the process of doing some license conversion work as you obviously know and there obviously have been some near-term headwinds that we fully anticipated with some of the acquisitions that we’ve done right, you could take BELLIN for example where we purposely are working through modifying that offering to better serve the 80.2 rule. Right. Which means, in some cases, moving on from legacy business, that doesn’t fit that profile, but rather setting ourselves up for the longer term.

The same kind of 80:20 principle applies to LLamasoft and what we’re doing in building up our Coupa supply chain and designing capability. But when you talk about health of the business and this is as Tony noted below — noted earlier rather, right? For the fiscal year-to-date, new business, just look at new business, including both new logos and add-on business that’s up nearly 90% from last year, right?

And I think, another important data point that really starts to cut through the noise is that that revenue growth from the core, the core itself grew faster this past quarter than any of the last several quarters in both our emerging, both our Enterprise segment and frankly was even more pronounced in our mid-market segment.

So we’re seeing some really promising signs here, but it does require a little bit of dissection and cut through some of the noise around the periphery and look, we couldn’t be more excited about, as I said, the coming quarters and years.

Tony Tiscornia — Chief Financial Officer

And Alex, as you may recall that as you pointed out in the beginning of your question, the COVID-related trajectory last year from Q2 to Q3 was highly abnormal from a seasonality perspective. And as I noted, it created an unusually difficult compare for Q3. We also had a bit of the more typical European seasonality this year that had some impact on Q3 and Rob walked through some of the near term headwinds related to the work we’re doing with acquisitions. But as Rob pointed out, our core business is very, very strong and growing in Q3, new business was just slightly below that of Q2.

Operator

Your next question is from Siti Panigrahi with Mizuho.

Siti Panigrahi — Mizuho — Analyst

Thanks for taking my question. Tony, it seems like some of the expenses bounced back this quarter after a dip in Q2. I’m wondering, as you look into next year, do you expect some of this pre-COVID expenses coming back? How should we think about next year?

Tony Tiscornia — Chief Financial Officer

Sure. The key thing to point out here, Siti is in Q1, we’re going to be having our Inspire Conference in April, which we’re very excited about. It’s been very successful for many years. So we’re looking forward to that. In the past couple of years, we’ve been doing more localized, highly curated events, but it will be great to be getting everyone back together. So that will have some additional sales and marketing expense.

We also have some decently sized beginning of the year sales events to kick off the year, which we’re very excited about. So you should consider those in the P&L for Q1. Also of course, we have fewer days in Q1. So just from a pure mathematical standpoint, the apples-to-apples revenue goes a little bit down because we recognize fewer days of revenue. And on top of that, I would just say, we’re excited about our business and we’re continuing to make investments across the business.

Operator

Your next question is from Brad Sills with Bank of America.

Brad Sills — Bank of America — Analyst

Great. Hey, guys. Thanks for taking my question. I wanted to ask a question about just the in-person meetings coming back, and Inspires coming back in April. How important is that conference been traditionally for lead generation at the beginning of the year? And you mentioned a return to office could be a real positive for your business in-person meetings, maybe just elaborate a little bit on that and what you meant there? Thank you so much.

Rob Bernshteyn — Chief Executive Officer

Yes, sure, Brad. I mean, absolutely, in both cases, we think that getting back to a more in-person interaction will present — ought to present the tailwind for our business. Physically being able to sit across the table from a senior executive and lock arms around a broad-based digital transformation project, it’s something we simply haven’t had the opportunity to do for nearly two years now. So that in of itself we believe ought to be a tailwind.

And Inspire undoubtedly is a real, not just a prospect building sort of conference but it’s an energy building conference and we have thousands of customers that are highly successful with deployments of Coupa that is delivering measurable value for them. Obviously, those people in the same — in physical environment with prospects and partners even our own colleagues is incredibly energy creating and that energy leads to very often to faster deal cycles, fair price points of those sales cycles, quicker deployments with more value being created. So we’re looking forward to that and certainly as Tony mentioned helping that because we hope that these variants are not going to present the kind of safety precautions that led us to close down nearly two years ago.

Operator

Your next question is from Peter Levine with Evercore.

