Coupa Software Incorporated (COUP) Q2 2021 Earnings Call Transcript

Coupa Software Incorporated  (NYSE: COUP) Q2 2021 earnings call dated Sep. 08, 2020

Corporate Participants:

Steven Horwitz — Vice President of Investor Relations

Robert Bernshteyn — Chief Executive Officer

Todd Ford — Chief Financial Officer

Analysts:

Robert Napoli — William Blair — Analyst

Josh Beck — KeyBanc — Analyst

Chris Merwin — Goldman Sachs — Analyst

Robert Simmons — RBC Capital Markets — Analyst

Stan Zlotsky — Morgan Stanley — Analyst

Brad Sills — Bank of America Merrill Lynch — Analyst

Terry Tillman — Truist Securities — Analyst

Daniel Jester — Citi — Analyst

Peter Levine — Evercore — Analyst

Siti Panigrahi — Mizuho — Analyst

Koji Ikeda — Oppenheimer — Analyst

Brian Peterson — Raymond James — Analyst

Ryan MacDonald — Needham — Analyst

Joseph Vafi — Canaccord — Analyst

Mark Chen — JMP Securities — Analyst

Presentation:

Operator

Good day, ladies and gentlemen, and welcome to the Coupa Software Second Quarter Fiscal Year 2021 Earnings Release Conference Call. [Operator Instructions] At the conclusion of our prepared remarks, we will conduct a question-and-answer session. [Operator Instructions] 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 Horwitz — Vice President of Investor Relations

Thank you. Good afternoon and welcome to Coupa Software’s 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 — 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.

Robert Bernshteyn — Chief Executive Officer

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 and how businesses manage their spending with the support of innovative and re-imagined 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 want 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 in the 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. Our financial results clearly illustrate the leverage in our model, not to mention the strength in our balance sheet. We delivered solid results across the board, but make no mistake, we are playing to win the market over the long term.

Let me share some additional updates about our business. Sales cycles have not surprisingly extended somewhat from what we were seeing last year. However, many customer prospects who had paused in the March and April time frame, re-engaged and became the newest members of our Coupa Community. We are also seeing strong pipeline build and an increase in RFP activity. Our new customers and prospects are focused on business resilience and they are seeing Coupa’s platform as mission-critical for today’s new realities.

Many of these customers have testified — are testifying to the importance of our Value-as-a-Service platform. A prime example of this is TransUnion, who spoke about Coupa on their June earnings call. They discussed their strategic initiatives to transform global operations by creating consistent standards around the world. They specifically highlighted that they are implementing a full lifecycle procure-to-pay system from Coupa allowing complete business spend visibility globally.

Schneider Electric’s Global Director of P2P transformation shared comments about their recent successful Go live. She said, “I am extremely proud of my team in deploying Coupa Software, harmonizing processes and centralizing our people across France, US and Mexico. We are bringing simplification, compliance and organizational efficiency around the world delighting our stakeholders.”

Another mention came from Westpac Bank. Their CPO said, “Amazing that someone can access a procurement business application and make purchases within 15 seconds without any manual instructions or training. We are excited to be implementing this at Westpac. Thank you, Coupa and Deloitte for being on this journey with us.” Clearly their CPO quickly discovered the user-centric aspect of our platform, also known as the ‘U’ in Coupa.

Now, this quarter, we completed 100% of our go-lives remotely and did so with great efficiency. We have reduced implementation times by roughly one month as customers are relying more heavily on our prescriptive approach around best practices.

Now let me highlight a few of the many customers that have gone live across more than a dozen industries during the quarter. Representing the consumer products industry, ADM, a Fortune 50 global leader in human and animal nutrition has recently gone live with Coupa. Even with project teams working remotely, the implementation was completed on schedule. Joe Taets [Phonetic], VP, Global Procurement said, “The pandemic certainly added challenges, but I am extremely proud of our ADM team, Coupa and our business partners for their relentless engagement and focus, which allowed us to deliver this go-live as planned. Using Coupa, ADM enhances end-to-end processes, improves data insights, establishes a common platform for spot bids and standardizes and automates core processes. This is done through a Business Spend Management platform that makes it easy for colleagues to request the goods and services they need and for business partners to engage with ADM.”

Representing the process manufacturing industry, Grupo Cementos de Chihuahua, a leading supplier and producer of cement and concrete across Mexico, United States and Canada has gone live on Coupa. The focus of GCC was to automate supplier management, increase spend control and generate savings. With Coupa, GCC has gone from disconnected purchasing processes to a single digitized platform and has procured millions of dollars in peel back spend in just the first few weeks of being live. Such accelerated user adoption has helped GCC to increase spender management and elevate cost savings through contract compliance.

