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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549 
FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended October 31, 2021
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number: 001-37901
COUPA SOFTWARE INCORPORATED
(Exact name of Registrant as specified in its charter)
 
Delaware20-4429448
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
1855 S. Grant Street
San Mateo, CA 94402
(Address of principal executive offices, including zip code)
 
(650) 931-3200
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
 
Title of each classTrading SymbolName of each exchange on which registered
Common Stock, par value $0.0001 per shareCOUP
The Nasdaq Stock Market LLC
(Nasdaq Global Select Market)
 
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨
Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files).    Yes  x    No  ¨
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filerxAccelerated filer¨
Non-accelerated filer¨Smaller reporting company
Emerging growth company
 
If an emerging growth company, indicate by check mark if the Registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ¨ 
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  x
As of December 3, 2021, the Registrant had 74,680,462 shares of common stock, $0.0001 par value per share, outstanding. 





TABLE OF CONTENTS

Page
PART I.
Item 1.
Item 2.
Item 3.
Item 4.
PART II.
Item 1.
Item 1A.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.
  

i


NOTE ABOUT FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains forward-looking statements. All statements other than statements of historical facts contained in this report, including statements regarding our future results of operations and financial position, the expected impact of the COVID-19 pandemic on our business, results of operations and financial condition, customer lifetime value, strategy and plans, market size and opportunity, competitive position, industry environment, potential growth opportunities, product capabilities, expected impact of business acquisitions, our expectations for future operations and our convertible senior notes, are forward-looking statements. The words “believe,” “may,” “will,” “estimate,” “continue,” “anticipate,” “design,” “intend,” “expect,” “could,” “plan,” “potential,” “predict,” “seek,” “should,” “would” or the negative version of these words and similar expressions are intended to identify forward-looking statements. We have based these forward-looking statements on our current expectations and projections about future events and trends that we believe may affect our financial condition, results of operations, strategy, short- and long-term business operations and objectives, and financial needs. The forward-looking statements are contained principally in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Risk Factors.”
These forward-looking statements are subject to a number of risks, uncertainties and assumptions, including those described in “Risk Factors” and elsewhere in this Quarterly Report on Form 10-Q. Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties and assumptions, the forward-looking events and circumstances discussed in this Quarterly Report on Form 10-Q may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements.
You should not rely upon forward-looking statements as predictions of future events. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee that the future results, levels of activity, performance or events and circumstances reflected in the forward-looking statements will be achieved or occur. Moreover, except as required by law, neither we nor any other person assumes responsibility for the accuracy and completeness of the forward-looking statements. We undertake no obligation to update publicly any forward-looking statements for any reason after the date of this Quarterly Report on Form 10-Q to conform these statements to actual results or to changes in our expectations.
 

1


PART I—FINANCIAL INFORMATION
Item 1. Financial Statements.
COUPA SOFTWARE INCORPORATED
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share amounts)
(unaudited)
October 31,
2021
January 31,
2021
Assets
Current assets:
Cash and cash equivalents
$458,195 $323,284 
Marketable securities
209,660 283,036 
Accounts receivable, net of allowances
179,278 196,009 
Prepaid expenses and other current assets
32,283 36,381 
Deferred commissions, current portion
18,848 15,541 
Total current assets
898,264 854,251 
Property and equipment, net30,161 28,266 
Deferred commissions, net of current portion42,623 36,832 
Goodwill1,515,141 1,480,847 
Intangible assets, net543,628 632,173 
Operating lease right-of-use assets38,183 41,305 
Other assets35,853 31,491 
Total assets
$3,103,853 $3,105,165 
Liabilities, Redeemable Non-Controlling Interests, Other Temporary Equity and Stockholders’ Equity
Current liabilities:
Accounts payable
$5,279 $4,831 
Accrued expenses and other current liabilities
96,716 80,271 
Deferred revenue, current portion
352,198 356,115 
Current portion of convertible senior notes, net (Note 8)
633,641 609,068 
Operating lease liabilities, current portion
12,401 11,222 
Total current liabilities
1,100,235 1,061,507 
Convertible senior notes, net (Note 8)952,285 897,525 
Deferred revenue, net of current portion14,058 5,773 
Operating lease liabilities, net of current portion27,174 31,845 
Other liabilities68,210 67,915 
Total liabilities
2,161,962 2,064,565 
Commitments and contingencies (Note 9)
Redeemable non-controlling interests10,044  
Other temporary equity 369 
Stockholders’ equity:
Preferred stock, $0.0001 par value per share; 25,000,000 shares authorized at October 31, 2021 and January 31, 2021; zero shares issued and outstanding at October 31, 2021 and January 31, 2021
  
Common stock, $0.0001 par value per share; 625,000,000 shares authorized at October 31, 2021 and January 31, 2021; 74,613,510 and 72,753,659 shares issued and outstanding at October 31, 2021 and January 31, 2021, respectively
7 7 
Additional paid-in capital
1,724,042 1,556,865 
Accumulated other comprehensive income
8,748 9,165 
Accumulated deficit
(800,950)(525,806)
Total stockholders’ equity
931,847 1,040,231 
Total liabilities, redeemable non-controlling interests, other temporary equity and stockholders’ equity
$3,103,853 $3,105,165 

 See Notes to Condensed Consolidated Financial Statements.

