COUP (2021 - Q4)

Good day, ladies and gentlemen, and welcome to the Coupa Software Fourth Quarter Fiscal Year 2021 Earnings Release Conference Call. At this time, all participants are in a listen-only mode. At the conclusion of our prepared remarks, we will conduct a question-and-answer session. As a reminder, this call is being recorded. I'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 H

Thank you. Good afternoon, and welcome to Coupa Software's fourth quarter conference call. Joining me today are Rob Bernshteyn, Coupa's CEO; and Todd Ford, Coupa's CFO. Our remarks today include forward-looking statements about guidance and future results of operations, strategies, market size products, competitive position and potential growth opportunities. Our actual results may be materially different. Forward-looking statements involve risks and uncertainties and assumptions that are described in our most recently filed 10-Q. These forward-looking statements are based on our beliefs and assumptions today, and we disclaim any obligation to update any forward-looking statements. If this call is replayed after today, the information presented may not contain current or accurate information. We also present both GAAP and non-GAAP financial measures. A reconciliation of certain of these measures is included in today's earnings release which you can find on our Investor Relations website. A replay of this call will also be available. Unless otherwise stated, growth comparisons are against the same period of the prior year. One final note before we get started is that we will be conducting an Analyst Day on July 15, and we'll be doing so in a virtual setting. With that, I will now turn the call over to Rob. Rob?

All right. Thanks, Steven. Hello, everyone and thank you for joining us. It's amazing to think about where the world was a year ago. Last year on this exact date, we held our year-end earnings call for fiscal 2020. That same morning, our home state of California was announcing emergency shelter-in-place orders in response to the COVID pandemic. It's likely that none of us realized at that moment how much our world was about to change. With employee safety as a top priority, companies would be shuttering their offices and bracing for impact, and this uncertain time called on all of us to do things differently with many of our customers needing to take swift actions to survive. Through it all, I'm proud to say that my Coupa colleagues and I stood side by side with our customers. We sought ways to help them in any way possible, and thankfully, our expertise in business spend management proved useful. In an adverse uncertain situation, companies can often make the most important impact by controlling their spend and we helped many to do so. As the leader in business spend management solutions, we were there to ensure our customers had the resiliency and the agility to endure the difficult times and to prevail despite them. We ourselves also took to heart the state of mind and wisdom we impacted to our customers as we planned our own growth strategy in the face of this wide-scale global pandemic.

