Coupa Software Incorporated (COUP) Q3 2021 Earnings Call Transcript

Coupa Software Incorporated  (NASDAQ: COUP) Q3 2021 earnings call dated Dec. 07, 2020

Corporate Participants:

Steven Horwitz — Vice President of Investor Relations

Rob Bernshteyn — Chief Executive Officer

Todd Ford — Chief Financial Officer

Analysts:

Chris Merwin — Goldman Sachs — Analyst

Stan Zlotsky — Morgan Stanley — Analyst

Alex Zukin — RBC Capital Markets — Analyst

Michael Berg — Mizuho — Analyst

Nick Negulic — Truist Securities — Analyst

Koji Ikeda — Oppenheimer — Analyst

Michael Turrin — Wells Fargo — Analyst

Matt VanVliet — BTIG — Analyst

Peter Levine — Evercore ISI — Analyst

Andrew DeGasperi — Berenberg — Analyst

Steve Koenig — SMBC Nikko — Analyst

Ryan MacDonald — Needham & Co. — Analyst

Brad Sills — BOA Securities — Analyst

Joseph Vafi — Canaccord Genuity — Analyst

Presentation:

Operator

Good day, ladies and gentlemen and welcome to the Coupa Software Third Quarter Fiscal Year 2021 Earnings Release Conference Call. [Operator Instructions]

I’d 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 third quarter conference call. Joining me today are Rob Bernshteyn, Coupa’s CEO; and Todd Ford, Coupa’s CFO. Our remarks today include forward-looking statements about guidance and future results of operations, strategies, market size products, competitive position and potential growth opportunities. Our actual results may be materially different. Forward-looking statements involve risks and uncertainties and assumptions that are described in our most recently filed 10-Q. These forward-looking statements are based on our beliefs and assumptions today and we disclaim any obligation to update any forward-looking statements.

If this call is replayed after today. The information presented may not contain current or accurate information. We also present both GAAP and non-GAAP financial measures. A reconciliation of certain of these measures is included in today’s earnings release, which you can find on our Investor Relations website. A replay of this call will also be available on our Investor Relations website. Unless otherwise stated growth comparisons are against the same period of the prior year.

And with that, I will now turn the call over to Rob. Rob?

Rob Bernshteyn — Chief Executive Officer

Thanks, Steven. So, hello, everyone and thank you for joining us. I hope everyone had a great Thanksgiving. I trust everyone is staying safe. At Coupa, I’m pleased to share that we’re continuing to execute against our massive market opportunity. We’re doing so with consistent tenacity and unrestrained passion for delivering what we believe is indisputable value-as-a-service for all our customers. Customers and prospects are looking to Coupa’s comprehensive business spend management platform to ensure that they’re creating increased agility, resilience and of course, profitability.

To that end, we saw improved Q3 trends despite the persistent pandemic situation. We saw continued meaningful growth in our sales pipeline. We delivered multiple global marquee customer wins and go lives, our corporate and mid-market businesses are scaling and our cumulative spending management is now well over $1.2 trillion — $2.1 trillion, excuse me. All that translates well to our recent financial results. Specifically, looking at Q3, we delivered a record $133 million in revenue, our 11th consecutive quarter of non-GAAP profitability. And 30% plus calculated billings growth. So with that, let me dive into some deeper highlights from the quarter. Let’s begin with some customer go lives. Now corporate social responsibility is important to the Coupa community and we are uniquely positioned to help customers in this area.

With that as a backdrop, this quarter, let me share some go lives that highlight humanitarian companies focused on corporate social responsibility and showcase how we’re working together. Let’s start with World Vision who recently went live with inventory management. World Vision is responding to the COVID-19 health emergency by providing aid and the Central supplies to tens of millions of people in the US and abroad. Using Coupa, World Vision has centralized its inventory model to support disaster relief efforts around the world. Norbert Hsu, partnership leader for global impact shared, we now have full visibility into our three global inventory warehouses and a more efficient ordering process, our disaster management team can see what’s available across all three locations, so they can deliver and order, quickly order suppliers like PPE and have a delivered communities and children where it’s needed most. World Vision is doing incredible work and my colleagues and I are proud to support them. In terms of company size, one of the world’s largest shipping companies responsible for delivering PPE and ventilators during the pandemic went live this quarter in record time. This is one of the fastest deployments we’ve ever done for a Fortune 50 company.

In terms of savings impact NESTEA [Phonetic] number 3 on a global 100 list of the most sustainable companies also recently went live at Coupa. In their first ever ROC auction event, they achieved 17% savings on IT related subscriptions and services. This well exceeded their 10% target. And in terms of speed, New Horizons, an Australian non-profit that helps its customers achieve greater well being went live in truly accelerated fashion or the A in Coupa. Jointly, we got it done in less than 10 weeks. Of course, these are just a few examples.

Now let’s turn to supporting diversity and inclusion where we are also making an impact. Today, we have more than 30 unique — uniquely designed configuration settings in our platform to support diversity for our customers’ spend management program. Customers can easily find and engage with minority-owned businesses on our platform and leverage the power of community intelligence to make selections that form last thing business relationships. You’ll recall that the letter O in Coupa doesn’t just represents our open technical architecture, it also represents our openness to everyone with inclusion as the guiding light. To that end, we recently published a microsite on coupa.com highlighting our own diversity and inclusion principles including how we strive to attract underrepresented minorities how we educate our current workforce on these principles and how we advocate to provide support to adverse communities. Now let’s talk about our pipeline generation as well as our recent sales.