2


COUPA SOFTWARE INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
(unaudited)
 
Three Months Ended
October 31,
Nine Months Ended
October 31,
2021202020212020
Revenues:
Subscription
$164,745 $118,083 $461,079 $335,399 
Professional services and other
21,071 14,881 70,912 42,700 
Total revenues
185,816 132,964 531,991 378,099 
Cost of revenues:
Subscription
52,279 36,528 154,701 99,335 
Professional services and other
25,341 14,259 81,865 42,729 
Total cost of revenues
77,620 50,787 236,566 142,064 
Gross profit
108,196 82,177 295,425 236,035 
Operating expenses:
Research and development
39,990 30,528 125,625 87,459 
Sales and marketing
83,779 53,204 237,902 149,831 
General and administrative
40,513 32,092 116,139 69,941 
Total operating expenses
164,282 115,824 479,666 307,231 
Loss from operations(56,086)(33,647)(184,241)(71,196)
Interest expense(31,130)(29,308)(90,854)(61,820)
Other income (expense), net(1,298)746 (2,746)8,833 
Loss before benefit from income taxes(88,514)(62,209)(277,841)(124,183)
Benefit from income taxes(476)(1,411)(2,697)(5,453)
Net loss(88,038)(60,798)(275,144)(118,730)
Net loss attributable to redeemable non-controlling interests(273) (790) 
Adjustment attributable to redeemable non-controlling interests3,438  8,673  
Net loss attributable to Coupa Software Incorporated$(91,203)$(60,798)$(283,027)$(118,730)
Net loss per share, basic and diluted, attributable to Coupa Software Incorporated
$(1.23)$(0.88)$(3.85)$(1.76)
Weighted-average number of shares used in computing net loss per share, basic and diluted
74,133 68,941 73,514 67,349 
 
See Notes to Condensed Consolidated Financial Statements.

3


COUPA SOFTWARE INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(in thousands)
(unaudited)
 
Three Months Ended
October 31,
Nine Months Ended
October 31,
2021202020212020
Net loss$(88,038)$(60,798)$(275,144)$(118,730)
Other comprehensive gain (loss) in relation to defined benefit plans, net of tax258 (53)313 34 
Changes in unrealized loss on marketable securities, net of tax(227)(1,421)(285)(335)
Foreign currency translation adjustments, net of tax(92)(1,833)(507)4,456 
Comprehensive loss(88,099)(64,105)(275,623)(114,575)
Less comprehensive loss attributable to redeemable non-controlling interests:
Net loss attributable to redeemable non-controlling interests(273) (790) 
Foreign currency translation adjustments, net of tax, attributable to redeemable non-controlling interests(51) (62) 
Comprehensive loss attributable to redeemable non-controlling interests(324) (852) 
Comprehensive loss attributable to Coupa Software Incorporated$(87,775)$(64,105)$(274,771)$(114,575)
 
See Notes to Condensed Consolidated Financial Statements.

4


COUPA SOFTWARE INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(in thousands, except share amounts)
(unaudited)
 
Three Months Ended October 31, 2021
Common StockAdditional Paid-In CapitalAccumulated Other Comprehensive Income (Loss)Accumulated DeficitTotal Stockholders' Equity
SharesAmount
Balance at July 31, 202173,991,612 $7 $1,662,804 $8,758 $(712,912)$958,657 
Issuance of common stock for employee share purchase plan74,348 — 11,149 — — 11,149 
Exercise of stock options
185,723 — 2,713 — — 2,713 
Stock-based compensation expense
— — 50,641 — — 50,641 
Vested restricted stock units
286,897 — — — — — 
Settlement of convertible senior notes (Note 8)
75,025 — (108)— — (108)
Temporary equity reclassification
— — 8 — — 8 
Other comprehensive loss
— — — (10)— (10)
Net loss attributable to Coupa Software Incorporated, including adjustment to redeemable non-controlling interests
— — (3,165)— (88,038)(91,203)
Balance at October 31, 202174,613,605 $7 $1,724,042 $8,748 $(800,950)$931,847 
Nine Months Ended October 31, 2021
Common StockAdditional Paid-In CapitalAccumulated Other Comprehensive Income (Loss)Accumulated DeficitTotal Stockholders' Equity
SharesAmount
Balance at January 31, 202172,753,659 $7 $1,556,865 $9,165 $(525,806)$1,040,231 
Issuance of common stock for acquisitions
22,370 —  — —  
Issuance of common stock for employee share purchase plan
156,810 — 21,626 — — 21,626 
Exercise of stock options
597,586 — 7,431 — — 7,431 
Stock-based compensation expense
— — 145,982 — — 145,982 
Vested restricted stock units
951,082 — — — — — 
Settlement of convertible senior notes (Note 8)
132,098 — (348)— — (348)
Temporary equity reclassification
— — 369 — — 369 
Other comprehensive loss
— — — (417)— (417)
Net loss attributable to Coupa Software Incorporated, including adjustment to redeemable non-controlling interests
— — (7,883)— (275,144)(283,027)
Balance at October 31, 202174,613,605 $7 $1,724,042 $8,748 $(800,950)$931,847 
 
See Notes to Condensed Consolidated Financial Statements.