Thanks, Rob and good afternoon everyone. As Rob noted a year ago today, we held our fiscal 2020 Q4 earnings call. At that time, we were entering a period of significant uncertainty as the COVID pandemic was just beginning to impact businesses across the globe. In spite of this uncertainty, we approached the situation with resiliency in mind. We weren't just focused on getting through the pandemic, but on continuing to build our business to be best positioning upon exiting COVID. During the year, we continued to invest across our organization and to the success of our customers and we made strategic investments with the acquisitions of Kinaxis, BELLIN, Moop Net, LLAMAsoft during fiscal '21 and our most recent acquisition of Pana in early February. While making these investments, we delivered 39% year-over-year revenue growth while continuing to show leverage in our operating margins and adjusted free cash flows. In fact, even with the economic headwinds and the impact from our acquisitions, we executed well and still generated an adjusted free cash flow margin of 21%, up from 14% last year and we exited the year from a Rule of 40 perspective at 60% and we define the Rule of 40 as revenue growth rate plus adjusted free cash flow margin. I'm proud of our fiscal '21 results and that we delivered on our commitments to our stakeholders. Most importantly with the assertive posture taken last year, we are well positioned for FY '22 and beyond. Now, let's get into the details of Q4. We had a very strong Q4 across the board with significant contributions from Coupa Pay including Coupa Treasury and Coupa Supply Chain Management, formerly LLamasoft. Total revenue for Q4 was $164 million, up 47% year-over-year with subscription revenue of $135 million, up 37% compared to last year. Total revenue for fiscal '21 was $542 million, up 39% year-over-year with subscription revenue of $470 million, up 36% compared to last year. The revenue contribution from LLamasoft for Q4 and the full year was approximately $22 million. As a reminder, the opening deferred revenue for LLamasoft was subject to a one-time purchase accounting haircut of nearly 50% and it will take at least one full annual cycle before the impact of this haircut has worked its way through our financials. Calculated billings for Q4 were $270 million, up 49% year-over-year and $642 million for the full year, up 37% compared to last year. Calculated billings included approximately $15 million of LLamasoft opening deferred revenue post haircut. As a reminder, the comparative period of Q4 fiscal '20 last year was our last pandemic quarter and we delivered record results across the board during that quarter. Given the difficult compare and the volatility of the pandemic-influenced business environment throughout fiscal '21, we were pleased with our execution for Q4 and for the full fiscal year. Turning to gross margin; our fourth quarter non-GAAP gross margin was 70.1%, well above our guidance of 67% to 68%, but approximately 2.5 points lower than Q3 due to the LLamasoft acquisition. Given the size of LLamasoft, we expect to experience meaningful gross margin compression for most of fiscal '22. This is already reflected in our guidance, which I will share with you in a few minutes. Non-GAAP gross margin for fiscal '21 was 71.9% compared to our guidance of 71%. Let's now take a look at Q4 results of operations. Despite the impact of onboarding the full LLamasoft expenses while taking a revenue reduction from the opening deferred haircut, the scale and leverage of our financial model was once again demonstrated through our strong operating income and cash flow results. Specifically, we delivered Q4 non-GAAP operating income of $11 million or 7% of total revenue as well as non-GAAP net income of $13 million or $0.17 per share on approximately 77 million diluted shares. For fiscal '21, we delivered non-GAAP operating income of $53 million or 10% of total revenue as well as non-GAAP net income of $56 million or $0.77 per share on approximately 73 million diluted shares. We also delivered very strong cash flow results. This is a testament to the Coupa platform being mission-critical for our customers and vital to achieving their business objectives. Q4 and full year operating cash flows were $20.4 million and $78.2 million respectively. Adjusted free cash flow for the fourth quarter was $38.1 million or 23% of total revenues. For fiscal '21, adjusted free cash flows were $113.5 million or 21% of total revenues, a result which truly demonstrates our ability to grow the business and to do so profitably. Please note, that our Q4 operating cash flows were negatively impacted by one-time $19.4 million payout of legacy equity awards for the LLamasoft acquisition. These are awards that while granted by the legacy company and paid for out of acquisition consideration flow through the P&L of the acquiring entity, in this case Coupa, as stock-based compensation costs. For the full year, operating cash flows were also negatively impacted by $27.4 million related to early redemptions on our 2023 convertible notes with most of this impact coming in Q2 and Q3 and none in Q4. In total, the full-year impact of these items was $46.8 million. I mean that our operating cash flows would have been $125 million if we adjusted for these two items. Cash at quarter-end was $606 million; the decrease in our cash balance was driven by cash paid for the LLamasoft acquisition of approximately $792 million. As you already know, we also issued stock with a fair value of approximately $635 million to complete the transaction. Now, let's turn to guidance. There are several inputs this quarter. So I'll start by laying out the framework. First, the vaccines are now being distributed and it appears we are continuing to trend in the right direction. It will still take some time for things to return to normal, at least some version of the new normal. Many customers and prospects continue to operate with caution, making it difficult to predict the timing of when deals will close. Though we continue to see incremental strength with each successive quarter both in terms of feedback from our go-to-market teams and customer and prospect conversations, considerable uncertainty still exists and thus we will continue to proceed in a measured fashion. Next, our guidance once again assumes no billings or revenue contribution in Q1 or fiscal '22 from Coupa Travel Saver. It is possible we could see travel pick up in the second half of the year. However, it's currently too difficult to predict what that recovery may look like with respect to both timing and volume. We will update you on future quarters if we begin to incorporate contributions from Travel Saver into our guidance. Finally, let's talk about Coupa Supply Chain design and planning, formerly LLamasoft. As we've stated in the past, our strategy is to align their business model with Coupa's, optimizing for long-term success with Coupa core and supply chain management working together in one cloud BSM platform. We are committed to this approach, which is clearly the right long-term strategy for our business. In the near term, however, this will cause the revenue contribution from LLamasoft to be significantly lower than their legacy pre-acquisition annual revenue of approximately $105 million. For at least all of fiscal '22 and most, if not all of fiscal '23; let me explain why. First, our objective is to convert legacy on-prem license arrangements to the cloud. This process, which we anticipate will be spread out over the next two plus years and will primarily happen in conjunction with customer renewals and it's already underway. Under ASC 606, license revenue is recognized upfront whereas cloud revenue is recognized ratably over time. Therefore, cloud conversions will create a decrease in revenue on the front-end. Conversely, revenue on the back-end will be greater in a SaaS arrangement than it would have been with an non-prime license, but it will take time to reach that inflection point. As a reminder, we report on-prem license revenue in our professional services and other revenue line. Next, LLamasoft was doing substantially all their own implementation work prior to the acquisition, which resulted in meaningful professional services revenue. As you know, GSI's and regional partners lead 80% plus of our Coupa implementations. This partner-led model is key to our strategy and we are training our partners to take on LLamasoft professional services work. This will drive a much cleaner model and better margins in the long-term. Finally, the opening deferred revenue haircut for LLamasoft was significant, nearly 50% as I noted earlier. This haircut will have a meaningful impact on fiscal '22 subscription revenues. With these considerations as a backdrop, we expect total revenue for the first quarter to be $151.5 million to $152.5 million with subscription revenue of $133.5 million to $134.5 million and professional services and other revenues of approximately $18 million. As a reminder, we recognized revenue based on the number of days in the quarter and since there are fewer days in Q1 due to February, steady state subscription revenues are seasonally lower by several million dollars in Q1 compared to Q4. For calculated billings on a trailing 12-month basis, we expect to exit Q1 at a year-over-year growth rate of approximately 33%. Moving down the income statement, we expect a Q1 non-GAAP gross margin of 65% to 66%. Factors contributing to the lower Q1 gross margin guidance include lower LLamasoft revenues due to the deferred revenue haircut, shift to subscription revenue and shifting services revenue to partners and the reduced number of days in Q1 because of February. We expect a non-GAAP operating loss of $10 million to $12 million and a non-GAAP net loss of $13 million to $15 million resulting in a non-GAAP net loss per share of $0.18 to $0.21 on approximately 73 million weighted average basic and diluted shares for the quarter. After finishing the year strong with $38.1 million of positive adjusted free cash flows in Q4 on strong collections performance, we expect Q1 adjusted free cash flows of $3 million to $5 million. For the fiscal year-end, January 31st, 2022, we expect total revenues of $675 million to $678 million. This includes subscription revenue of $586 million to $589 million and professional services and other revenue of approximately $89 million. In this guidance, we are assuming a legacy subscription revenue contribution from LLamasoft of $30 million to $35 million. The interesting dynamic here is that to the extent we are not successful in converting former LLamasoft customers to the cloud in the time frame we are planning, our revenues will be higher in the near-term. Turning to gross margin, for fiscal '22, we expect a non-GAAP gross margin of 66% to 67%, a non-GAAP operating loss of $7 million to $10 million and a non-GAAP net loss of $17 million to $20 million resulting in a non-GAAP loss per share of $0.23 to $0.27 on approximately 73.5 million weighted average basic and diluted shares for the year. As we work our way through the timing of revenues recognized from LLamasoft as well as taking advantage of synergies on the cost side of the equation, we expect our P&L to improve over the next several quarters. With respect to adjusted free cash flows, we expect to be up on an absolute dollar basis for fiscal '22. That concludes our prepared remarks. We'd now be happy to take your questions. Operator?