Our early stage pipeline continues to grow rapidly and small thanks to our developing customer community. To help scale their efforts, we’re using larger group virtual events, to engage the entire community like our recent smarter together webinar series. Then we follow up with smaller curated events, where current customers from similar industries and geographies share best practices and showcase the successes of their Coupa deployments. The Coupa community and the customer advocacy flywheel comes to life at these events when new friends get with existing friends and we’ve become friends. The success of our virtual go-to-market initiatives and committed events is clearly evidenced by the fact that we saw more user groups, training sessions, click-throughs on email campaigns and downloading of content by customer prospects in Q3, than we saw in Q1 and Q2 combined. What these prospects and customers are finding is that Coupa’s value-as-a-service platform better positions them to be resilient during difficult economic conditions while simultaneously preparing them to be highly agile as things improve.

Now, in terms of sales, in Q3, we saw improved conditions in the US and Europe as well as in emerging markets. Before I welcome our long list of new customers, let me call out two, which I believe showcase how we’re extending our market leadership position. The first of these is, Walmart, one of our largest customers using Coupa Source to Pay. Alongside Amazon, we are now providing our comprehensive platform, the C in Coupa to the two largest companies on the Fortune 100 list. The second customer, new customer to call out is the United States House of Representatives. As we continue our pursuit in the federal sector, it’s its wins like this that will propel our growth.

Let’s now welcome many other organizations that joined the Coupa community during the quarter, including ADB companies, AkzoNobel, Casey’s General Stores, DHL Global, Elevate Textiles, GIS International, GlobalLogic, iCapital Network, Immunovant, Ovid Therapeutics, Pilot Freight Services, SafetyCulture, Sam’s Mart, Turo, United Safety and Survivability, Uniting Care – Queensland, University of Bristol, Welbilt, ZoomInfo and many others. We are excited that these, and many other customers have joined our thriving community. Now to close out sales, we also saw strong growth in emerging markets. In fact business in Latin America, Asia Pacific, Japan, the Middle East and Africa essentially doubled over the last 12 months.

In terms of business updates, let’s start with our federal business. As I mentioned a moment ago, the US House of Representatives has recently joined the Coupa community. Adopting the Coupa platform is part of the house’s initiative to modernize all administrative systems. Once they go live, Coupa will be used by every person in Congress and by their staff as well. By law, we can’t disclose which additional federal opportunities are currently in front of us, but we can confirm, there is a robust broad pipeline across several federal agencies. During the quarter we also graduated into the next stage of FedRAMP, which is the federal government standard for cloud-based solutions. We are now FedRAMP, ready moderate which signifies that we have passed all the vigorous tests and already for federal sponsor. We are excited about the inroads, we are making in federal.

Let’s now touch base on Community Intelligence. Community Intelligence represents perhaps the greatest barrier to entry for our business over the longer term. Given the significant interest we’re seeing from some of the largest financial services institutions in the world, we’re looking to re-platform themselves for the digital features. Let me share what’s possible with Coupa Community Intelligence at our existing customer Barclays. Barclays is one of the largest banks in the world serving millions of businesses and individuals globally with the financial disruptions from COVID-19. Barclays has played a leadership role in helping businesses and individuals weather the storm.

With Community Intelligence and real-time performance benchmarks against peers, Barclays’ Head of Sourcing, Phil Thomas and Barclays procurement transformation lead, Sonya Fainaro [Phonetic] were able to optimize their electronic invoicing and approval cycle times. Leveraging community prescriptions, the P in Coupa, Barclays targeted suppliers, that the Coupa community already identified as electronic invoice enabled. This allowed them to increase electronic invoicing by 26% with Community Intelligence sales optimized their workflow to reduce approval cycle times by an amazing 73%. This is just one customer example of the power of Community Intelligence we’re seeing in action.

Another exciting aspect of our developing business is Coupa Pay. During the quarter, we continued to strengthen our Coupa Pay partner ecosystem with the addition of American Express, now supporting virtual card payments in the United States. These and the many other partnerships we’ve launched are helping us build the foundation for Coupa Pay success over the long term. In the near term we’re proving to be especially important in today’s work from home environment where customers need better ways to pay suppliers virtually.

As the overall offering expands so too, does the customer base, it took nearly two years to reach the 100 customer milestone for Coupa Pay that I shared with you in June. And now that number has grown to over 150 in just the last two quarters. In addition with new customers, we’re seeing a Coupa Pay attach rate of approximately 30%. This growth comes despite the headwinds of a difficult market environment and the fact that our most recent offering and invoice payments has only been available for a few quarters.

In terms of invoice payments, Couchbase, a leader in NoSQL databases recently switched to Coupa Pay from a legacy payments provider. While using its legacy solution, Couchbase needed to toggle between multiple systems, which created room for error and complicated reconciliation processes. With Coupa Pay, Couchbase now makes their invoice payments from the Coupa platform in one seamless integrated experience that provides the financial organization with increased visibility into their payments, greater data accessibility and a streamlined approvals process as Manisha Goel, Director of Accounting for Couchbase put it, there is now one source of truth.

In addition to the value of having one platform, Couchbase leverages our ease of use, configurability and flexibility, essentially our user centricity or the u in Coupa. They are now processing approximately 90% of their payments through Coupa Pay and are planning to take advantage of our cross-border payments and virtual credit cards soon.

Now let’s move on to M&A. Immediately after the end of Q3, we announced our acquisition of LLamasof an AI powered supply chain design and planning software company. This acquisition represents our continued expansion of our direct spend capabilities and is very much in line with our declared vision of comprehensively managing all business spend. Supply chains are being required globally. Today, it’s all about agility and the ability to design, transact, learn and optimize very quickly combining LLamasof’s data driven platform with Coupa’s $2 trillion plus of community powered spend data creates a synergy that can build on itself introducing that amount of new timely and relevant data to what is already considered the supply chain design and planning platform of choice will help customers make optimized supply chain decisions.