5


COUPA SOFTWARE INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(in thousands, except share amounts)
(unaudited)

Three Months Ended October 31, 2020
Common StockAdditional Paid-In CapitalAccumulated Other Comprehensive Income (Loss)Accumulated DeficitTotal Stockholders' Equity
SharesAmount
Balance at July 31, 202068,778,343 $7 $822,197 $8,333 $(403,621)$426,916 
Issuance of common stock for acquisitions —  — —  
Issuance of common stock for employee share purchase plan104,488 — 8,240 — — 8,240 
Exercise of stock options
375,612 — 5,513 — — 5,513 
Stock-based compensation expense
— — 37,106 — — 37,106 
Vested restricted stock units
341,543 — — — — — 
Settlement of 2023 Notes (Note 8)110,580 — (804)— — (804)
Temporary equity reclassification— — (52)— — (52)
Other comprehensive loss
— — — (3,307)— (3,307)
Net loss
— — — — (60,798)(60,798)
Balance at October 31, 202069,710,566 $7 $872,200 $5,026 $(464,419)$412,814 
Nine Months Ended October 31, 2020
Common StockAdditional Paid-In CapitalAccumulated Other Comprehensive IncomeAccumulated DeficitTotal Stockholders' Equity
SharesAmount
Balance at January 31, 202064,528,970 $7 $790,468 $871 $(345,689)$445,657 
Issuance of common stock for acquisitions432,634 — 41,841 41,841 
Issuance of common stock for employee share purchase plan
209,306 — 15,631 — — 15,631 
Exercise of stock options
1,363,416  15,122 — — 15,122 
Stock-based compensation expense
— — 95,862 — — 95,862 
Vested restricted stock units
999,828 — — — — — 
Equity component of 2026 Notes, net of issuance costs
— — 501,053 — — 501,053 
Purchase of capped calls in relation to 2026 Notes
— — (192,786)— — (192,786)
Settlement of 2023 Notes (Note 8)2,176,412 — (385,218)— — (385,218)
Deferred tax related to convertible senior notes— — (9,588)— — (9,588)
Temporary equity reclassification— — (185)— — (185)
Other comprehensive income
— — — 4,155 — 4,155 
Net loss
— — — — (118,730)(118,730)
Balance at October 31, 202069,710,566 $7 $872,200 $5,026 $(464,419)$412,814 
 
See Notes to Condensed Consolidated Financial Statements.

6


COUPA SOFTWARE INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
 
Nine Months Ended
October 31,
20212020
Cash flows from operating activities
Net loss attributable to Coupa Software Incorporated$(283,027)$(118,730)
Net loss and adjustment attributable to redeemable non-controlling interests7,883  
Net loss(275,144)(118,730)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization
109,900 36,529 
Amortization of premium on marketable securities, net
625 869 
Amortization of deferred commissions
13,335 10,102 
Amortization of debt discount and issuance costs
85,716 58,727 
Stock-based compensation
145,251 94,851 
Loss (gain) on conversion of convertible senior notes
357 (3,166)
Repayments of convertible senior notes attributable to debt discount (Note 8)
(1,338)(27,208)
Other
(3,204)3,923 
Changes in operating assets and liabilities net of effects from acquisitions:
Accounts receivable
21,433 22,519 
Prepaid expenses and other current assets
4,529 1,591 
Other assets
13,968 (2,730)
Deferred commissions
(22,445)(11,355)
Accounts payable
500 (1,435)
Accrued expenses and other liabilities
6,795 4,941 
Deferred revenue
3,630 (11,630)
Net cash provided by operating activities
103,908 57,798 
Cash flows from investing activities
Purchases of marketable securities
(116,583)(788,047)
Maturities of marketable securities
94,142 351,973 
Sales of marketable securities
94,916 830,125 
Acquisitions, net of cash acquired
(46,719)(94,121)
Purchases of other investments(10,000) 
Purchases of property and equipment
(10,256)(9,559)
Net cash provided by investing activities
5,500 290,371 
Cash flows from financing activities
Investment from redeemable non-controlling interests2,223  
Proceeds from issuance of convertible senior notes, net of issuance costs
 1,355,066 
Purchase of capped calls
 (192,786)
Repayments of convertible senior notes
(5,748)(554,244)
Proceeds from the exercise of common stock options
7,444 14,425 
Proceeds from issuance of common stock for employee stock purchase plan
21,626 15,631 
Net cash provided by financing activities
25,545 638,092 
Effects of foreign currency exchange rates on cash, cash equivalents, and restricted cash(178)128 
Net increase in cash, cash equivalents, and restricted cash134,775 986,389 
Cash, cash equivalents, and restricted cash at beginning of year327,589 268,280 
Cash, cash equivalents, and restricted cash at end of period$462,364 $1,254,669 
Reconciliation of cash, cash equivalents, and restricted cash to the condensed consolidated balance sheets
Cash and cash equivalents
$458,195 $1,251,006 
Restricted cash included in other assets
4,169 3,663 
Total cash, cash equivalents, and restricted cash$462,364 $1,254,669 

See Notes to Condensed Consolidated Financial Statements.

7


COUPA SOFTWARE INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
 
Nine Months Ended
October 31,
20212020
Supplemental disclosure of cash flow data
Cash paid for income taxes$3,181 $2,495 
Cash paid for interest$3,101 $533 
Supplemental disclosure of non-cash investing and financing activities
Property and equipment included in accounts payable and accrued expenses and other current liabilities$468 $323 
 
See Notes to Condensed Consolidated Financial Statements.

8


COUPA SOFTWARE INCORPORATED
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 
Note 1. Organization and Description of Business
Coupa Software Incorporated (the “Company”) was incorporated in the state of Delaware in 2006. The Company provides a comprehensive, cloud-based business spend management (or “BSM”) platform that provides greater visibility into and control over how companies spend money. The BSM platform enables businesses to achieve savings that drive profitability. The Company is based in San Mateo, California.
The Company’s fiscal year ends on January 31.