Peter Levine — Evercore — Analyst

Great. Thanks for taking my questions. Rob, you highlighted a new Pay partnership with a global financial service firm. Can you provide any or some additional color on like how the revenue split works, expectations in terms of contributions or kind of what the bank customers are using now? And then just a quick follow-up is, was this partnership factored into the metrics given at the Analyst Day around Pay or should we look at this as kind of additional upside? Thank you.

Rob Bernshteyn — Chief Executive Officer

Well, look, I mean, I think we’re never going to limit our own upside in what we do working with anyone, whether it’d be a partner, whether it’d be a customer, whether it’d be our pace of development. We want to — never want to limit our upside, but looking backward. First of all, just looking at the Pay business. Let’s take a moment for that. Things are pretty darn healthy, right, our customer adds have been strong and they’re getting stronger. We continue to have new logo attach rates of greater than 30%, in fact in Q3, it was even higher than that, in fact it was our largest attach rate quarter ever for that offering and our energies are being spent in what I believe to be the right places building a broader ecosystem of partnerships, no doubt, one of the ones I mentioned in my prepared remarks, but even more so, working with our customer community of deployed Coupa Pay customers and deploying Coupa Pay customers to suss out the 80:20 functionality, we need to continue to — putting into our releases three of which we do every year to get to a place where we can develop really the industry’s first all-in Coupa Pay offering that can support the needs of companies from mid-market to the largest enterprises in the world. So that’s really what we’re playing for here and we feel like we’re well on our way.

Operator

Your next question is from Ryan MacDonald with Needham.

Ryan MacDonald — Needham — Analyst

Thanks for taking my questions. Rob, for you, you started to talk about travel and expense again and some of the investments you’ve made there to sort of re-launch that product in or improved upon that product. Can you talk about, especially now that you’re thinking about in-person conferences next year, how you’re starting to think about travel and expense and if we’re going to see a recovery there over the next six-12 months? Thanks.

Rob Bernshteyn — Chief Executive Officer

Sure. I mean, look, it’s a great question. I wish I had an answer that could be delivered with incredible fidelity around the rate at which travel will kick in, but what I could tell you is what we’re doing, which is we’re expanding a really robust expense management offering that’s being used now today by hundreds of customers around the world to expand upstream with the bookings engine that’s going to make it super-simple and intuit for them to actually make their travel plans to seamlessly integrate that into our expenses core, to seamlessly make it possible for you to then pay and reimburse for that travel and expenses and leverage the power of our community to identify, fraud and recommend and prescribe travel options for employees and users around the world.

So while I can’t predict you the pace at which travel is likely to improve, I think we all intuitively think it will, which is, don’t know at what pace. What I can tell you is we’re going to be in market with an offering that I think is quite compelling and unlocks more of the value of our suite synergy and delivers measurable results to customers.

Operator

Your next question is from Steve Koenig with SMBC Nikko.

Steve Koenig — SMBC Nikko — Analyst

Hi Rob and Tony. Thanks for taking my question. I’m curious what you all are seeing with respect to business spend? I don’t know if I heard your business spend index that you sometimes highlight. And how, if at all, are supply chain issues and labor shortages affecting your outlook as it runs through any impact on customers’ business spend? Thank you very much.

Rob Bernshteyn — Chief Executive Officer

Sure. It’s a very interesting picture that’s developing there, by the way, if you’re interested in this, simply going to spendindex.com and you could drill in a little deeper on what we’re seeing industry by industry, category by category. But here is the big picture of what I see happening in this whole supply chain area.

It’s very similar to when COVID first hit. What happened was that the world was really, as we all recall in this acute kind of situation and that meant by the way, deal sizes stopped, deal closures significantly halted, people were just trying to figure out how to begin to work from home and do what they need to do. And what we’re seeing today interestingly, is that — we’re seeing the downstream implications of COVID on global supply chain issues, right? And those global supply chain issues today are acute, very similarly to the way COVID was acute for us — much of last year.

So what we’re doing in this market, in this environment is that we’re helping our customers, we are helping prospects address kind of near-term acute supply chain issues with some of the tools that we have in the marketplace. But we’re at the same time locking arms with them and anticipating broader and deeper supply chain design and planning transformations to take hold once this kind of acute phase begins to settle. And I can tell you that perspective is informed not only by my own personal interactions with senior executives within our prospect and customer base, but via many touch points within — with our own sales leadership team, which is having these conversations day in and day out. But we’re really proud to be right in front of them even this acute phase at some level. And I shared with you in my prepared remarks one example of just one example of immediately being able to save on freight and leverage our integrated supply chain design and planning to sourcing capability. So it’s good today, but it’s even more promising as we kind of get past this acute phase.