Those smarter decisions will drive additional direct spend through our platform, which will in turn yield additional valuable data. This cycle will allow our newly integrated supply chain design and planning technology to continually improve and yields greater and greater value for all our customers. Now, of course, this deal is very consistent with our stated M&A strategy of adding technology components to 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. As always in making this decision, we considered culture first, we considered buy versus build and we considered whether it could be integrated into our platform in several product releases. I could not be more excited to welcome our colleagues from LLamasof to Coupa.

Now let’s move on to the Coupa Business Spend Index or BSI. Before getting into the Q4 outlook, I’d like to once again reiterate that the BSI data is not necessarily indicative of the trends we’re seeing in our own Coupa business. Coupa Q4 BSI indicates that business spend sentiment is continuing to recover from a sharp drop in Q1 as companies grow increasingly more comfortable operating in the new normal. However, despite the positive adjustments made by companies in most major sectors our analysis shows the confidence in the economy is still low and is likely to remain below trend for at least the next three to six months. Sector data indicates that the health and life sciences industry showed the largest quarter-over-quarter improvement while financial services, retail and high-tech showed some modest improvement. Spend sentiment for manufacturing though continues to decline.

For a closer look at our Q4 BSI where we share more data on each of these trends I invite you to visit spendindex.com. Now let’s talk about our people. I’d like to start by recognizing a few of my colleagues that have made outstanding contributions in alignment with our core values. Let’s start with Sunil More who was recently recognized by his peers for exemplifying our number 1 value of ensuring customer success. Sunil is accessible on top of issues and always aiming to provide better service is always positive and consistently exceeds expectations. Simon Devane was recognized for focusing on results. He is both the leader, and a great team player. Simon is well known for his ability to rise to new challenges and share his deep knowledge, expertise with members of our community. And finally, Michael Schanker was recognized for embodying our core value of striving for excellence. Mike’s colleagues noted that he has the most genuine approach towards inclusion and collaboration. Simply put, he makes an already strong team 10 times stronger. Congratulations and thank you to Sunil, Simon and Mike.

Recently, we also made a number of key leadership promotions.Today, let me highlight the promotion of our very own, Rob Glenn, Executive Vice President of Global Sales. While Rob was responsible for approximately 70% of our sales footprint, he will officially be taking over 100% of the effort from Steve Winter on February 1, 2020. Steve will nonetheless be available for Coupa during 2021 as he moves into retirement. Let me say that Steve and I have been planning for Bob’s promotion for a number of years as we’ve jointly supported Rob’s professional growth at Coupa watching him take on challenge after challenge and deliver.

In tandem, I’m extremely grateful to Steve for the incredible teamwork and camaraderie we’ve shared over the years, and I wish him a wonderful retirement. So in closing, we are currently well into our 48th quarter of execution. We continue to focus on delivering unprecedented value-as-a-service for each and every one of the customers and our growing community, and thus winning the business spend management market in the process. This success is going to bring us together and we are on the road to that success.

With that, let me now hand the call over to our Chief Financial Officer, Todd Ford who will review our Q3 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. This represents our fourth earnings call during the COVID-19 pandemic. This has been quite a journey as we’ve continued to build a great business during these uncertain times and then they remote working environment. As we entered COVID back in March, our hypothesis was that we would face significant headwinds in Q2 and Q3, and that things would generally begin to open up in Q4. In this environment, Q2 results were very strong and that momentum into Q3, especially given Q3 is a historically weaker quarter for us.

The Q3 results exceeded the high end of the range of potential outcomes we analyzed when providing Q3 guidance. The strong results are driven by fantastic execution by our go-to-market team. As we look to Q4, it stays off all over again. Right now, I feel a similar way to how I did when we provided a guidance on our last earnings call. We are entering the quarter with a significantly stronger pipeline than this time last year, both on a gross dollar basis and in terms of what we consider later stage qualified pipeline, though, we are excited about our new business prospects for the quarter and momentum in our business. Our enthusiasm is tempered by the uncertainty of the COVID-19 situation and the reality that the pandemic is at its tipping point, which makes it difficult to predict the timing of when deals will close.

As we looked at FY ’22, the progress made with vaccines, coupled with the resiliency of our business provides a favorable set up going into next year. With that as the backdrop, let’s get into some details. Today, I’ll cover our Q3 results, our outlook for Q4 and details regarding the financial impact of the LLamasoft acquisition. Please note, since the acquisition closed in Q4 LLamasoft results are not included in our Q3 results, but are included in our Q4 guidance.

Let’s begin with Q3 results. Total for the revenue grew 31% year-over-year to $133 million. Subscription revenue for Q3 was $118 million, also up 31% compared to Q3 of last year comprising 89% of total revenue. Calculated billings for Q3 were $140 million, a 33% year-over-year increase compared to the 21% year-over-year increase we saw in Q2. For the trailing 12 months, calculated billings were $553 million up from $416 million a year ago, also representing a 33% increase.

Total deferred revenue at the end of Q3 was $256 million up from $193 million at the end of Q3 last year, a year-over-year increase of 33%. Looking at margins and results of operations, our third quarter non-GAAP gross margin was 72.5% above our guidance of 70% to 71%. The BELLIN integration will soon be complete in all material respects. So any gross margin drag from BELLIN should become immaterial as we enter next year.

However, with respect to LLamasoft this acquisition closed on the first business day of Q4, and due to its size, we expect it will create a meaningful drag on gross margins for at least the next two to three quarters, which is reflected in our guidance, which I’ll provide more color on in a few moments. As a reminder, after completing an acquisition, we typically see a drag in gross margin for the first ever quarter, primarily due to one immediately post-acquisition will carry the full burden of the acquired businesses costs, but don’t recognize 100% of the revenues, because of the write-down of deferred revenue in the purchase accounting. And two, it takes several quarters to complete the full business integration to the point where we can take advantage of expense related synergies.