 Note 2. Significant Accounting Policies

Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been prepared using accounting principles generally accepted in the United States of America (“GAAP”) and applicable rules and regulations of the Securities and Exchange Commission (“SEC”) regarding interim financial reporting. Certain information and note disclosures normally included in the financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. These condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and related notes included in the Company’s Annual Report on Form 10-K for the year ended January 31, 2021 filed with the SEC on March 18, 2021 (the “Form 10-K”). The condensed consolidated financial statements include the results of the Company, its wholly-owned subsidiaries, as well as subsidiaries in which the Company has a controlling interest. All significant intercompany transactions and balances have been eliminated during consolidation.
The condensed consolidated balance sheet as of January 31, 2021, included herein, was derived from the audited financial statements as of that date, but does not include all disclosures including certain notes required by GAAP on an annual reporting basis. In the opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all normal recurring adjustments necessary to present fairly the financial position, results of operations, comprehensive loss and cash flows for the interim periods, but are not necessarily indicative of the results to be expected for the full fiscal year or any other period.
There have been no changes to the significant accounting policies described in the Form 10-K for the year ended January 31, 2021.
Use of Estimates
The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the condensed consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. On an ongoing basis, management evaluates its significant estimates including, but not limited to, the valuation of accounts receivable, the lives of tangible and intangible assets, the fair value of certain equity awards, the fair value of contingent purchase consideration, the valuation of acquired intangible assets and the recoverability or impairment of intangible assets, including goodwill, revenue recognition, redemption value of redeemable non-controlling interests, convertible senior notes fair value, the benefit period of deferred commissions, and provision for (benefit from) income taxes. Management bases its estimates on historical experience and on various other market-specific and relevant assumptions that management believes to be reasonable under the circumstances. Actual results could differ from those estimates and such differences could be material to the financial position and results of operations.
Foreign Currency Translation
The functional currency of the Company's foreign operations is primarily the U.S. dollar, while a few of its subsidiaries use the local currency as their functional currency for the nine months ended October 31, 2021. In cases where the Company uses a foreign functional currency, the Company translates the foreign functional currency financial statements to U.S. dollars using the exchange rates at the balance sheet date for assets and liabilities, the period average exchange rates for revenues and expenses, and the historical exchange rates for equity. The effects of foreign currency translation adjustments are recorded in other comprehensive income as a component of stockholders' equity and the related periodic movements are presented in the condensed consolidated statements of comprehensive loss. Foreign currency transaction gains and losses are included in other income (expense), net, in the condensed consolidated statements of operations for the period.

9


Concentration of Risk
Financial instruments that potentially subject the Company to a concentration of credit risk consist of cash and cash equivalents, marketable securities, and accounts receivable. Cash deposits may, at times, exceed amounts insured by the Federal Deposit Insurance Corporation and the Securities Investor Protection Corporation (“SIPC”). Marketable securities balances may, at times, also exceed SIPC limits. The Company has not experienced any losses on its deposits of cash and cash equivalents to date. Refer to Note 14, “Significant Customers and Geographic Information” for additional information on significant customers during the period.
Comprehensive Loss
Comprehensive loss is defined as the change in equity of a business enterprise during a period from transactions and other events and circumstances from non-owner sources. The Company’s comprehensive loss consists of net loss, other comprehensive gain (loss) in relation to defined benefits plans, net of tax, changes in unrealized gain (loss) on marketable securities, net of tax, and foreign currency translation adjustments, net of tax. The other comprehensive gain (loss) in relation to defined benefits plans represents net deferred gains and losses and prior service costs and credits for the defined benefit pension plans. 
Fair Value Measurements
Fair value is the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Subsequent changes in fair value of these financial assets and liabilities are recognized in earnings or other comprehensive loss when they occur. When determining the fair value measurements for assets and liabilities which are required to be recorded at fair value, the Company considers the principal or most advantageous market in which the Company would transact and the market-based risk measurement or assumptions that market participants would use in pricing the assets or liabilities, such as inherent risk, transfer restrictions and credit risk.
The Company applies the following fair value hierarchy, which prioritizes the inputs used to measure fair value into three levels and bases the categorization within the hierarchy upon the lowest level of input that is available and significant to the fair value measurement:
Level 1 - Quoted prices in active markets for identical assets or liabilities.
Level 2 - Observable inputs other than quoted price in active markets for identical assets or similar assets or liabilities in inactive markets, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
Level 3 - Inputs that are generally unobservable and typically reflect management’s estimates of assumptions that market participants would use in pricing the assets or liabilities.

Revenue Recognition
The Company derives its revenues primarily from subscription fees, professional services fees and other. Revenues are recognized when control of these services are transferred to the Company’s customers in an amount that reflects the consideration expected to be entitled to in exchange for those services. Revenues are recognized net of applicable taxes imposed on the related transaction. The Company’s revenue recognition policy follows guidance from Accounting Standards Codification 606, Revenue from Contracts with Customers (Topic 606).
The Company determines revenue recognition through the following five-step framework:
Identification of the contract, or contracts, with a customer;
Identification of the performance obligations in the contract;
Determination of the transaction price;
Allocation of the transaction price to the performance obligations in the contract; and
Recognition of revenue when, or as, the Company satisfies a performance obligation.