Operator

Your next question is from Terry Tillman with Truist.

Taylor McGinnis — UBS — Analyst

Yeah, thanks for taking my question, Rob, and Tony, it’s one question I promise with two parts though. In the actual quote of the press release, Rob, you talk about in 4Q actually closing strategic customer deals. Anything notable in terms of you’ve got a month under your belt, larger kind of milestone deals that were closed, that’s kind of giving you confidence. And then secondly, related to that, are you seeing Europe actually bounce back here in the fourth quarter today? Thank you.

Rob Bernshteyn — Chief Executive Officer

Well, without calling out customer names, without getting their approval, one that I probably wouldn’t do that. But when I look at some of the late stage deals in our pipeline as well as some of the ones we’ve closed in the course of the previous weeks, it’s a very compelling picture for us and gives us even more energy to push forward at full speed.

In terms of Europe, I don’t think I have anything statistically significant to report. There are signs that are negative, there are signs that are positive by country, by week, if you will. So unfortunately not much there to tell.

Tony Tiscornia — Chief Financial Officer

And Terry just to add, the European seasonality that I noted is the typical Q3 holiday seasonality that you historically see in the European region. Nothing out of the norm. And then on top of that, it brings home the point that the COVID related trajectory last year kind of washed away the impact of that typical seasonality being — us being meaningfully up from Q2 to Q3 when things started kind of improving to some degree at that point. So really the point there is just to call out that we’re seeing more normalized Q3 seasonality in Europe this year.

Terry Tillman — Truist — Analyst

Understood. That’s helpful, thanks.

Operator

The next question is from Brent Bracelin with Piper Sandler.

Clarke Jeffries — Piper Sandler — Analyst

Hi, this is Clarke Jeffries on for Brent Bracelin. RPO growth accelerated for the fourth straight quarter to 58%. I think, that is the highest in several years. You gave us some good color on the deal size trajectory. But I was wondering if you could comment on how duration has trended? How much is duration helping the uptick in RPO that we’re seeing or is this predominantly new business year-to-date?

Tony Tiscornia — Chief Financial Officer

Yes, thanks for the question. So you’re right, RPO growth has grown meaningfully and it’s up 58% year-over-year, which is a strong figure. As far as duration, there is really no impact on duration. Whether you’re looking at the mean or the median deal, links have been very consistent the last several quarters and even going back further than that, very, very consistent. Three years on average for a new business deal and less than that for renewals.

The reason RPO is growing so healthily is simply that we’re doing a lot more new business this year than we did last year which we — Rob and I both talked about today and those deals tend to be large multi-year deals. You get that pronounced effect in RPO and also we don’t typically discuss CRPO current RPO figures. But to give you a sense this quarter, CRPO was — growth was in the mid 40s year-over-year percentage wise. And if you back out LLamasoft, it was still well into the mid 30s percentage wise. So again this is a very strong reflection of the healthy new business growth in our core.

Operator

The next question is from Taylor McGinnis with UBS.

Taylor McGinnis — UBS — Analyst

Hi. Yes, thanks for taking my question. Actually, just to touch on what you just said with organic CRPO growth in the mid 30s. Can you just talk about the divergence between that mid 30s and versus some of the organic billings numbers we have seen over the past several, several quarters and what might be causing some of that difference?

And how to think about trailing 12 month billings as a leading indicator, maybe versus that CRPO disclosure that you just gave?

Tony Tiscornia — Chief Financial Officer

Sure. Thanks, Taylor for the question. As I noted, new business deals on average three years. We often do large deals that are even longer than that, right? And so when you look at RPO, if you do a three year deal, of course in billings, you get a one year, one year benefit in the numerator for the current period, but in RPO, you get a full three years benefit from that. Right.

So mathematically it’s very strong. When you look at CRPO. As Rob mentioned in his remarks earlier, there is some near-term kind of friction or headwinds in the financial modeling perspective that pertain to some of the legacy agreements from LLamasoft and some of the other acquisitions we’ve done, which we are working through of course to benefit our stakeholders and our business in the coming quarters and years, you of course have the license migration that’s going on and our push for professional services to continue to have our partners very strategically perform those professional services.