Looking at Q3 operating expenses, we continue to assertively invest in our business and hire employees amid the pandemic. And we also had our first full quarter of BELLIN expenses. Despite this, the scale and leverage in our model, once again showed through in our strong operating margin and adjusted free cash flow results. For the quarter, we delivered non-GAAP operating income of $14 million or 11% of total revenue, as well as non-GAAP net income of $13 million or $0.18 per share on $73.8 million diluted shares. I’d also like to note that G&A expenses in Q3 included more than $2 million of consulting services related to the LLamasoft acquisition that once again closed in Q4.

Moving on to cash and cash flows, the strength of our business, mission critical nature of our platform and quality of our customer base continues to evidence itself in our cash flow results. Q3 operating cash flows were $19 million, and adjusted free cash flows were $17 million or 13% of total revenue. These results included a cash outflow of approximately $13 million for prepayments we made to our primary hosting provider to optimize long-term hosting costs. For the trailing 12 months, operating cash flows were $80 million or 16% of total revenues and adjusted free cash flows were $96 million or 20% of total revenues. As a reminder, we define adjusted free cash flows as operating cash flows, plus purchases of property and equipment plus repayments of convertible senior notes attributable to debt discount. Cash at quarter end was $1.35 billion, up from $1.34 billion last quarter. We paid $6 million for cash in Q3 to settle obligations from our first convert our 2023 notes.

Now let’s turn to guidance. With respect to guidance, there are several moving parts in a substance for you to consider. First, as we previously noted, due to the ongoing pandemic, many customers and prospects continue to operate with caution, making it difficult to predict the timing of when deals will close. Also from a competitive perspective, we call that Q4 of last year was our last pre-pandemic quarter, and we had a record quarter across the board. The fourth quarter and full year guidance we’re providing today incorporates our current assumptions with respect to the uncertain effects of the challenging macroeconomic environment based on information available to us at this time around new business, renewals, timing of collections and various other inputs. Variations from these assumptions may cause our results to differ.

Also our guidance once again assumes no billings, or revenue contribution in Q4 from Coupa Travel Sabre formerly Yapta. As you may recall and during the year, we expect to $20 million plus in billings in revenue contribution from Coupa Travel Sabre, but since the pandemic hit hard in mid-March, we have essentially recognized no revenue from that business since then. And finally, our guidance today includes our current expectations for a full quarter of LLamasoft. In the coming weeks, we plan to file the required 8K A SEC filing related to the acquisition. From that, you will be able to approximate that LLamasoft as a standalone company, prior to the acquisition had revenue of just over $100 million per year.

As part of the standard purchase accounting we do in every acquisition, LLamasoft acquired deferred revenue will be written down significantly. It will take approximately one year for the impact of the circuit to flow through, and for us to return to the pre-acquisition LLamasoft revenue run rate. Gross and operating margins will also be impacted by this as well, because for one year, we will incur 100% of the cost, but won’t get the full benefit of all the revenue. With that as the backdrop, we expect total revenue for the fourth quarter to be $145 million to $146 million. This includes an expected contribution of approximately $13 million to LLamasoft.

Before providing the breakdown between subscription and professional services and other revenue, let me first share some color on LLamasoft revenue profile. Leading up to the acquisition, the majority of LLamasoft recent new customer business was for hosted SaaS arrangements. However, from a legacy customer perspective LLamasoft did have a sizable cohort of on-prem license arrangements, which are subject to different revenue recognition treatment in SaaS.

On-prem license revenue is recognized upfront at the time of sale including for renewals. While SaaS revenue is recognized ratably over the subscription term. Going forward, we plan to sell the hosted SaaS solution to new customers, and to the Coupa install base customers when sold as an add-on, not the on-prem. For the LLamasoft install base customers with on-prem licenses, we intend to transition the majority of them to the cloud over the next several quarters.

From a P&L geography perspective, we report on-prem license revenue in our professional services in other revenue line. Prior to LLamasoft, we had very little license revenue. With that as a backdrop, we expect Q4 subscription revenue of $124.5 million to $125.5 million, which includes approximately $5.5 million from LLamasoft. We expect professional services and other revenue of approximately $20.5 million, including approximately $7.5 million from LLamasoft. For calculated billings on a trailing 12 month basis, we expect to exit Q4 at a year-over-year growth rate of approximately 27%. For Q4 and FY 21, we expect LLamasoft calculated billings contribution of approximately $22 million to $24 million.

Moving down the income statement, we expect a Q4 non-GAAP gross margin of 67% to 68%, a non-GAAP operating loss of $6 million to $8 million and a non-GAAP net loss of $7 million to $9 million. This results in a non-GAAP net loss per share of $0.11 to $0.13 on approximately $72 million weighted average basic and diluted shares for the quarter. Our non-GAAP, other income, and expense guidance, contemplates potential currency fluctuations and tax liabilities, as well as lower interest rates on our cash and cash interest expense of 18% and 38% on the notes from our second and third convertible debt offerings respectively.

Also after continuing to generate meaningful cash flows and strong collections in Q3, we expect adjusted free cash flows for Q4 to be breakeven to slightly positive. For the fiscal year ending January 31, 2021, we expect total revenues of $523 million to $524 million. This includes subscription revenue of $460 million to $461 million, and professional services and other revenue of approximately $63 million. We expect a non-GAAP gross margin for the year of approximately 71%. Net operating and net income for the year was of $34 million to $36 million, resulting in a non-GAAP net income per share of $0.47 to $0.49 on approximately 72.5 million weighted average diluted shares for the quarter. We will provide FY ’22 guidance on our next call, but as you roll your model 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.