Thank you, Mr. Ford. Your first question comes from Marla Lencho from Barclays.

Hey, congratulations and a great finish to the -- to a very strong year. My question was around the Coupa Pay and there -- the invoice function. Rob, can you talk a little bit about what you're seeing in terms of the debate we -- you have the clients around doing this in Coupa versus doing this in ERP; you gave a very good example. I would assume that situation -- that messiness that you have with the ERP system is pretty much everywhere. But where are customer on their journey to kind of actually acknowledge that and finally move on and embrace you? Thank you.

Sure. Thanks so much for the question. Look, they -- they continue to acknowledge it without a doubt the challenges that they're having, they're not difficult to see the very real challenges. And because of that our customer acquisition rate is accelerating, and our deployments and transactional spend running through the system is accelerating. A lot of it has to do with the fact that we're in a very unique situation, we face a scenario where you have very disjointed processes for Pay, you have a lot of manual effort being deployed, you have a lot of different perhaps ERP modules being used. And you have this value proposition of a centralized hub where you have visibility to everything, from the point of thought around making a request to buy something all the way through to payment, and the ability to use any rail seamlessly to make those payments across their geographies of -- you know, hundreds, in some cases thousands of suppliers. So we're continuing to make really, really good headway there. And it's a process, but one that we're obviously committed to because the value proposition is just so, so strong.