In the oil and gas industry, ProPetro Holdings completed its implementation of Coupa to enable process improvements for greater efficiency and enhanced spend control. Using Coupa, ProPetro established best practices across procure-to-pay, including the use of online catalogs to ensure spend compliance and dynamic approval chains for spend visibility and improved financial controls. Within the first 12 days, they had processed millions of dollars in pre-approved spend through Coupa.

And in the relatively hard-hit retail industry, Canadian Tire Corporation went live with Coupa to standardize and automate non-merchandise procure-to-pay purchases. Leveraging Coupa, Canadian Tire has replaced multiple disintegrated systems across its retail locations with a unified enterprise-wide platform. Already more than $1 billion of spend has flowed through the platform. Our cross-industry impact doesn’t end with these examples. We also completed implementations in the banking, business services, industrial manufacturing, insurance, life sciences, non-profit, technology and transportation industries during the quarter.

Now, let me welcome some of our new customers representing companies of all industries and sizes as well. First, let me highlight some up and coming companies such as Confluent, Delly’s, GAF Materials, SalesLoft, Samancor Chrome, Shorelight Education, Welltok and many others. We also welcomed mid-size organizations including CSC ServiceWorks, Strategic Education, Toyota Financial Australia and others. And, of course, we welcomed large enterprise companies such as Canfor, Cycle and Carriage, Engen Petroleum, OneMain Financial, Schaeffler, Sekisui Chemical, Westpac Banking and numerous others. Not only are companies of all sizes joining our community, but also across nearly 20 different industries.

Now, as you’ve heard me say many times before, our continued progress in providing customers with prescriptive insights, the PN Coupa is a major reason our prospects and customers are in lockstep with our vision. There is a revolution happening in business, where companies are cognitively there with us and that they will have a strategic advantage if they can leverage insights from our growing customer community. On a side note, I am humbled to have the opportunity to share personal thoughts on this subject in our new book, Smarter Together, which is being released this week. This new book is essentially a position paper that builds upon our first book Value-as -a-Service.

Let me share an example of our Community Intelligence helped the Brock Group, a company who provides specialty craft and maintenance services to diverse industries across the United States and Canada and employs more than 13,000 employees in over 400 facilities, reduce fraudulent spend. As construction and maintenance projects ramp-up at the end of each year, the Brock Group hires seasonal field workers. With so many seasonal employees submitting expenses, it’s difficult for them to review all expense reports for suspicious transactions. This leaves opportunities for spend leakages and even fraud. Coupa Community Intelligence has helped them address this problem by detecting suspicious transactions at scale across all of their spend.

Using artificial intelligence to detect patterns from the Coupa Community, spend that deviates from expected behaviors that would otherwise fly under the radar is flagged as suspicious. In the first hour after turning on these capabilities, the Brock Group identified tens of thousands of dollars of suspicious transactions. They identified duplicate transactions and even discovered an employee who had submitted thousands of dollars of seemingly legitimate small dollar expenses that were fraudulent. With Community Intelligence, Brock Group prevented spend leakage and fraud.

The knowledge that comes from access to data is also extremely important when strategically managing inventory. Detailed inventory studies have shown that company inventory is inaccurate more than one-third of the time and nearly half of companies either don’t track inventory or do so manually. When you consider that inventory represents approximately 15% of the total assets for public companies in the United States, there is clearly a big disconnect. To remedy the disconnect, Coupa has worked with more than 100 customers to improve visibility, management and optimization in the area of inventory management, whether your inventory includes a camera, TV, medical supplies or any direct components that are part of your manufacturing process by linking inventory directly with procurement, customers can optimize their spend.

One of our enterprise customers, Amazon takes advantage of this real-time visibility with all of their packing materials, such as boxes and labels, to ensure that their fulfillment centers around the world always have the materials necessary to quickly ship packages to customers. By having a single system of record for orders, receipts and inventory, they can ensure that they aren’t placing duplicate orders and then employees are making purchases from approved suppliers. With hundreds of thousands of transactions every month, the optimization of this inventory process saves the company significant amounts of money.