That concludes our prepared remarks. As we move to Q&A, please be mindful that we have a long queue of folks weighting to ask questions. In order to accommodate this, please limit yourself to one question. With that, we would be happy to take your questions. Operator?

Questions and Answers:

Operator

Thank you, Mr. Ford. [Operator Instructions] Your first question comes from the line of Chris Merwin with Goldman Sachs.

Chris Merwin — Goldman Sachs — Analyst

Hey, thanks so much for taking my question. So, I wanted to ask about LLamasoft. This is obviously a very significant acquisition, both financially and strategically. And just hoping you could talk a bit about how the integration work has been going so far, when we might expect to see that fully completed. And then also, from a sales perspective, how has the feedback been so far on it, and how should we be thinking about the impact of this acquisition to deal sizes in time? Thank you.

Rob Bernshteyn — Chief Executive Officer

Sure, thanks for the question. So, the integration work is well underway, as with every acquisition we’ve done to date, we look at it from a people process and technology perspective. We monitor that very closely. And I would expect by the next earnings call we will be very far along, particularly in people and process. And we’ll be able to recognize some of the key tech stack synergies as well. The impact is very, very meaningful here in many of the conversations I’ve had personally as well as members of my team have had with both joint customers as well as customers on both sides, there’s a clear understanding of the synergy that we can unlock between what LLamasoft came to the table with and what Coupa has. And we absolutely anticipate that to be a contributor to continued growth in AR per deal that we’ve had in virtually every quarter for the last 47 quarters.

Operator

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

Stan Zlotsky — Morgan Stanley — Analyst

Perfect, thank you so much. Good afternoon, gentlemen and congratulations on a very strong quarter. Maybe from my end, you mentioned a very impressive of 150 Coupa Pay customers, and 30% Coupa Pay attach rate to new logos. Maybe to dig into that — the attach rate a little bit, is the 30%, is it attach on just logo basis, is it an attach on the spend that’s flowing through the system? And just overall on Coupa Pay, obviously there’s a lot of disruption that’s happening in the world right now, how are your customers thinking about Coupa Pay, and how it can integrate with your LLamasoft deal? Thank you.

Rob Bernshteyn — Chief Executive Officer

Sure, Stan. There are a lot of questions there, but let me just attack it from the way in the order I heard it. So yes, that is in terms of logos, in terms of 30% attach rate. I will tell you that amongst the customers that have signed on with us, their adoption rate is accelerating. When you kind of step back and look at all the modules we’ve launched over the last decade-plus of building this Company, this is our fastest growing new module, without a doubt. And we’re taking a methodical approach to running transactions through the platform. Folks are adopting the solution. They’re seeing it as a reason to streamline a whole bunch of processes that are still often either paper based or phone based, and it require them to be in the office to conduct, or requiring them to go into multitude of different systems to kickoff that payment runs, as one example. So, really good continued progress and we can be more excited about it.

Todd Ford — Chief Financial Officer

Hey, Stan, the other thing I would add to that is that the impact to our pricing from Coupa Pay is still well beyond 20% uplift, where Coupa Pay is includes versus those deals where Coupa Pay is not.

Operator

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

Alex Zukin — RBC Capital Markets — Analyst

Hey, guys, thanks for taking the question. I guess maybe Rob, for you, when you think about your pipeline build in the current environment and what you’re seeing now as hopefully we’re coming through the end of at least 2020, I don’t know about the end of the pandemic. Are we at a point where you’re seeing the new prioritization of spend management decisions kind of move up the priority stack? And help us kind of calibrate as we think about growth on the other side of this pandemic, particularly with things like Coupa Pay with your ability to now sell it to the direct spend and managed direct spend areas, give us a sense for what your prioritization of growth drivers is as you think about the catalysts for growth for next year?

Rob Bernshteyn — Chief Executive Officer

Sure, thanks, Alex. Well, I can tell you certainly looking at the last two quarters when we think about the order of taking on digital transformation in some of these larger companies, what we are offering is certainly making or it’s way higher in the priority list as that’s seen in our financials. That’s also seen in the conversations I’m having with CIOs and chief digital officers and others at these organizations. And one of the wonderful things about the unlocked synergy that we’ll be unlocking between LLamasoft and Coupa is the fact that LLamasoft was largely selling to chief supply chain officers and chief digital officers, which is sort of an overlap in terms of the constituent that we were touching along the way.

In terms of Q4, look, it’s hard to say when some of the deals land. We’re going into a very tough, obviously, environment with the winter and COVID, but I can tell you gaining into the next year, undoubtedly, the synergy of these two offerings and their priority of managing all of your business spending in one place, direct design and modeling and simulation, as well as overall transactional spend is something companies would be short served if they weren’t putting higher and higher on their list of areas to attack. And we can help them with that in a big way.

Operator

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

Michael Berg — Mizuho — Analyst

Hi. Sorry, I was on mute. This is Michael Berg on for Siti Panigrahi. Congrats on a great quarter. I wanted to ask — this has already been asked a couple times, but how are you thinking about the recovery as we go into next year. I know you’re being a little bit cautious in the Q4, but how would — and how would a vaccine impact the Coupa business?

Rob Bernshteyn — Chief Executive Officer

Look, that’s a very hard question to answer without making predictions that I probably can’t make without knowing how things work out in the next four months with the points you just laid out. But I can tell you what we’re doing is making us stronger and stronger every week, every month, every quarter. Our customers see incredible value in what we’re offering, they’re paying us more and more on an annual subscription basis. The customers that we have are renewing and looking to add on more business without us actually pushing sales in their way, they’re actually absorbing a lot of our additional offerings. There’s a great deal of value in thinking about supply chains at this moment, and thinking about optimized ways to run your business when we get back to a new normal.