Your next question comes from Bob Napoli from William Blair.

Thank you. I appreciate it. I was wondering if you could give any color on the success in cross-selling some of the new acquisitions in LLamasoft and the Treasury business in particular that seemed to have so much? What -- are they filling in the gap you expected in your product offerings?

Sure. So let me just say that what's really working for us is our set strategy of delivering an integrated business spend management platform. What we're seeing from customers of any size that we interact with is, they do not have visibility to their spend, whether it pertains to direct or indirect, whether it pertains to the cash that they're utilizing properly to manage the expenditures that they're making; whether it has to do with their expense processes, their invoice processes, their contracts management, their sourcing. They are looking for across the board visibility, control and optimization of business spend management, and because of that they realize the synergy of partnering with a value, as a service player like ourselves who offers a business spend management platform for that. So, of course, they are uptaking supply chain design and planning, Treasury, and many of the modules and capabilities I just listed. But the secret sauce to it is, the alignment between ourselves and our customers around the vision of business spend management, and how to get to an optimized success with it.

Your next question comes from Daniel from Citi.

Great, thanks for taking my question. I just wanted to go back to your comments about the source together events in the Coupa Advantage. If I heard correctly, you had sort of 70 suppliers kind of offering there; how much did that grow in the past year? And maybe, we know -- can you inform us on anything you're doing to sort of boost the number of suppliers that are making use of that? Thanks.

Well, our focus is on boosting the value that we deliver to our customers that may be by increasing more suppliers than may be through negotiating stronger contracts with our preferred suppliers, that may be by facilitating these incredible events we're driving where we're bringing together multiple customers to facilitate a sourcing event where everyone gets to save based on aggregating buying power. So our orientation is not so much on number of suppliers, it's always oriented towards the value we're delivering for our customers and -- you know, we're very proud of our continued growth in the value we're driving for all of them. You know, what you could see numerically there is that we're over $2.3 trillion of spend is now running through the platform, where you can see numerically is that our average subscription per year from our customers is growing virtually every quarter now for 48 quarters; so that's our orientation and all of that is moving in the right direction, and we're very pleased with it.

Your next question comes from Stan Zlotsky from Morgan Stanley.

Perfect, thank you so much, guys. And congratulations on a very strong end to the fiscal year. When you look at your fiscal '22 guidance, what are some of the -- from the macro data points that you're looking at as far as informing how you're thinking about growth -- revenue growth for the full year and where to put your -- your investment dollars? Thank you.

Maybe we can address that both from external, and then we'll ask Todd to talk about a bit from internal. But from an external perspective, as you'd imagine as executives of the company we'll look at every element of data we have in front of us. We're looking at how our pipeline is growing. And then, I'm proud to say it's the largest pipeline we've ever had as a company at this moment. We're looking at the talent that we have, all over the world that can work that pipeline to bring deals to closure. We're looking at our ability to implement those customers successfully and quickly, and the systems integrator network that we're developing and certifying around the world. We're looking at just about every piece of data we can get to continue this -- this move, this quarter-over-quarter move to build out the company. So, not one specific measure but every measure that -- that we have in our purview from an external perspective.

Yes, Stan. And then, from a financial perspective, obviously, we look at trends that we've seen in the past three quarters. We look at the strength of the pipeline, picking up multiple data points from customers and prospects alike. And the -- looking at a range of outcomes and trying to take a very measured approach with respect to that range. And similar to how we've done things in the past; we assume that we'll start that kind of a lower range, and as we execute we'll update it accordingly. And our guidance and philosophy too -- our guidance philosophy hasn't changed.

Your next question comes from Michael Turrin from Wells Fargo.

Great, thanks. Good afternoon, thanks for taking the question. On LLamasoft, I just was hoping we can get more detail on what that helps unlock from the direct spend side and how that value can potentially contribute to the community on the Coupa platform? I'm also wondering, just initial observations you might be able to share on any difference between the two buyers? And how much cross-sell could prove part of the equation for success there as well; appreciating Todd's commentary just around the push-pull dynamics of migrating to the cloud versus the traditional license model there.