Moving on, the pandemic induced focus on cost reduction and risk mitigation has led to higher demand for quick ROI solutions, such as Coupa Advantage, Coupa Risk Assess, Coupa Strategic Sourcing and Coupa Source Together. An example of how our customers address this focus while simultaneously continue to tap into our open platform, the ‘O” in Coupa, can be seen with Strategic Sourcing. A great example is illustrated by a quote from Procter & Gamble’s Associate Director of Purchasing. He said, “With the help of Coupa’s sourcing tools Procter & Gamble significantly optimized several hygiene raw materials purchases. With Coupa, the team was able to manage the end-to-end sourcing process more efficiently, collecting bids and running numerous complex scenarios to optimize awards in a short period of time. The process is now more robust and we are better able to achieve our stewardship goals.”

Another area where our customers are extracting meaningful value is Coupa Pay. As most of you know by now our Pay module has strong value propositions, for both large enterprises and mid-sized customers. Apart from the efficiency that a company of any size can extract from integrating payments into their spend platform, enterprise customers are able to save hundreds of thousands of dollars per year by eliminating the need for bank integrations. At the same time, mid-sized companies can migrate from manual to digitized processes.

One example of a mid-sized company that has digitized their payments approach is SambaNova, a next generation AI company that takes innovations from advanced research organizations around the world and makes them available to everyone everywhere. One of our earliest Coupa Pay customers, SambaNova uses the entire Pay module and platform to consolidate technology and banking, scale payment processes and significantly improve compliance and control. Implementing Coupa pay, they were running a siloed process using spreadsheets — before implementing Coupa Pay, they were running a siloed process using spreadsheets, hundreds of invoices covering millions of dollars per month were being handled manually.

These manual processes not only increase the potential for error, but they were far from optimal for internal process purposes. They also had an inefficient working capital approach often paying bills by pay per check in 15 days in fear of having late payments. Scalability was out of the question.

To fix these issues, SambaNova wanted a unified process and integrated platform. Working closely with our customer success team, Coupa Pay was implemented in less than three months, a great example of accelerated or the ‘A’ in Coupa. Within 90 days of being live, they were paying 95% of their invoices through the Coupa platform. SambaNova now have confidence in their simple and trackable digital payments process. They’ve even commented on how feedback from their suppliers is overwhelmingly positive with an appreciation that the money is in the bank and the remittances right there in Coupa. And the ease of cross-border payments has enabled them to confidently scale internationally. Perhaps, that’s why their VP of Finance said in recent webinar, “Coupa Pay is an absolute no-brainer.”

We appreciate the finance people realize the value that Coupa Pay provides. In fact, it’s part of our strategy to continue bringing more value to the office of the CFO as we expand our already comprehensive offering known as the ‘C’ in Coupa. To that end, during the quarter we completed the acquisition of BELLIN, a leader in treasury management. BELLIN’s offering provides real-time transparency on cash balances, centralize the control of cash accounts to prevent fraud, provides efficient liquidity management and supports direct bank-to-bank communications for money transfer.

Treasury is another important department within companies that Coupa is working to help un-silo and make part of a strategic approach for any business. Our intention with Coupa Treasury Management is to make spend, contract data and the risks associated with both clearly visible to and actionable by the treasury team. As we work to synergize our integrated offering, future capabilities of treasury will include access to Community Intelligence, which will show our customers best practices for conserving cash. They will also be made aware of potential contract risks if a customer has filed for bankruptcy. These are just a few examples representing only the tip of the iceberg when it comes to the value we will be able to create by incorporating treasury management into the Coupa platform.

As I’ve noted before, anytime we look at a potential acquisition, we are focused on adding technology components that maximize and enhance the value of our organic transactional core engine and/or augmenting this engine with key advanced power applications that optimize the value of these transactions. This acquisition addresses both aspects of this strategy, most importantly, BELLIN’s culture and values are in close alignment with ours and we are already well on our way towards unifying as one.

Now let’s move on to the Coupa Business Spend Index or BSI. The BSI is a leading indicator of economic growth, analyzing hundreds of billions of dollars in aggregated and anonymized business spend. Before getting into the Q3 outlook, I’d like to once again reiterate that the BSI data is not necessarily indicative of the trends we’re seeing in Coupa’s business. I previously shared that the Q2 BSI showed a significant decline in economic confidence likely as a response to the pandemic. The Q3 BSI indicates the business spend sentiment has modestly improved likely is a correction to the acute scenario witnessed during Q1.