So, we’re putting our best foot forward quarter in and quarter out. And that’s coming out in what you see in the financials, but more importantly, it’s setting us up for a really, really incredible future in terms of unlocking the potential of business spend management in a huge total addressable market globally.

Operator

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

Nick Negulic — Truist Securities — Analyst

Hi, how is it going? This is actually Nick on for Terry. Thanks for taking our question. So, I guess in terms of your PowerApps what are you most excited about from a growth perspective over the next few years? And just as a follow-up, how much have you thought about forming versus hunting new logos when driving adoption of these PowerApps? Thanks.

Rob Bernshteyn — Chief Executive Officer

Sure, and thanks for the question. So, we are largely hunting, and we continue to do so because when we land in an account we deliver value very, very quickly to our customers, and then they choose over time to add on more and more capabilities. As you know, we started procurement and procurement does not represent the majority of what we offer our customers today. So that’s a very exciting development. What I’m most excited about is not one individual module. There’s certain quarters when one module leads, there are other quarters a different module leads. There are certain industries when one module leads, there’s certain company sizes where a different module leads.

What I’m most excited about is the synergy amongst these modules, how we go from all the way from someone in an organization thinking that they need to request some good or service, all the way to the workflow, the ordering, the receiving, the ability to invoice from the supplier, the management the supplier experience, all the way through managing the inventory and on-hand inventory, and reordering times, and updating the contracts with the suppliers, and managing the money in an organization and the expense processes, all the way back to the AI and algorithms that are being used within LLamasoft to help us design and plan the way we’re going to spend money and plan our supply chain.

So it’s unlocking the power of all of these things working together for companies so they actually orchestrate in a world of business spend management. And that’s something that has never been delivered in our industry, and it’s something that we’re laser-focused on in terms of building the people, the processes and technologies to make that a reality.

Operator

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

Koji Ikeda — Oppenheimer — Analyst

Yes, congrats on the quarter, and thank you for taking my question. Just had a question on LLamasoft there, digging in on to their revenue model a little bit. You said they have a healthy portion of legacy license revenue. Could you just let us know what that mix of, of that $100 million coming in from LLamasoft? And then how should we be thinking about that transition to SaaS for those customers, is there any sort of expected revenue uplift from the transition to SaaS from a legacy plus maintenance model? Thank you.

Todd Ford — Chief Financial Officer

Hey, Koji. Yeah, let me give you a few data point on the revenue breakout, and how it’s even transitioned in the past six months, and then a few comments on professional services as well. If you look at last year, their last fiscal year, approximately 46% of the revenue was licenses, 32% was subscription, and 22% was professional services. So once again, that’s last year. If you look at the first six months of this year, the licensing has gone down from 46% to 24%, subscription revenue has gone up from 32% last year to 45%. And then professional services is roughly 30%, 31%, and on professional services, two things I would call out there. Over time, we do expect it as a percentage to be more in line with our historical norm.

Prior to Coupa, they didn’t have SI relationships that we do, so some of that will be transitioned to SI. But the vast majority of that prior to the launch of llama.ai they would build AI and machine learning models on a customer-specific basis, and that’s being productized as a recurring revenue stream as well. So, the pro serve amount, you’ll see a lot of that move into subscriptions over the coming quarter. But it’s transitioning actually fairly quickly from on-prem to subscription SaaS.

Rob Bernshteyn — Chief Executive Officer

I would add to that, I think it’s important because some of the questions have been around synergy, that whether it’s delivered initially on-prem and moving to cloud, the real value here is, first of all, on the 150 data scientists that we now have has part of Coupa working on one IP data model with an algorithm library that is very, very robust, and that’s going to allow us to take their supply chain simulation, their demand planning capabilities, their own build-your-own app environment, right, and merge that with the transactional community intelligence we have. All the data we have around order cycle times, restocking patterns, time to delivery, ordering trends to help customers actually predict the way that their supply chain is going to function, help them forecast with a high degree of accuracy what is going to be happening within the way they spend organizational money.

And that’s going to help them in big, big ways that will be seen in their financials. When should they do restocking? When should they renegotiate to drive their margins? What are the landed costs of any item that they purchase? How do they optimize order quantities? How do they figure out optimal transportation routes and mitigate supplier risk? And so much more. So the value here is really in the data model, the IP, and the people. And the delivery model and topology for that will be mitigated over time, will be merged over time into a 100% cloud-based environment.

Operator

Your next question comes from the line of Michael Turrin with Wells Fargo.

Michael Turrin — Wells Fargo — Analyst

Hey there, thanks. Thanks and good afternoon. I just want to, maybe one for Todd on just the margin impacts and how you think about growth, and first profitability from here? Obviously you’re layering more capabilities on to the platform and with LLamasoft, maybe at a little bigger scale than what we’re used to. Once we’re through just kind of the near-term accounting impacts of some of the things that you’ve called out, how should we just think about the general resources required? Is the extension of something into supply chain planning, how natural is that given the sort of resources that you have today, how natural sort of a tangentially added selling motion is there? Or are there more things you need just to help add scale in that CFO-type conversation into the purview of what you’re working towards here?

Todd Ford — Chief Financial Officer

Yeah, so at the highest level, we look at acquisitions from multi several factors and dimensions, and one of them is definitely synergies. And, as Rob kind of went into from a product synergy, there’s actually a lot of synergies on the go-to-market, the engineering and obviously, we can drive a lot of synergies on the back office type functions. And we act very assertively on that. So, we’re not hey, let’s wait six to nine months to figure that out, we actually do that as part of the M&A transaction and partnership with the Aquiire in this case, and it’s very similar, just I would — even though it’s much bigger than some of the other acquisitions, but if you look at BELLIN right, a couple quarters margins returned up 72%, 73%. And in this case, it’s order of magnitude, but the timing to get there shouldn’t be any different in two to three quarters, you should see the leverage in our financial model continue and still on the path to the long-term targets that we highlighted at our last Analyst Day. So, from a resource perspective, I think it’s a one plus one equals three, and in the areas where we can drive synergy, we’re certainly moving on those.