While at the broader sense I can tell you there is not one executive that I've spoken to over the last four to five months that is not thinking about how they get work through optimization of their supply chain in some way, right, especially if they're dealing with any kinds of products whatsoever. So, that is an area of very real focus, not only commercially, but also in the public sector, obviously. So, we think we've got just an incredible platform here to help companies not only design their supply chain for longer term and short-term, but actually plan out what goods and services, they're going to need to source immediately, and then take action on those sourcing events through operational and transactional purchasing and receiving, and -- of course, invoice reconciliation, and payments, and background for designing and planning; so the synergy is very clear, and the alignment is very clear. And we're really excited about the culture of the people that we brought on as well, that's starting to really become one Coupa village as we like to call it here. And that hasn't taken a lot of time for us to really see things out as a set of colleagues grounded in a common set of values; the value proposition is crystal clear. There is a second portion to your question around the value of community data. Very simply put, when you complete a design and set a plan for supply chain, that feeds directly into our sourcing optimization capability. So, once you know what it is that you need, we can help you get it very, very quickly, we can get it from the right folks with the lowest risk and at the right price, and with the highest likelihood of on-time delivery; so that's an obvious synergy point. But the beauty then is, after we see that that transactional spend happening, as you start buying these products; we're picking up a whole host of community data that's highly relevant, everything from time to deliver, to ordering trends, to order cycle time, restocking patterns, consumption data and much more. And we're looking to use some of that information to inform how to more optimally design and plan next time around. And in fact, we've created a center of excellence in data science here that is tasked with optimizing or leveraging that optimized data for the design and planning used case. So it's really, really exciting time for us here because this just has never before been done in our industry.

Your next question comes from Steve Koenig from SMBC Nikko.

Hey, guys. Thanks for taking my question. I was curious to get some color on competition in two aspects. One is, maybe a little bit on your competition with SaaS providers in HR-ERP and procure-to-pay that have made an initiative to try to get in that space in a bigger way. And secondly, on Pay itself, which could ultimately disrupt a huge TAM and B2B payment, you know, understood that this is 99% greenfield probably, but -- but how do you think about your competition in that space as well? Thank you very much, and congrats on the Q4.

Sure, thank you very much. You know, you may be new to some of the comments we've shared in the past round competition, but we all here firmly believe that the primary competitor we have is an incredible one, and that is purely ourselves. No one else is as -- has a broad vision around business spend management that we could see in the market. And so our pursuit of that and our ability to execute for our customers is our fundamental competition. Now, of course, we're not naive, there are some point solution providers and certain distinct used cases that may be competitive for those used cases; but if we align around a common vision with our customers, we tend to be victorious every time. So that's our orientation; it's orientation around becoming a leader in this marketplace by redefining it and delivering values of service that's measurable for every one of our customers. Any point solution providers overtime will have to sort themselves out.

Your next question comes from .

Great. Hey guys, thanks for taking my question. I wanted to ask about Coupa Pay; another question in Coupa Pay, please. In the past, you've provided the ASP uplift, greater than 20%. Could you comment on how that's trending and any commentary on the core invoicing solution versus some of these other add-ons, like V-Card early payment ; are those starting to contribute to that metric as well because it sounds like you're seeing broader adoption of Coupa Pay elements? Thank you so much.

Sure, sure. Happy to answer. So, the tax rate for Coupa Pay this quarter is similar to -- I think last quarter we shared roughly 30% that's healthy, still the -- but certainly the fastest growing new module that we've ever done now up to nearly 200 customers, I think I shared that in the prepared remarks. The customer acquisition rate itself is accelerating and what I think you should know is that customers are thoughtfully taking methodical approach to ramping their transactional spend. And indeed, more and more of that is happening in the last capability of Coupa Pay that we took GA, and that is invoice payments. Of course, we see virtual credit card adoption, we see dynamic discounting adoption but -- or what we call Coupa Accelerate; but at the core, of course, the real play here is around invoice payments and continued healthy adoption and customer add-ons, quarter-in, quarter-out.

Your next question comes from Joseph Vafi from Canaccord Genuity.

Hey guys, thanks for taking the question. Great execution. I know, Rob, you're talking about one big customer and the big savings they had there. I was wondering if you could kind of expand out to a higher level and maybe provide a little color on where you see ROI savings or discount savings now for your broader customer base versus, perhaps where you were a year or 18 months ago. Thanks.