10


Subscription Revenues
The Company offers subscriptions to its cloud-based business spend management platform, including procurement, invoicing and expense management. Subscription revenues consist primarily of fees to provide the Company’s customers access to its cloud-based platform, which includes routine customer support. Subscription contracts do not provide customers with the right to take possession of the software, are in general, non-cancelable, and do not contain general rights of return. Generally, subscription revenues are recognized ratably over the contractual term of the arrangement, beginning on the date that the service is made available to the customer. Subscription contracts typically have a term of three years with invoicing occurring in annual installments at the beginning of each year in the subscription period.
Term-based licenses are sold as bundled arrangements that include the rights to a term license and post-contract customer support (“PCS”). Accordingly, the Company allocates the transaction price to each performance obligation. The revenues related to the amount allocated to PCS are included in subscription revenue, which are recognized ratably over the contract term beginning on the license delivery date.
Professional Services Revenues and Other
The Company offers professional services which primarily include deployment services, optimization services, and training. Professional services are generally sold on a fixed-fee or time-and-materials basis. For services billed on a fixed-fee basis, invoicing typically occurs in advance, and revenue is recognized over time based on the proportion performed. For services billed on a time-and-materials basis, revenue is recognized over time as services are performed.
Term-based licenses are sold as bundled arrangements that include the rights to a term license and PCS. Accordingly, the Company allocates the transaction price to each performance obligation. The revenues related to the amount allocated to term-based licenses are included in other revenue, which is recognized at the start of the license term when delivery is complete.
Refer to Note 14, “Significant Customers and Geographic Information” for additional information related to disaggregated revenue during the period.
Significant Judgments
The Company’s contracts with customers often include promises to transfer multiple products and services to a customer. For these contracts, the Company accounts for individual performance obligations separately if they are distinct. Subscription services, professional services, term-based licenses, and related PCS are distinct performance obligations that are accounted for separately. In contracts with multiple performance obligations, the transaction price is allocated to separate performance obligations on a relative standalone selling price ("SSP") basis.
The determination of SSP for each distinct performance obligation requires judgment. The Company determines SSP for performance obligations based on overall pricing objectives, which take into consideration market conditions and entity-specific factors. This includes a review of historical data related to the size of arrangements, the applications being sold, customer demographics and the numbers and types of users within the arrangements. The Company uses a range of amounts to estimate SSP for performance obligations. There is typically more than one SSP for individual products and services due to the stratification of those products and services by considerations such as size and sales regions.
Contract Balances
The timing of revenue recognition may differ from the timing of invoicing for contracts with customers. The Company records a receivable when revenue is recognized prior to invoicing. Deferred revenue primarily consists of billings or payments received in advance of revenue recognition. Subscription and fixed-fee professional services arrangements are commonly billed in advance, recognized as deferred revenue, and then amortized into revenue over time. The Company's term-based license contracts are billed annually in advance, recognized as deferred revenue, and then recognized as revenues upfront for the license component and ratably over the term license for the PCS component. However, other professional services arrangements, primarily those recognized on a time-and-materials basis, are billed in arrears following services that have been rendered. In addition, for multi-year term-based license contracts, the revenue allocated to license component is recognized upfront while the billing is on annual basis. This may result in revenue recognition greater than invoiced amounts which results in a receivable balance. Receivables represent an unconditional right to payment. As of October 31, 2021 and January 31, 2021, the balance of accounts receivable, net of the allowance for credit losses, was $179.3 million and $196.0 million, respectively. Of these balances, $20.3 million and $24.2 million represent unbilled receivable amounts as of October 31, 2021 and January 31, 2021, respectively. In addition, as of October 31, 2021 and January 31, 2021, the balance of long-term unbilled receivables was approximately $2.6 million and $7.1 million, respectively, which were included in other assets on the Company's condensed consolidated balance sheet.

11


When the timing of revenue recognition differs from the timing of invoicing, the Company uses judgment to determine whether the contract includes a significant financing component requiring adjustment to the transaction price. Various factors are considered in this determination including the duration of the contract, payment terms, and other circumstances. Generally, the Company determined that contracts do not include a significant financing component. The Company applies the practical expedient for instances where, at contract inception, the expected timing difference between when promised goods or services are transferred and associated payment will be one year or less. Payment terms vary by contract type, however arrangements typically stipulate a requirement for the customer to pay within 30 days.
At any point in the contract term, the transaction price may be allocated to performance obligations that are unsatisfied or are partially unsatisfied. These amounts relate to remaining performance obligations on non-cancelable contracts which include both the deferred revenue balance and amounts that will be invoiced and recognized as revenue in future periods. As of October 31, 2021, approximately $1,182.7 million of the transaction price from contracts with customers is allocated to the remaining performance obligations. The Company expects to recognize revenue on approximately three-fourths of these remaining performance obligations within the next 24 months and the remainder thereafter. The Company applies the practical expedient to exclude remaining performance obligations that are part of contracts with an original expected duration of one year or less and contracts where revenue is being recognized under the as-invoiced method. During the three and nine months ended October 31, 2021, the revenue recognized from performance obligations satisfied in prior periods was approximately $1.2 million and $1.6 million, respectively.
Accounts Receivable and Allowances for Credit Losses
The Company extends credit to its customers in the normal course of business and does not require cash collateral or other security to support the collection of customer receivables. The Company estimates the amount of uncollectible accounts receivable at the end of each reporting period and provides a reserve when needed based on an assessment of various factors including the aging of the receivable balance, historical experience, and expectations of forward-looking loss estimates. When developing the expectations of forward-looking loss estimates, the Company takes into consideration forecasts of future economic conditions, information about past events, such as historical trends of write-offs, and customer-specific circumstances, such as bankruptcies and disputes. Accounts receivable are written off when deemed uncollectible. The allowances for credit losses were not material as of October 31, 2021 and January 31, 2021.
Marketable Securities
Marketable securities consist of financial instruments such as U.S. treasury securities, U.S. agency obligations, corporate notes and bonds, commercial paper, asset backed securities and certificates of deposit. The Company classifies marketable securities as available-for-sale at the time of purchase and reevaluates such classification as of each balance sheet date. All marketable securities are recorded at estimated fair value. Credit losses related to the marketable securities are recorded in other income (expense), net in the condensed consolidated statements of operations through an allowance for credit losses rather than as a reduction in the amortized cost basis of the securities. No credit losses related to marketable securities were recorded by the Company during the three and nine months ended October 31, 2021. Any remaining unrealized losses, or any unrealized gains, for marketable securities are included in accumulated other comprehensive income, a component of stockholders’ equity.