Operator

Your next question comes from the line of Matt VanVliet with BTIG.

Matt VanVliet — BTIG — Analyst

Good, thanks for taking the question. Congratulations, I guess thinking about the question about overall attach rates and some of the PowerApps I was asked earlier, but from a little bit different angle, obviously a lot of uncertainty in the market. Just curious what you’re seeing with deal sizes, maybe total modules per deal. Just kind of what you’re seeing, I know historically, you’ve landed much larger, but are customers trying to take on a little bit more of a land and expand in this environment or are you still seeing the demand for automation, maybe even outpacing what budgets look like and sort of factoring in those different elements there?

Rob Bernshteyn — Chief Executive Officer

Well, I would say what we saw early on when the pandemic hit, it was a lack of interest in doing bigger, more transformational initiatives out the gate. And so we wound up picking up more smaller entry point types of deals than we had anticipated, but if you look at the last quarter, we’ve seen really in many ways return back to thinking about this in a much more broad context. And I think customers are having real vision lock with us around having all these proxies working in one integrated fashion around one data model, for one company that has highly strong references of measurable success delivered, that’s developed best practices for deploying these solutions with a host of systems integrators, we’ve trained nearly 5,000 people around the world to implement Coupa.

So we’re starting to return back to what we always knew is the right vision, which is more and more of these capabilities upfront transformational type projects, and that’s evidenced in your question around ARR per deal that continues to go up.

Operator

Your next question comes from the line of Peter Levine with Evercore ISI.

Peter Levine — Evercore ISI — Analyst

Great, thank you for taking my question. Congrats on a good quarter. But curious if you could take deeper into the Federal business, maybe talk about how large the Federal opportunity is, what are you replacing, if anything and then anything unique worth calling out in terms of sales cycles, go-to-market approach, anything would be great. Thank you.

Rob Bernshteyn — Chief Executive Officer

Sure. Well, first of all, the challenge of Federal, as we all know is that starting out the sales cycle tends to be quite long. And there’s a whole host of things like FedRAMP, and more that you need to do to gain credibility and trust of both the civilian side, as well as agencies like the Department of Defense and others. So we have a robust pipeline now built-up on both sides of the house, we also are gaining quite a bit of momentum here with LLamasoft and that a lot of the things that many of these agencies are struggling with do pertain to the design and planning of their supply chains, in a highly agile world, something that agility is something that they sorely desire.

So what we’re replacing very often is either some kind of static solutions that are very, very difficult to turn into an agile environment, or we’re walking into an environment where they just don’t have robust solutions for supply chain simulation, for easy use, simple indirect spend procurement and invoicing. So across the board, we think there’s a big, big opportunity here and we’re just scratching the surface of it, but thankful that we’ve built the robust pipeline to begin to take it to next level.

Operator

Your next question comes from the line of Andrew DeGasperi with Berenberg.

Andrew DeGasperi — Berenberg — Analyst

Thanks for taking my question. I just had one on Coupa Pay. It’s been a few quarters you have a quite a set of customers now using it. I’m just wondering have you received any feedback in terms of the pricing, in terms of how do they feel? It works for them at this stage and you potentially see any changes coming if otherwise?

Rob Bernshteyn — Chief Executive Officer

Yeah, thanks for the question. We continue to fine tune that, we’re still not in the degrees of numbers where we can get to a place where we can say what percent we want to be part of ARR versus exactly what percent would be sort of shared or at risk, but I can tell you, there is a very strong appetite amongst this customer base for all of our Coupa Pay products from V-Card to our Accelerate to invoice management, and the uptake and adoption is very strong. So as we get into higher numbers more and more throughput, we’ll be able to fine tune, fine tune our pricing, but we haven’t gotten strong pushback in any way, and in fact, there’s real interest in helping us fine tune that amongst our customer community. So we’re going to continue along that path.

Operator

Your next question comes from the line of Steve Koenig with SMBC Nikko.

Steve Koenig — SMBC Nikko — Analyst

Hey, great. Thanks, guys for taking my question. Just another one on LLamasoft, can you help us understand like, to what degree is LLamasoft poised to change your spend mix between indirect and direct procurement? And maybe just digging down a minute, they did a pretty big acquisition maybe a year and a half ago of this opex analytics? Can you explain how that fits into LLamasoft mix and those data scientists and that revenue was that more pro-service that was being productized? So maybe just a little bit there on LLamasoft would be great.

Rob Bernshteyn — Chief Executive Officer

Yeah, sure. That acquisition brought a whole host of capabilities around demand planning. And you’re exactly right, a whole host of data scientists to help folks companies that LLamasoft served, get better and better at forecasting the future, literally creating a digital replica of the physical world inside their platform to help companies understand what’s actually happening in their supply chain right to answer simple questions. Simple example, is we’re not traveling as much. So Coca-Cola, there is demand for beverages at the airport, these days probably not. So how can you reroute some of your supply chain to account for that? How do you meet the revenue goals based on goods availability in general, right.

How do you begin to run what if scenarios with high degrees of fidelity, how do you avoid out-of-stock in certain categories, in a very dynamic environment, we have a lot of customers now, jointly that are going from international single sourcing, they need to get into domestic markets and figure out multi-sourcing strategies where they still optimize time to delivery, optimize on hand inventory, optimize the way they make their sourcing choices and beyond.