Sure, thank you for that. And again, as you know, as we discussed in the past, savings is one of value proposition, there are so many more around our overall suite. But we measure overall savings in the tens of billions of dollars for our customers, right, in aggregate, and that continues to grow. And that that is delivered through the fundamental value proposition of business spend management; greater visibility to opportunities for savings, greater control around your expenditures, actually preventing spend from happening where you otherwise wouldn't have been able to, and then continuing to optimize that spend so that it's routed -- is routed to the right suppliers with the lowest risk, at the right price points, with the right quality level; so we continue to grow that. And again, quantitatively, I think you see the outcome of that which is just incredible renewal rates and continued adoption of other modules of our product with a lot lower cost of customer acquisition and currently for us which is why we continue to primarily hunt rather than gather in the marketplace.

Your next question comes from Ryan MacDonald from Needham.

Hi, thanks for taking my questions and congrats on a great quarter. My question is really for Rob here. Can you talk about billing in LLama? And how that started to contribute into fourth quarter and what you see heading into first quarter, particularly on the billing side?

Like I mentioned earlier, you know, so the answer is significant contributions in both areas but the most interesting I think and relevant for you, as you think about our business in coming quarters and years is that it's coming through a realization by the prospect, that an integrated platform that supports all the used cases that we have now integrated together and put onto one technology platform, one usability layer, more and more one business logic layer is what they're actually looking for; so continued growth. Having said that, I think it's also important to note that the core areas of Coupa, what you might call organic, if you are thinking about it from a product perspective, it continued to grow rapidly as well, and we see strong growth there.

Your next question comes from Chris Merwin from Goldman Sachs.

Thanks so much for taking my question. As the platform continues to grow here through M&A, can you give us a sense of some of the increases in deal sizes that you're seeing, and I know, it's still early with LLamasoft and supply chain planning, but just trying to get a sense for any increase you've seen there in particular, with deal sizes for customers taking that, in addition to your broader platform, just given a bigger category, supply chain management is? Thank you.

Sure, they're quite meaningful. I mean, I think the two measures to look at as I said, in the past, virtually every quarter, 48 quarters, average annual recurring revenue for the platform for new customers has grown right and incrementally grown. But when you started, you know, very small numbers and you start again, you get into the hundreds of 1000s. And you start doing multimillion dollar annual deals, you know, you're making significant progress. Certainly the addition of supply chain design and planning is a continued contributor to that, and the willingness for just about any executive in the world that runs a meaningful organization to spend money on best in class. Now, modern AI supported information technology solutions for sorting out how to optimize their supply chain is very, very strong. And so we will continue to charge fairly for the values and service we deliver and continue to grow that value as a service on both ends and as we continue our way into this market.

Your next question comes from Brent Mason from Piper Sandler.

Thank you and good afternoon. I was hoping you could double click on the Pana acquisition and logic here, you acquired Yapta about a year ago, imagine you learned a lot in the last year just around the travel space. My question here is, what do you learn in the last year that it's increasing your confidence and decision to double down on travel and expense management? And what was unique about Pana that attracted you to that business, it looks like it's slightly larger than the Yapta, also looks like it's got an integrated payment rails for travel expense management. So walk me through the logic there and what you've learned about that travel expense management space from last year? Thanks.

Sure. Thank you for the question. I think one of the things that's distinctly unique about that company is the culture and the people and the passion they have for this category. It's a category that we've watched, and been in some way part of, for quite some time now. And that's number one, number two; they took a very innovative approach, a very smart pending approach to sorting out the very generic travel bookings process that's prevalent in our industry. And we love the innovation that they brought to that approach and the thoughtfulness they brought to that approach. And so making that transactional construct part of our overall expense management offering and thus, part of our overall business spend management offering just seemed like a complete no brainer to us. And we're well underway to integrating that offering already. We look forward to have being in market with that as one integrated suite here very, very shortly. We look forward to going live on in ourselves here in our own like Coupa environment shortly as well. It's just really, really exciting for us.

Your next question comes from Brian Peterson from Raymond James.

Hi, gentlemen, thanks for taking the question and congrats on the strong quarter. So you've had a pretty successful M&A engine over the last few years. I'm curious on the path of value creation for customers and ultimately, revenue for you. How would you rank LLamasoft versus some of the acquisitions you've made in the past and you also mentioned, migrating services to the channel versus internal, any impact on active deployments or ramping the SIs that are impacting the '22 guide? Thank you.