Sector data indicates, financial services, retail and high-tech showed improvement quarter-over-quarter, although it’s important to note that all sectors remain below trend. For example, spend sentiment in the retail sector continues to be significantly impacted by the pandemic, but more online shopping has likely contributed to the slight improvement in sentiment relative to the previous quarter. Also given the continued impact on global supply chains, spend sentiment in manufacturing decreased slightly in Q3. For a closer look at our Q3 BSI where we share more details on each of these trends, please visit www.spendindex.com.

Moving on, let me now recognize a few of my colleagues that have made outstanding contributions that clearly demonstrate Coupa’s core values. Let’s start with Kevin Christopher-George, who is recently recognized by his peers for exemplifying our number one core value of ensuring customer success. Customers consider Kevin to be a strategic resource, often feeling like he is part of their company. He holds the customer accountable for their commitments and always delivers on his.

Next I’d like to mention Terry Kim, who is recognized for focusing on results. We won many deals because of Terry. He works across teams to ensure we are as accurate as possible upfront. This sets everyone up for success during implementation. He always pushes projects towards the best outcomes for the customer.

And finally, Srinivas Kannan embodies striving for excellence. Sri passionately pushes everyone to connect, collaborate and improve and he does so with tremendous inspiration and professionalism. Congratulations and thank you, Kevin, Terry and Sri.

Further to our core values, we showed great alignment across our employee base in a survey completed by Great Places to Work. 97% of respondents ascribed to our number one core value of ensuring customer success, 98% ascribed to our number two core value of focusing on results, and 97% ascribed to our number three core value of striving for excellence. My aspiration is to get all of these to 100%. I also believe that having nearly all our employees ascribing to these core values is a big reason Coupa was included in the list of Best Enterprise Software Companies to Work For by Glassdoor. We are proud and humbled to have 95% of survey respondents recommend working at Coupa.

So in conclusion, we believe that the archaic old fashioned methods of attempting to deliver value in our industry will soon be a thing of the past. Frankly, those who have been disappointed in the past are vexed, fuming and they’ve had it up to hear, we aspire to a completely different level of customer value creation. As we unleash value for our customers like never before, we will continue to emphasize the importance of business resilience. Decisions made today will affect how companies persevere during difficult times and how they position themselves for even stronger economic conditions in the future.

In closing, we are currently well into our 47th quarter of execution. And as we guide our customers through these times as a key priority, we simultaneously remain focused on Coupa’s long-term success and market leadership.

With that, let me now hand it over to our Chief Financial Officer, Todd Ford, who will review our Q2 financial results and provide our outlook for the third quarter and updated fiscal 2021. Todd?

Todd Ford — Chief Financial Officer

Thanks, Rob, and good afternoon everyone. While the world has changed, we’re all adapting into 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 investments and demonstrating leverage in our operating model as we continue to grow, specifically operating and cash flow margins. 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 the 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 one-time spike in billings related to the Exari acquisition that we completed in Q2 of last year. The impact of 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 an acquisition due to immediately post-acquisition, we carry the full burden of the acquired businesses costs that 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 flow results. GAAP operating cash flows for Q2 were $23.4 million and we delivered record adjusted free cash flows 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 — debt discount.

For the trailing 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 greenshoe. 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 acquisitions 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 consider 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 are 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 TravelSaver, 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 TravelSaver. 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 “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 our 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 flow 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, at 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 average 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 normalcy.

Now, we’d be happy to take your questions. Operator?

Questions and Answers:

 

Operator

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

Robert Napoli — William Blair — Analyst

Thank you. Good afternoon. Hoping to get an update on Coupa Pay, it’s an 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?

Robert Bernshteyn — Chief Executive Officer

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 a doubt, we continue to build a very rich pipeline in our market. Secondarily, we are closing quite a few deals and I would say if you look at many of the other solutions that we’ve rolled out over the course of 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 are clearly moving away from paper-based or disjointed processes to more streamlined centralized processes and they are 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 couldn’t be more excited about it.

Robert Napoli — William Blair — Analyst

Great. Thank you.

Operator

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

Josh Beck — KeyBanc — Analyst

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 are starting to factor in that broader macro recovery.

So maybe just provide a little bit of color on what was some of the positive surprise you saw in the quarter and how that juxtaposes with pushing out the recovery time in just a bit on the macro front?

Robert Bernshteyn — Chief Executive Officer

Sure, sure. I appreciate the question. I think the broader context is worth sharing with everyone on the call. And those of you who have known us for some time you know that we’re playing to win this category without any question whatsoever. And to that end, we’ve continued to develop a really rich and robust and very sizable pipeline. And we continue to have incredible engagement within that pipeline. So that it’s 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 fulfill demand as it drops in 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 is 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. And as we build this company into something very, very meaningful and special on the world of Information Technology, Enterprise Software and Business.