So this is very, very significant for us, and to your point about mix of direct and indirect, as you know for probably two and half years, we’ve been taking on more and more direct spend through our invoice management capability, through our inventory management capability, and so, this is a continued evolution in that area, but what’s super powerful again is the ability to take real transactional data, both direct and indirect, and feed that back into the design and planning process, so that you can not only simulate a better version, a more precise version in a digital environment. But you could be better at prescribing optimized way to set up your spend processes, and predict and prescribe, as we say with the letter P in Coupa. So the opportunity here is really, really exciting, I think will be first to market really in the world in bringing these types of things together for the benefit of some of the largest companies in the world today.

Operator

Your next question comes from the line of Ryan MacDonald with Needham & Co.

Ryan MacDonald — Needham & Co. — Analyst

Thanks for taking my question. I guess a quick follow-up to the earlier Federal question. Can you talk about what potential there is now given the breadth of the platform and the growing FedRAMP status for a potential government wide deal similar to what we saw with Concur several years ago, and then on LLamasoft, could you just talk about the process of how you’re thinking about providing support for the on-premise customers, and what assumptions you might be making for churn? Thanks.

Rob Bernshteyn — Chief Executive Officer

Well, so I think it’s early to talk about a government-wide deal. We don’t have something that in flight at the moment to be very transparent, but the opportunity is obviously very, very meaningful both on the direct supply chain design and planning side, as well as on the indirect transactional side. So, the opportunity is definitely there, and as we gain more and more of these supporting sort of stamps of approval like FedRAMP and beyond with that opportunity auto grow meaningfully.

Todd Ford — Chief Financial Officer

Yes, and then on the LLamasoft with the respect to on-prem and the cloud, as you can see in the last six months, the transition to the cloud has been pretty rapid, much faster than you would see another historical company, and I think that’s just because of the value of brains and the way that it’s deployed, and once again being an abstraction layer of an ERP, similar to our strategy from day one. And I think if you wrap that around, our number one core value of ensuring customer success, we’re going to make these people successful, and while we may take a conservative mindset towards renewal rates, you know, our goal is to keep 100% of them, and certainly have a higher renewal rate than perhaps maybe what was historical run rate.

So, we’ll obviously get more details on that in history as time goes by, but I think we’re positioned with the strength of Coupa and also the strength of LLamasoft, and this was a very strong company with deep leadership across the board. And I’m very confident that we’re going to create some great results there.

Operator

Your next question comes from the line of Brad Sills with BOA Securities.

Brad Sills — BOA Securities — Analyst

Great. Hi guys, thanks so much for taking my question. Another question on Coupa Pay, nice result there on the net ads there and new ads there. You mentioned the Amex partnership for V Card. You talked about a customer running cross border. I know there is the accelerate option in there as well. Can you talk about some of these add-on services to the base offering? What is the interest level been there in our customers running the base offering in order to get to some of these other transaction services, or are these kind of further down the line, any color on the attach rate there, and maybe in volumes would be very helpful? I know it’s very early. Thank you.

Rob Bernshteyn — Chief Executive Officer

Sure. We’ve seen both — interestingly, we’ve seen both types of permutations. We’ve seen some cases where obviously a large portion of our customer base uses our requisitioning capability, our purchase order capability, receiving invoicing. It’s only natural for them to go further downstream into handling payments, but we’ve also seen it go the other way around where they see the value of all the upstream capabilities, everything from sourcing and contract management, but they actually begin with pay in their deployments, because they see the greatest opportunity for automation, streamlining, less errors in that area, and then they go upstream from there.

So it’s always been our vision to have a set of capabilities that operates very much like a Swiss Army knife, where you can begin with the tool that is most relevant to your company at the current time, and then begin to utilize all the other capabilities as needed. And that maturity model is continuing to express itself. And we see that obviously in the mix of products, our customers are continuing to uptake.

Operator

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

Joseph Vafi — Canaccord Genuity — Analyst

Hi guys, good afternoon. Thanks for squeezing me in. Just — and we really interested to hear, you know, if we kind of rewind the clock a couple of years ago, the ROI value prop that you were talking about, just if you’re a new perspective, Coupa customer, and a couple of years ago you were focused on a supplier network that was providing discounts and workflow benefits, and now you look at the kind of totality of the solution from Pay to LLamasoft to BELLIN to all these other add-ons, is there a way to kind of think about how that ROI has changed? And I know it’s a little bit more subjective than perhaps it used to be, but it’d be interesting. Thank you.

Rob Bernshteyn — Chief Executive Officer

Thanks for the question. Well, the wonderful thing is that ROI has only grown with every acquisition that we’ve integrated into our platform as well as what we’ve done organically. I mean, if you just look at LLamasoft as one example, they’ve been realizing for customers, you know, 5% to 10% savings in areas from sourcing to production improvements of a transportation optimization, better inventory management, better handling management. So, all of these capabilities all come back down to real measurable value, real dollars and cents. They could see on an income statement.

At the same time, they have huge strategic value, right? They provide greater visibility to business spending within an organization. They mitigate supplier risk for the supplier network that you referenced a moment ago, and they bring companies into a digital world, where they seamlessly manage all of their business spending in one integrated digital platform, and that’s always been the vision for Coupa and one we’ve been executing on now for well over 10 years.

Operator

Thank you, ladies and gentlemen. I’d now like to turn the call back over to Mr. Steven Horwitz for any closing comments.

Steven Horwitz — Vice President of Investor Relations

Thank you everyone for joining us and apologies to the number of questioners who are still in the queue. We look forward to just talking to you again in March for our Q4 earnings report. Thanks again, guys.

Operator

[Operator Closing Remarks]