Well to your first question, how we'd rank it; that's a tough one. Because we appreciate all the people that joined us from all the different companies that we've acquired, and now made part of Coupa core. I mean, they're all my Coupa colleagues, and Todd’s Cooper colleagues, and everyone that's listening here that works at Coupa. So we don't really think of it that way. But what I can tell you is that over the course of the last 12 or so years, we've progressed in terms of the sizes of some of the acquisitions we've taken on, but we did that very thoughtfully, very, very carefully, making sure that we do everything possible to increase the likelihood of those acquisitions, being highly successful from a people perspective, from a process perspective, certainly for technology perspective, as long as all of it is aligned with our common vision around business spend management, and LLamasoft was certainly no exception. Just some incredible folks that were pursuing an area that we will continue to pursue, now part of a much stronger overall core. So that's what I'd say is most important. Maybe Todd could add to some of your secondary question there as well.

From a guidance perspective, Brian, you know, we made an assumption that we're going to convert all the license to the cloud, and the vast majority of professional services work to GSIS, which will bring them billions of revenues if we're successful. And we structured in a manner such that if we don't succeed to the level we expect, or actually revenues and billings would be higher. So we do expect to have some professional services, but then our guidance we assumed very little. And part of that's also just to get the goals and objectives in alignment, that I want to guide to higher numbers with professional services and licenses. And then if it doesn't happen, then we're having a discussion. So we've basically taken that off of the table. And to the extent we don't execute, it's upside to our guidance.

Your next question comes from Peter Levine from Evercore.

Thanks, guys. The piggyback offer, prior comment you made on pipelines. Can you just share how much of that might be net new versus up sells? Curious to know if that mix shift, basically how that mix it's trended throughout the year and your expectations into fiscal '22. And then second is have you guys seen some of the most impacted industries returned to market curious to know if you see a rebound here in 2021 from some of these industries? Thanks.

Sure. Well, we don't you know, we don't break out pipeline in terms of add on or net new, but I can tell you, certainly healthy in both and our primary focus is certainly on net new, net new customers because the add on business tends to come on, as I mentioned earlier, a much lower cost of customer acquisition happens much more organically. In terms of industries, look, we see an acceleration of pipeline in some of the largest, most prominent industries. And as you'd see, with COVID, now starting to kind of stretch and start to look healthy and healthier each day. We see some of the larger projects in manufacturing, Telecom, even high tech, retail certainly move a bit quicker. But those are just some of the verticals and the very, sort of situational data I'm sharing with you. It's not scientific fuel.

Your next question comes from Matt Van Vliet from BTIG.

Hey, guys, thanks for taking the question. Nice job in the quarter. Maybe digging in just a little bit further on the Pana acquisition, and really the overall travel space. Todd, you mentioned that you're not really assuming much revenue contribution this year in the guide. So I guess, maybe a couple of parts. How much more, if anything, do you feel like you need to sort of build out that whole product to be competitive when you see corporate travel coming back and sort of cross selling there to existing customers? And then secondarily, what level of travel or entertainment are you currently budgeting in for the guidance on the margin side for Coupa spending?

Well, you know, on the first part around product, we feel like we're in a really good spot and our expense management module and offering on its own is used by hundreds of customers around the world and is very robust and has been replacing a number of incumbent providers for some time. With the travel booking component with travel saver as well, we’re very encouraged of our ability to not only be competitive, but to really reframe the whole market. I mean, the challenges of that market is frustration with these ability. People booking outside, known channels, not getting the savings that they would like. Frustrations, a lot of money left on the table with pre negotiated discounts that being take advantage of and much, much more. Also, of course, using AI to track fraud, we support each and every one of those challenges that customers are facing with an integrated offering. So we won't rest on our laurels, we'll continue to build out the panel offering it's a core platform that we're going to continue invest in. But, we think we're really well positioned as travel begins to take hold more in coming quarters and emerged as a leader in a very interesting category. But one that we still believe it's just a subcategory of broader business management, which is what we're planning for.

And from a guidance perspective, really what we're doing with Pana is coming from a perspective of resiliency and skating to the path, right, we know the world is going to come back and some sort of sense of normalcy, whether it's six months, 12 months or 18 months. And by getting ahead of this on the travel expense side, we're going to be really well-positioned when travel does come back. So from a guidance perspective, literally no revenue is contemplated in the guidance and then obviously, the expenses are still flowing through the P&L and there are some incremental from Pana that's in the guidance, but I would say it's pretty small in the grand scheme of things.