If quoted prices for identical instruments are available in an active market, marketable securities are classified within Level 1 of the fair value hierarchy. If quoted prices for identical instruments in active markets are not available, fair values are estimated using quoted prices of similar instruments and are classified within Level 2 of the fair value hierarchy.
Other Investments
Other investments consist of non-marketable debt and equity investments in privately-held companies without readily determinable fair values in which the Company does not have a controlling interest or significant influence.
The Company records non-marketable debt investments at their estimated fair value on a recurring basis with changes in fair value recorded in accumulated other comprehensive income, a component of stockholders’ equity.
The Company elected to apply the measurement alternative for non-marketable equity securities, measuring them at cost, less any impairment, and adjustments resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer.
These non-marketable debt and equity investments are included in other assets on the Company's condensed consolidated balance sheets.


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Deferred Revenue
Deferred revenue consists of non-cancelable customer billings or payments received in advance of the recognition of revenue and is recognized as revenue as the revenue recognition criteria are met. The Company generally invoices its customers annually for the forthcoming year of service. Accordingly, the Company’s deferred revenue balance does not include revenue for future years of multiple year non-cancelable contracts that have not yet been billed. During the three and nine months ended October 31, 2021, the Company recognized revenue of $153.1 million and $314.8 million that was included in the deferred revenue balance as of July 31, 2021 and January 31, 2021, respectively.  During the three and nine months ended October 31, 2020, the Company recognized revenue of $107.8 million and $228.0 million that was included in the deferred revenue balance as of July 31, 2020 and January 31, 2020, respectively. 
Deferred Commissions
Commissions are earned by sales personnel upon the execution of the sales contract by the customer, and commission payments are made shortly after they are earned. Commission costs can be associated specifically with subscription, professional services and license arrangements. Commissions earned by the Company’s sales personnel are considered incremental and recoverable costs of obtaining a contract with a customer. These costs are deferred and then amortized over a period of benefit of five years. The Company determined the period of benefit by taking into consideration its past experience with customers, future cash flows expected from customers, industry peers and other available information.  
For commissions earned from the sale of term-based license contracts, the Company allocates the costs of commission in proportion to the allocation of transaction price of license and PCS performance obligations. Commissions associated with the license component are expensed at the time the related revenue is recognized. Commissions allocated to PCS are deferred and then amortized over five years.
The Company capitalized commission costs of $9.1 million and $5.3 million, and amortized $4.8 million and $3.6 million to sales and marketing expense in the accompanying condensed consolidated statements of operations during the three months ended October 31, 2021 and 2020, respectively. The Company capitalized commission costs of $22.4 million and $11.4 million, and amortized $13.3 million and $10.1 million to sales and marketing expense in the accompanying condensed consolidated statements of operations during the nine months ended October 31, 2021 and 2020, respectively.
Redeemable Non-Controlling Interests
During the quarter ended April 30, 2021, the Company established a joint venture in Japan ("Coupa K.K."), which is a variable interest entity, obtaining a 51% controlling interest. Accordingly, the Company consolidated the financial results of the joint venture. The share of the loss in the joint venture attributable to the redeemable non-controlling interests was approximately $273,000 and $790,000 during the three and nine months ended October 31, 2021, respectively.
The agreements with the minority investors of Coupa K.K. contain redemption features whereby the interest held by the minority investors is redeemable either (i) at the option of the minority investors or (ii) at the option of the Company, both beginning on the tenth anniversary of the initial capital contribution. The balance of the redeemable non-controlling interest is reported at the greater of the initial carrying amount adjusted for the redeemable non-controlling interest's share of earnings or losses and other comprehensive income or loss, or its estimated redemption value. The resulting changes in the estimated redemption amount are recorded with corresponding adjustments against additional paid-in-capital due to the absence of retained earnings. The carrying amount of the redeemable non-controlling interests is recorded on the Company's condensed consolidated balance sheets as temporary equity.
Leases
Leases arise from contracts that convey the right to control the use of identified property or equipment for a period of time in exchange for consideration. The Company’s leasing arrangements are primarily for office space used to conduct operations.
Leases are classified at commencement as either operating or finance leases. As of October 31, 2021, all of the Company’s leases were classified as operating leases. Rent expense for operating leases is recognized using the straight-line method over the term of the agreement beginning on the lease commencement date.
At commencement, the Company records a lease liability at the present value of future lease payments, net of any future lease incentives to be received. Lease agreements may include options to renew the lease term, which is not included in the lease periods to calculate future lease payments unless it is reasonably certain the Company will renew the lease. The Company estimates its incremental borrowing rate (“IBR”) based on the information available at the lease commencement date in determining the present