Josh Beck — KeyBanc — Analyst

Really helpful. Thank you.

Operator

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

Chris Merwin — Goldman Sachs — Analyst

Hi. Thanks very much for taking my question. So 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 would be two-fold. Number one, should we see any major impacts to the financials? And number two, I know that there is some account receivable automation vendors out there that offer treasury management solutions. So in the future could we maybe see you expand more into the accounts receivable automation space? Or I know there’s a lot of TAM where you are now, but just curious if you think about the product or M&A pathway from here? Thanks.

Robert Bernshteyn — Chief Executive Officer

Sure, sure. Well, our thinking generally around M&A or acquisitions that we’d be considering is for it to fall into the strategy that every one of the acquisitions we’ve done before falls into, right? 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’ll likely to follow very much the same strategic approach to acquisitions and this one clearly fell right in the sweet spot of that.

Todd Ford — Chief Financial Officer

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 other 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 and overall pricing of the BSM platform as we continue to see our average deal size increased quarter-on-quarter, which we continue to see this last quarter as well.

Chris Merwin — Goldman Sachs — Analyst

Perfect. Thanks so much.

Operator

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

Robert Simmons — RBC Capital Markets — Analyst

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

Robert Bernshteyn — Chief Executive Officer

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 or some percentage of electronic transaction model with just a few exceptions of Coupa Pay in some cases being that type of exception. But if you think about the overall business, it’s largely a Value-as-a-Service business where there is 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 are seeing more and more value being delivered for them on this platform, and Coupa Pay is just an additional module that provides it.

Robert Simmons — RBC Capital Markets — Analyst

Got it. Great. Thanks. And then can you talk to your net retention rate, what you’re seeing there?

Todd Ford — Chief Financial Officer

Yeah. 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 and up-sell with our current customers in multiple areas whether it’s Coupa Risk Assess, Coupa Sourcing, Coupa Pay and others. And one of the things that’s important to note and that we saw a little bit of impact on this in Q2. When we do these power app add-ons, in many cases we don’t realize the benefit of a full year billing to the customer in our calculated billings results because the first billing installment for the add-on modules is often coterminous with the customers’ either annual anniversary or renewal date, meaning that we won’t bill the customer for a partial year upfront.

So while no impact necessarily on revenue, it 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.

Robert Simmons — RBC Capital Markets — Analyst

Great. Thank you very much.

Operator

[Operator Instructions] And your next question comes from line of Stan Zlotsky with Morgan Stanley.

Stan Zlotsky — Morgan Stanley — Analyst

Perfect. Thank you so much and congratulations on a good quarter, guys. Maybe just one very quick one from 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?

Todd Ford — Chief Financial Officer

Yeah. 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 are done remotely. So, I feel good about professional services. Renewals have continued to be strong and we think even customers reaching in on the expansion that we had 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 lots of small numbers, our new bookings in August were higher than last year. And 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 in later stage. But as Rob mentioned, it’s also difficult to predict sales cycles time and there’s also some seasonality in Q3, historically, although there are 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.

So — and then on the qualitative side, we are seeing some green shoots, particularly in the level of engagement by our go-to-market team has been extremely high and overall I’d 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.

Stan Zlotsky — Morgan Stanley — Analyst

Perfect. Very helpful. Thank you so much.

Operator

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

Brad Sills — Bank of America Merrill Lynch — Analyst

Great. Hey. Thanks, guys. I wanted to ask about some of the progress you’ve seen here with the Community Intelligence applications. You mentioned Advantage, Risk Assess, Sourcing. It seems like those are picking up, we’re hearing it out 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 might be driving that? Thank you.

Robert Bernshteyn — Chief Executive Officer

Yeah. 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 is a massive amount of data that’s going in to providing the Community Intelligence back to customers. Now, I think we’ve passed many thresholds of data volume that were required to make the individual insights that are prescribed or offered up to individual customers be of value, and we’re getting to levels where that is becoming meaningful and valuable for them in making their decisions.

I think there is also an incredible continued willingness amongst our community to share anonymized and sanitized data so that it builds up the likelihood that the insights would be valuable. And then it’s the current times. 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 are 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 helped to 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 is a lot of factors that are coming into play. But all of them are producing exactly what I think you are hearing from our community, which is we’re starting to get real meaningful value from Community Intelligence and I can tell you without any reservation, we are 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.