Your next question comes from Josh Beck from KeyBanc.

Thanks for taking the question. I just wanted to ask a little bit about the budget process that you're seeing from your customers. It seems like a year ago today, the back office really got de-prioritized in light of other front office areas, collaboration, et cetera. Do you think now that we're a year removed, certainly things are starting to look a lot brighter on the vaccine front, that it's been considered the BSM and back office area, more maybe where it was pre-pandemic? I know that's a bit of a tricky one to answer. But just curious maybe on any antidotes, you can share along those lines?

Well, I would say what we're seeing is probably what may be most valuable to the audience here, is that there's a broader arc perhaps than just a one-year. If we look at a five to 10-year arc, in that arc, there's no question whatsoever that this area of business for management is making its way higher and higher on the priority list of digital transformation and moving to the cloud. We've largely started around the customer revenue side or CRM, spent a great deal of time moving, human capital and those core constructs into the cloud and that will really make our own way into one of the last areas to wrap around core ERP, which is business management. So it's still episodic in some cases, obviously. There are certain industries, there are certain companies that see this at the very top of the list where others are not as keen on it. But the broader arc strongly suggests that a greater prioritization in this area is upon us.

Your next question comes from Siti Panigrahi from Mizuho.

Thanks for taking my question. I want to ask you about BELLIN. It's been now more than couple of quarters since you acquired BELLIN. So how's the integration going? I understand BELLIN's is more synergistic to Coupa Pay, since it adds more options to bank connectivity and also, it's in Europe. So how are you seeing the opportunity to post balance Treasury into the US market?

That's correct about the greatest era of synergy with Coupa Pay and that is exactly how that's been playing out. We've been having really exceptional success with BELLEN -- not only from the people perspective, but from the go-to-market perspective, from the customers we're closing, the deployments we're doing. We just finished the annual 1CC conference, which had I think, over 750 active participants in the Treasury community, which is part of our broader Coupa community now. So, really pleased with what's happening with that area of our business.

Last question comes from Mike Murphy from J.P. Morgan.

Hi. Good afternoon. This is Matt Coss on behalf of Mark Murphy. Thank you for taking my question. Rob, you mentioned earlier that you've been able to reduce deployment times by about a month. Is there anything in there that indicates that that reduction in deployment times we'll continue how we're able to accomplish that? And any impact on gross margin from that?

Well, it's hard to predict, but I do think if I were to predict, I would say some of that is certainly sustainable for the longer term. If you think about a typical deployment in a physical world, there are days that are spent flying into the client account, or they spent flying out their dinners -- there's a whole bunch of work that's done that might be fun or interesting for folks, but it isn't focused on the result of getting the customer live. And now when we're on a Zoom session where you have the systems integrator, you have one of my Coupa colleagues, you have the right folks from the customer account, and they are sharing their screen, and configuring in real time and stepping through their Gantt Chart of execution to go live, obviously, that's much more efficient as long as folks are willing and tech-savvy enough to go about it that way. So my instinct is 100% of that operational efficiency improvement will likely not stick as people move back toward travel. I do think a significant portion of it will because we now know that it's doable. And of course, we'll see how that plays out.

And if you wanted to get some additional comments on the record, because we've gotten some messages offline with respect to Q4 billings in revenue contribution, in organic, inorganic. I thought it'd be worthwhile to highlight in this setting. While we don't really think about it that way internally, I know that a lot of you want some of the details here. So when we guided for Q4 for LLamasoft, we guided to $22 million to 24 million billings contribution. And we noted on the call that from the opening defer for LLamasoft was approximately $15 million. And for revenue, we guided to $13 million from LLamasoft and came in at $22 million related to LLamasoft. Some of that revenue came from the bleed off of the opening deferred, which was the $15 million. In addition, LLamasoft had a strong Q4 from net new business, which positively impact Q4 billings and revenues. Since we had little operating history with LLamasoft when we got to Q4, we took a cautious approach in our assumption for new business contribution and as you can imagine, we were pleased by their stronger than expected performance in Q4. Also, it's difficult to bifurcate organic and inorganic contribution when it comes to new business and professional services. What is organic and inorganic is subject to interpretation, and hence difficult to provide an exact number. In general, I personally think about organic billings and revenue growth rate for Q4 to be in the low 30s and as a reminder, that's against a tough compare from Q4 from a year ago.

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