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value of lease payments. In determining the appropriate IBR, the Company considers information including, but not limited to, the lease term and the currency in which the arrangement is denominated.
At commencement, the Company also records a corresponding right-of-use asset, which is calculated based on the amount of the lease liability, adjusted for any advance lease payments made and initial direct costs incurred. Right-of-use assets are subject to evaluation for impairment or disposal on a basis consistent with other long-lived assets.
As of October 31, 2021, the Company was not a material lessor in leasing arrangements or a party to material sublease arrangements.
Recent Accounting Guidance
New Accounting Pronouncements Not Yet Adopted
In August 2020, the FASB issued ASU No. 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity’s Own Equity (Subtopic 815-40), which simplifies the accounting for convertible instruments. The guidance removes certain accounting models that separate the embedded conversion features from the host contract for convertible instruments, requiring bifurcation only if the convertible debt feature qualifies as a derivative under ASC 815 or for convertible debt issued at a substantial premium. The ASU removes certain settlement conditions required for equity contracts to qualify for the derivative scope exception, permitting more contracts to qualify for it. In addition, the guidance eliminates the treasury stock method to calculate diluted earnings per share for convertible instruments and requires the use of the if-converted method. The ASU is effective for annual reporting periods beginning after December 15, 2021, including interim reporting periods within those annual periods, with early adoption permitted no earlier than the fiscal year beginning after December 15, 2020. The ASU allows entities to use a modified or full retrospective transition method. Under the modified approach, entities will apply the guidance to all financial instruments that are outstanding as of the beginning of the year of adoption. The Company will adopt the new guidance for the fiscal year beginning February 1, 2022, using the modified retrospective approach with the cumulative effect of adoption recognized at the date of initial application through an adjustment to the opening balance of retained earnings. The Company expects the adoption of this guidance will result in a material reclassification from equity to debt as well as a reduction in non-cash interest expense.
In October 2021, the FASB issued ASU No. 2021-08, Business Combinations: Accounting for Contract Assets and Contract Liabilities from Contracts with Customers (Topic 805). The amendments in this ASU require that an acquirer recognizes and measures contract assets and contract liabilities acquired in a business combination in accordance with Topic 606. The ASU is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years and should be applied prospectively to business combinations occurring on or after the effective date of the amendments. Early adoption is permitted. The Company is currently evaluating the timing of adoption and impact of this new standard on its consolidated financial statements and related disclosures.

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Note 3. Investments
 
Marketable Securities
The following is a summary of available-for-sale marketable securities, excluding those securities classified within cash and cash equivalents on the condensed consolidated balance sheets (in thousands):
 
October 31, 2021
Amortized CostsUnrealized GainsUnrealized LossesFair Value
U.S. Treasury securities$208,520 $8 $(166)$208,362 
Corporate notes and bonds1,297 1  1,298 
Total marketable securities
$209,817 $9 $(166)$209,660 
 
January 31, 2021
Amortized CostsUnrealized GainsUnrealized LossesFair Value
U.S. Treasury securities$268,141 $29 $(1)$268,169 
Corporate notes and bonds14,487 100  14,587 
Certificates of deposit280   280 
Total marketable securities
$282,908 $129 $(1)$283,036 
 
 
As of October 31, 2021, the fair values of available-for-sale marketable securities, by remaining contractual maturity, were as follows (in thousands):
 
Due within one year$135,900 
Due in one year through five years73,760 
Total
$209,660 

The Company's marketable securities consist primarily of U.S. Treasury securities. The Company views its marketable securities as available to support its current operations, therefore these marketable securities have been classified as short-term available-for-sale securities.
During the three and nine months ended October 31, 2021 and 2020, there were no material gross realized gains or losses from the sale of certain available-for-sale marketable securities that were reclassified out of accumulated other comprehensive loss.
The Company regularly reviews the changes to the rating of its debt securities by rating agencies as well as reasonably monitors the surrounding economic conditions to assess the risk of expected credit losses. As of October 31, 2021, the unrealized losses and the related risk of expected credit losses were insignificant.
Other Investments
The Company's other investments include non-marketable debt and equity investments in privately-held companies, which do not have a readily determinable fair value. As of October 31, 2021 and January 31, 2021, the balance of non-marketable debt and equity investments was $10.0 million and zero, respectively. Since the initial investments, there have been no impairments or adjustments to the carrying amount of the debt and equity investments during the three and nine months ended October 31, 2021.

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Note 4. Fair Value Measurements
The following table summarizes the Company’s fair value hierarchy for its financial assets and liabilities measured at fair value on a recurring basis at October 31, 2021 (in thousands):
 
Level 1Level 2Level 3Total
Cash equivalents:(1)
Money market funds
$220,198 $ $ $220,198 
Marketable securities:
U.S. treasury securities
 208,362  208,362 
Corporate notes and bonds
 1,298  1,298 
Other investments:
Privately-held debt investments
  5,000 5,000 
Total assets
$220,198 $209,660 $5,000 $434,858 

(1)Included in cash and cash equivalents.
The following table summarizes the Company’s fair value hierarchy for its financial assets and liabilities measured at fair value on a recurring basis at January 31, 2021 (in thousands):
 
