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 ~~July~~October 31, 2022


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-37901

COUPA SOFTWARE INCORPORATED

(Exact name of Registrant as specified in its charter)

Delaware

20-4429448

(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 class

Trading Symbol

Name of each exchange on which registered

Common Stock, par value $0.0001 per share

COUP

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 filer

Accelerated 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 ~~September~~December 18, 2022, the Registrant had 7576,~~930~~150,~~267~~794 shares of common stock, $0.0001 par value per share, outstanding.

TABLE OF CONTENTS

		Page
PART I.	FINANCIAL INFORMATION
Item 1.	Financial Statements (unaudited)	2
	Condensed Consolidated Balance Sheets	2
	Condensed Consolidated Statements of Operations	3
	Condensed Consolidated Statements of Comprehensive Loss	4
	Condensed Consolidated Statements of Stockholders’ Equity	5
	Condensed Consolidated Statements of Cash Flows	7
	Notes to Unaudited Condensed Consolidated Financial Statements	9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2829
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	4547
Item 4.	Controls and Procedures	4547
PART II.	OTHER INFORMATION
Item 1.	Legal Proceedings	4749
Item 1A.	Risk Factors	4749
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	7780
Item 3.	Defaults Upon Senior Securities	7780
Item 4.	Mine Safety Disclosures	7780
Item 5.	Other Information	7780
Item 6.	Exhibits	7881
	Exhibit Index	7881
	Signatures	7982

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, our pending acquisition by Thoma Bravo, including our expectations around the timing and completion thereof, the expected impact of various macroeconomic and geopolitical dynamics (e.g., the COVID-19 pandemic, the Russian-Ukraine conflict or rising inflation and higher interest rates) 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, our convertible senior notes, and the amount and timing of any repurchases of our common stock under our share repurchase program are forward-looking statements. The words “believe,” “may,” “will,” “estimate,” “continue,” “anticipate,” “design,” “intend,” “expect,” “could,” “plan,” “potential,” “possible,” “predict,” “seek,” “should,” “would,” “likely” 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 (the “Quarterly Report”). 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.

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

COUPA SOFTWARE INCORPORATED

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share amounts)

(unaudited)

	July 31,2022		January 31,2022
	October 31,2022		January 31,2022
Assets
Current assets:
Cash and cash equivalents	$	~~527~~521,~~963~~598	$	506,459
Marketable securities	~~281~~338,~~370~~530		223,032
Accounts receivable, net of allowances	~~219~~200,~~522~~841		226,191
Prepaid expenses and other current assets	3530,~~975~~866		38,270
Deferred commissions, current portion	2224,~~801~~013		21,096
Total current assets	1,~~087~~115,~~631~~848		1,015,048
Property and equipment, net	3134,~~989~~998		30,576
Deferred commissions, net of current portion	4950,~~166~~959		48,562
Goodwill	1,514,550		1,514,550
Intangible assets, net	~~446~~414,~~123~~338		510,663
Operating lease right-of-use assets	3736,~~341~~518		42,659
Other assets	2926,~~077~~496		31,121
Total assets	$	3,~~195~~193,~~877~~707	$	3,193,179
Liabilities, Redeemable Non-Controlling Interests, and Stockholders’ Equity
Current liabilities:
Accounts payable	$	84,~~433~~752	$	4,610
Accrued expenses and other current liabilities	98125,~~374~~958		79,160
Deferred revenue, current portion	~~477~~482,~~423~~145		468,783
Current portion of convertible senior notes, net (Note 8)	~~1,747~~2		1,639
Operating lease liabilities, current portion	13,~~084~~677		12,760
Total current liabilities	~~599~~626,~~061~~534		566,952
Convertible senior notes, net (Note 8)	2,~~159~~161,~~683~~519		1,614,257
Deferred revenue, net of current portion	2934,~~646~~362		22,655
Operating lease liabilities, net of current portion	2422,~~857~~852		31,172
Other liabilities	4645,~~544~~477		52,481
Total liabilities	2,~~859~~890,~~791~~744		2,287,517
Commitments and contingencies (Note 9)
Redeemable non-controlling interests (Note 3)	1819,~~775~~152		12,084
Stockholders’ equity:
Preferred stock, $0.0001 par value per share; 25,000,000 shares authorized at July 31, 2022 and January 31, 2022; zero shares issued and outstanding at July 31, 2022 and January 31, 2022	—		—
Preferred stock, $0.0001 par value per share; 25,000,000 shares authorized at October 31, 2022 and January 31, 2022; zero shares issued and outstanding at October 31, 2022 and January 31, 2022	—		—
Common stock, $0.0001 par value per share; 625,000,000 shares authorized at July 31, 2022 and January 31, 2022; 75,928,377 and 75,060,139 shares issued and outstanding at July 31, 2022 and January 31, 2022, respectively	8		7
Common stock, $0.0001 par value per share; 625,000,000 shares authorized at October 31, 2022 and January 31, 2022; 76,110,711 and 75,060,139 shares issued and outstanding at October 31, 2022 and January 31, 2022, respectively	8		7
Additional paid-in capital	1,~~154~~225,~~891~~829		1,778,840
Accumulated other comprehensive income	7,~~333~~005		9,643
Accumulated deficit	(~~844~~949,~~921~~031)		(894,912)
Total stockholders’ equity	~~317~~283,~~311~~811		893,578
Total liabilities, redeemable non-controlling interests, and stockholders’ equity	$	3,~~195~~193,~~877~~707	$	3,193,179