Brad Sills — Bank of America Merrill Lynch — Analyst

That’s great. Thanks, Rob.

Operator

And your next question comes from the line of Terry Tillman with Truist Securities.

Terry Tillman — Truist Securities — Analyst

Yeah. Thanks for taking my question. It’s related to Todd what you just talked about a few questions ago as it related to billings. 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 all have been aggressively pursuing or it’s just kind of happening kind of organically or naturally given the times we’re in?

Todd Ford — Chief Financial Officer

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 and 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 in 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 billing cycles and/or their renewals.

Operator

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

Daniel Jester — Citi — Analyst

Yeah. Thanks for taking my question. 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?

Robert Bernshteyn — Chief Executive Officer

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 it, it 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 leave. So you look at capabilities like dynamic strategic sourcing with multi-factorial 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, standardize on Coupa for making those decisions and a pipeline 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, would 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 areas, 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 waters. We see 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 and thoughtful and is going to allow us to build a long-term market-leading business here.

Operator

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

Peter Levine — Evercore — Analyst

Great. Thanks for taking my question and congrats on a good quarter. Maybe could you talk about how customers are thinking about Coupa, whether that be procurement and capital expenditure 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 were being pushed off, it seems like at least for Coupa 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.

Robert Bernshteyn — Chief Executive Officer

Sure. Well, look I think these categories around Business Spend Management and that Business Spend 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 areas perhaps came earlier but we were moving through — 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 have some part of 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 has been put on to them and we are in a phase right now that I would assess is one where companies are really trying to figure out how to develop their transformation agendas for the next two, three years for the mid-sized 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’re going to get value with us forever and stay with us forever as we build this business.

Operator

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

Siti Panigrahi — Mizuho — Analyst

Thanks for taking my question and thanks for all the color in terms of macro. Just wondering what kind of portfolio you are seeing in the US versus international, any color on geography would be helpful?

Robert Bernshteyn — Chief Executive Officer

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, when we get on calls like this with our investor base, 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 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 whales in enterprise that get us to where we need to be.

We also have an incredible portfolio effect in our product, the 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.

Operator

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

Koji Ikeda — Oppenheimer — Analyst

Great. Thanks for taking my questions. Wanted to ask you a question about deal cycles, thinking about some of your larger slip deals from the first half where maybe organizations were thinking about longer sales cycles overall? Have those conversations changed at all now that companies are becoming more comfortable in the norm from now environment? Are any of those elongated enterprise sales cycle coming back to something more recognizable pre-pandemic? Thank you.

Robert Bernshteyn — Chief Executive Officer

That’s a great question. Absolutely, they are. One of the things I shared and is exactly how I see it the fidelity, the precision of when the actual timing of a deal will naturally come to closure and we can 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 month of the quarter.

And look, due to the pandemic, the sales cycle times in some case have extended, but they’ve extended in 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 prospect on the business, while at the same time allows us to close dozens and dozens of new deals as we’ve done just this past quarter.

Operator

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

Brian Peterson — Raymond James — Analyst

All right, thanks for taking the question. So Rob, if you had 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?

Robert Bernshteyn — Chief Executive Officer

You know, it’s a great question and I’m not going to be able to give us 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 faced several companies that are having incredible processes, let’s say, around procurement, pre-ordering, 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 or wherever the organizational momentum is closest to beginning a Business Spend Management transformation. And then as you start to gain value in 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 faced who are doing almost 100% paper-based payments processes or completely disjointed log-ins 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 a 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 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.

Operator

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

Ryan MacDonald — Needham — Analyst

Yes. Good afternoon. Thanks for taking my question. 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 is an interesting core data set that you are 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.

Robert Bernshteyn — Chief Executive Officer

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 they were 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 were 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 not only expose one customer at a time, but they can give the keys to our community, so they can leverage that, add to that dataset, build that dataset 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 continue to be valuable for us.

Operator

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

Joseph Vafi — Canaccord — Analyst

Thanks. And great results, guys. I was just wondering, it maybe a multi-part answer, but could you try to frame the competitive landscape around Pay. I know there’s a lot of momentum in kind of pure play AP solutions. There is 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.

Robert Bernshteyn — Chief Executive Officer

Sure. 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 this 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 re-imagine 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 a 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 when 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.

Operator

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

Mark Chen — JMP Securities — Analyst

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 that people want to work at?

Robert Bernshteyn — Chief Executive Officer

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 working from home or they’re working in the office or they’re working from different planet, 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 a 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.

Operator

[Operator Closing Remarks]