So some of the near-term noise in calculated billings, really you cut through some of that when you look at the current RPO numbers. And as I mentioned, we don’t typically share those but this quarter, we felt like it was particularly important to give a clear picture of the underlying health of the business.

Taylor McGinnis — UBS — Analyst

Great. Thanks.

Operator

Your next question is from Bob Napoli with William Blair.

Bob Napoli — William Blair — Analyst

Thank you. Yes, I guess just following up on that. I had the same question on the divergence there. But with the momentum that you seem to have on new business and on the growth of RPO as we think about, I know you’re not giving guidance for next year, should we see acceleration? Do you have confidence in your 30% revenue growth targets over the medium term, given the rebound you’re seeing, is there any color on the, the medium to longer term growth targets organically that you’ve had?

Tony Tiscornia — Chief Financial Officer

Thanks for the question. So we give next year’s topline revenue guidance formerly at the next call. So we’ll address that more specifically at our next call. I think, our approach will be very consistent with what it’s been in the last several years.

Operator

Your next question is from Rishi Jaluria with RBC

Richard Cowen — RBC — Analyst

Hi. This is Richard Cowen [Phonetic], I’m here for Rishi. So it’s great to hear the continued traction that you’re seeing in the mid-market, could you maybe take a step back for us and talk about what’s driving the strength there in the mid-market, maybe where you’re doing from a go-to-market plan for any ways, you’ve kind of adopted certain products to the platform to better suit the mid market? Thanks.

Rob Bernshteyn — Chief Executive Officer

Sure. That’s — it’s a fine question and one that we committed to really drilling into as a business back at our road show. You know, for those of you that may not have been following us for now — well, I guess over a decade, is that we really began in the mid-market and we’ve built the business quarter-over-quarter in a way where the average subscription revenue per deal has increased virtually every quarter now for 51 quarters. And what we committed to the IPO is that we made our way into the enterprise, we’re actually going to go back and we’re going to find a way to build a really strong mid-market and upper mid-market business where the cost of customer acquisition was reasonable, where the renewal rate was incredibly strong, where the price per deal was there and growing, and where the value we’d delivering to customers would keep them forever and I’m very excited to share with you that we’ve done very much all of that.

Since. Now why are they selecting us? Well first of all, from a value proposition perspective, they’re getting a full suite of business spend management solutions with an incredibly fast time-to-value with embedded best practices and access to the community of thousands of other customers around the world that they can learn from on a real-time basis, all while delivering unprecedented usability, wide adoption and saving money for their company that they scale and they grow.

So we’re being selected as the platform of choice for business spend management for these companies as they continue pursuing their own missions and visions. And to address that from a go-to-market perspective, and an implementation perspective and a partner perspective and a business model perspective, we have done the heavy lifting over these years to put us in a position to easily say to you that the mid-market and upper mid market businesses can stand on their own are growing exceptionally rapidly and have a really, really special future ahead for them.

Operator

Your next question is from Pat Walravens with JMP Securities.

Aaron Kimson — JMP Securities — Analyst

Hi, this is Aaron Kimson on for Pat. I know that you guys don’t regularly disclose gross or net retention, but could you give some color on the magnitude of those metrics and trends you’re seeing within them?

Tony Tiscornia — Chief Financial Officer

Sure. So as far as renewal rates. The gross renewal rate and dollar-based expansion have been in the same range for the last several quarters and as you know, historically, we’ve had very strong figures for both.

Rob Bernshteyn — Chief Executive Officer

While we wait for the next question, I actually would like to add to that in terms of renewal rate because it’s one of the areas incredible resiliency that we’ve seen with this business. Number of folks reached out to us when COVID hit and were wondering, how resilient our installed base would be particularly when our primary buyer someone that is a buyer and so in some — in some sense makes a living at looking at other market alternatives and pushing out price points et cetera. And I can tell you, we’ve maintained a very resilient and consistent renewal rate through this — the COVID environment, have been paid, and paid on time and paid fairly for the value that we continue to deliver.

Operator

At this time there are no further questions.

Rob Bernshteyn — Chief Executive Officer

All right. Thank you everyone for joining us again this quarter and we look forward to speaking to you in about 90 days. Thank you.

Operator

[Operator Closing Remarks]