See Notes to Condensed Consolidated Financial Statements.

COUPA SOFTWARE INCORPORATED

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share amounts)

(unaudited)

Three Months EndedJuly 31,

Six Months EndedJuly 31,

Three Months EndedOctober 31,

Nine Months EndedOctober 31,

2022

2021

2022

2021

Revenues:

Subscription

~~192~~198,~~670~~409

~~156~~164,~~230~~745

~~371~~569,~~140~~549

~~296~~461,~~334~~079

Professional services and other

18,~~433~~927

2321,~~016~~071

3655,~~334~~261

4970,~~841~~912

Total revenues

~~211~~217,~~103~~336

~~179~~185,~~246~~816

~~407~~624,~~474~~810

~~346~~531,~~175~~991

Cost of revenues:

Subscription

6065,~~808~~427

5152,~~398~~279

~~118~~184,~~937~~364

~~102~~154,~~423~~701

Professional services and other

22,~~501~~289

2725,~~822~~341

4567,~~200~~489

5681,~~524~~865

Total cost of revenues

8387,~~309~~716

7977,~~220~~620

~~164~~251,~~137~~853

~~158~~236,~~947~~566

Gross profit

~~127~~129,~~794~~620

~~100~~108,~~026~~196

~~243~~372,~~337~~957

~~187~~295,~~228~~425

Operating expenses:

Research and development

4649,~~266~~158

4139,~~799~~990

89139,~~976~~134

85125,~~636~~625

Sales and marketing

~~103~~111,~~215~~599

7683,~~279~~779

~~204~~315,~~168~~767

~~154~~237,~~122~~902

General and administrative

4146,~~942~~248

3640,~~248~~513

84130,~~080~~328

75116,~~625~~139

Total operating expenses

~~191~~207,~~423~~005

~~154~~164,~~326~~282

~~378~~585,~~224~~229

~~315~~479,~~383~~666

Loss from operations

(6377,~~629~~385)

(5456,~~300~~086)

(~~134~~212,~~887~~272)

(~~128~~184,~~155~~241)

Interest expense

(3,~~619~~547)

(3031,~~621~~130)

(710,~~095~~642)

(5990,~~724~~854)

Other expense, net

(709)

(1,983)

(4,425)

(1,448)

Other income (expense), net

393

(1,298)

(4,032)

(2,746)

Loss before provision for (benefit from) income taxes

(6780,~~957~~539)

(8688,~~904~~514)

(~~146~~226,~~407~~946)

(~~189~~277,~~327~~841)

Provision for (benefit from) income taxes

23,~~641~~565

(~~155~~476)

58,~~392~~957

(2,~~221~~697)

Net loss

(7084,~~598~~104)

(8688,~~749~~038)

(~~151~~235,~~799~~903)

(~~187~~275,~~106~~144)

Net loss attributable to redeemable non-controlling interests

(~~462~~353)

(~~517~~273)

(~~666~~1,019)

(~~517~~790)

Adjustment attributable to redeemable non-controlling interests

~~5,133~~924

53,~~235~~438

56,~~609~~533

58,~~235~~673

Net loss attributable to Coupa Software Incorporated

(7584,~~269~~675)

(91,~~467~~203)

(~~156~~241,~~742~~417)

(~~191~~283,~~824~~027)

Net loss per share, basic and diluted, attributable to Coupa Software Incorporated

(01.9911)

(1.2423)

(23.0819)

(23.6285)

Weighted-average number of shares used in computing net loss per share, basic and diluted

7576,~~669~~040

7374,~~526~~133

75,~~429~~635

73,~~200~~514

See Notes to Condensed Consolidated Financial Statements.