Level 1Level 2Level 3Total
Cash equivalents:(1)
Money market funds
$90,437 $ $ $90,437 
Marketable securities:
U.S. treasury securities
 268,169  268,169 
Corporate notes and bonds
 14,587  14,587 
Certificates of deposit
 280  280 
Total assets
$90,437 $283,036 $ $373,473 
Derivative liabilities:(2)
Foreign currency forward contracts not designated as hedges
$ $47 $ $47 
Total liabilities
$ $47 $ $47 

(1)Included in cash and cash equivalents.
(2)The derivative liabilities were related to foreign currency forward contracts at a notional amount of $2.9 million. The derivative liabilities were included in accrued expenses and other current liabilities on the Company’s condensed consolidated balance sheets at January 31, 2021. The foreign currency forward contracts matured during the three months ended April 30, 2021 and were not renewed.
Other Investments
The Company's other investments include non-marketable debt investments, which are recorded at fair value on a recurring basis, and non-marketable equity investments, which are measured under the measurement alternative on a non-recurring basis. The estimation of fair value for non-marketable debt investments requires the use of significant unobservable inputs; as a result, the Company classifies these assets as Level 3 within the fair value hierarchy.
The table above does not include the Company's non-marketable equity investments. As of October 31, 2021 and January 31, 2021, the carrying value of non-marketable equity investments was $5.0 million and zero, respectively.
Convertible Senior Notes
The Company has $1,380.0 million in aggregate principal amount of 0.375% convertible senior notes due in 2026 (the “2026 Notes”), $805.0 million in aggregate principal amount of 0.125% convertible senior notes due in 2025 (the “2025 Notes”) and $1.8 million in aggregate principal amount of 0.375% convertible senior notes due in 2023 (the “2023 Notes” and, together with the 2025 Notes and 2026 Notes, the “Convertible Notes”) outstanding as of October 31, 2021. Refer to Note 8, “Convertible Senior Notes” for further details on the Convertible Notes.
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The Company carries the Convertible Notes at par value less the portion allocated to equity and the related unamortized discount and issuance costs on its condensed consolidated balance sheets and presents the fair value for disclosure purposes only. The estimated fair value of the 2026 Notes, 2025 Notes and 2023 Notes, based on a market approach as of October 31, 2021, was approximately $1,517.0 million, $1,257.1 million and $9.0 million, respectively, which represents a Level 2 valuation estimate. The estimated fair value of the 2026 Notes, 2025 Notes and 2023 Notes, based on a market approach as of January 31, 2021, was approximately $1,775.0 million, $1,617.5 million and $61.2 million, respectively, which represents a Level 2 valuation estimate. The estimated fair value was determined based on the estimated or actual bids and offers of the Convertible Notes in an over-the-counter market on the last trade completed prior to the end of the period.
Note 5. Business Combinations
 
Pana Industries, Inc.

On February 1, 2021, the Company acquired all of the equity interest in Pana Industries, Inc. ("Pana"), a corporate travel booking solution company. The purchase consideration was approximately $48.5 million in cash (of which $7.1 million is being held in escrow for fifteen months after the transaction closing date).
In addition, the Company issued 23,822 shares of unvested common stock with an approximate fair value of $7.6 million to two of Pana's shareholders. These shares are subject to service-based vesting conditions including continued employment with the Company. The value assigned to the unvested common stock will be recorded as post-acquisition compensation expense as the shares vest and has been excluded from the purchase consideration.
The acquisition was accounted for as a business combination and, accordingly, the total fair value of purchase consideration was allocated to the tangible and intangible assets acquired and liabilities assumed based on their fair values on the acquisition date. The major classes of assets and liabilities to which the Company has allocated the total fair value of purchase consideration were as follows (in thousands):
 
February 1, 2021
Cash and cash equivalents$3,413 
Intangible assets12,200 
Other assets772 
Goodwill34,409 
Accounts payable and other liabilities(2,255)
Total consideration
$48,539 
The purchase price allocation is preliminary. The Company continues to collect information with regard to its estimates and assumptions, including potential liabilities and contingencies. The Company will record adjustments to the fair value of the assets acquired, liabilities assumed and goodwill within the twelve month measurement period, if necessary. The goodwill recognized was primarily attributed to the assembled workforce and increased synergies that are expected to be achieved from the integration of Pana and is not deductible for income tax purposes. The Company determined the fair values of intangible assets acquired and liabilities assumed. The identifiable intangible assets acquired were as follows (in thousands):
Fair ValueUseful life
(in Years)
Developed technology$10,500 4
Customer relationships1,700 4
Total
$12,200 
The Company incurred costs related to this acquisition of approximately $440,000 for the nine months ended October 31, 2021. All acquisition related costs were expensed as incurred and have been recorded in general and administrative expenses in the accompanying condensed consolidated statements of operations.
The revenue and earnings of the acquired business have been included in the Company’s results since the acquisition date and are not material to the Company’s condensed consolidated financial results. Pro forma results of operations for this acquisition have not been presented as the financial impact on the Company’s condensed consolidated financial statements would be immaterial.
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LLamasoft, Inc.

On November 2, 2020, the Company completed the acquisition of Laurel Parent Holdings, Inc. and its subsidiaries ("LLamasoft"), a supply chain design and analysis software and solutions company, with total purchase consideration of approximately $1.4 billion. Refer to the Company's fiscal 2021 Form 10-K for further information. There have been no significant changes to the preliminary purchase price allocation performed when the acquisition was completed.

Note 6. Property and Equipment, Net
Property and equipment consisted of the following (in thousands):
 
October 31,
2021
January 31,
2021