COUPA SOFTWARE INCORPORATED

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(in thousands)

(unaudited)

	Three Months EndedJuly 31,				Six Months EndedJuly 31,
	Three Months EndedOctober 31,				Nine Months EndedOctober 31,
	2022		2021		2022		2021
Net loss	$	(7084,~~598~~104)	$	(8688,~~749~~038)	$	(~~151~~235,~~799~~903)	$	(~~187~~275,~~106~~144)
Other comprehensive gain (loss) in relation to defined benefit plans, net of tax	(51)		(213)		821		55
Other comprehensive gain in relation to defined benefit plans, net of tax	418		258		1,239		313
Changes in unrealized loss on marketable securities and non-marketable debt securities, net of tax	(~~183~~512)		(28227)		(23,~~769~~281)		(58285)
Foreign currency translation adjustments, net of tax	(~~128~~428)		(3192)		(~~725~~1,153)		(~~415~~507)
Comprehensive loss	$	(7084,~~960~~626)	$	(8788,~~021~~099)	(~~154~~239,~~472~~098)		(~~187~~275,~~524~~623)
Less comprehensive loss attributable to redeemable non-controlling interests:
Net loss attributable to redeemable non-controlling interests	(~~462~~353)		(~~517~~273)		(~~666~~1,019)		(~~517~~790)
Foreign currency translation adjustments, net of tax, attributable to redeemable non-controlling interests	(60194)		(1151)		(~~363~~557)		(1162)
Comprehensive loss attributable to redeemable non-controlling interests	(~~522~~547)		(~~528~~324)		(1,~~029~~576)		(~~528~~852)
Comprehensive loss attributable to Coupa Software Incorporated	$	(7084,~~438~~079)	$	(8687,~~493~~775)	$	(~~153~~237,~~443~~522)	$	(~~186~~274,~~996~~771)

See Notes to Condensed Consolidated Financial Statements.

COUPA SOFTWARE INCORPORATED

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in thousands, except share amounts)

(unaudited)

	Three Months Ended July 31, 2022
	Three Months Ended October 31, 2022
	Common Stock			Additional Paid-In Capital		Accumulated Other Comprehensive Income (Loss)		Accumulated Deficit		Total Stockholders' Equity
	Shares	Amount
Balance at April 30, 2022	75,541,575	$	7	$	1,102,962	$	7,635	$	(774,323)	$	336,281
Exercise of stock options	31,975	1		264		—		—		265
Stock-based compensation expense	—	—		56,336		—		—		56,336
Vested restricted stock units	354,827	—		—		—		—		—
Other comprehensive loss	—	—		—		(302)		—		(302)
Net loss attributable to Coupa Software Incorporated, including adjustment to redeemable non-controlling interests	—	—		(4,671)		—		(70,598)		(75,269)
Balance at July 31, 2022	75,928,377	$	8	$	1,154,891	$	7,333	$	(844,921)	$	317,311
	Six Months Ended July 31, 2022
Issuance of common stock for employee share purchase plan	120,325	—		7,221		—		—		7,221
Exercise of stock options	28,870	—		266		—		—		266
Stock-based compensation expense	—	—		64,023		—		—		64,023
Vested restricted stock units	345,360	—		—		—		—		—
Repurchases of common stock	(325,292)	—		—		—		(20,006)		(20,006)
Settlement of convertible senior notes (Note 8)	13,071	—		(1)		—		—		(1)
Other comprehensive loss	—	—		—		(328)		—		(328)
Net loss attributable to Coupa Software Incorporated, including adjustment to redeemable non-controlling interests	—	—		(571)		—		(84,104)		(84,675)
Balance at October 31, 2022	76,110,711	$	8	$	1,225,829	$	7,005	$	(949,031)	$	283,811
	Nine Months Ended October 31, 2022
	Common Stock			Additional Paid-In Capital		Accumulated Other Comprehensive Income (Loss)		Accumulated Deficit		Total Stockholders' Equity
	Shares	Amount
Balance at January 31, 2022	75,060,139	$	7	$	1,778,840	$	9,643	$	(894,912)	$	893,578
Cumulative adjustment due to adoption of ASU No. 2020-06	—	—		(738,892)		—		201,790		(537,102)
Issuance of common stock for employee share purchase plan	~~161~~282,~~728~~053	—		917,~~973~~194		—		—		917,~~973~~194
Exercise of stock options	89118,~~210~~080	1		~~959~~1,225		—		—		~~960~~1,226
Stock-based compensation expense	—	—		~~108~~172,~~954~~977		—		—		~~108~~172,~~954~~977
Vested restricted stock units	~~617~~962,~~300~~660	—		—		—		—		—
Other comprehensive loss	—	—		—		(2,310)		—		(2,310)
Repurchases of common stock	(325,292)	—		—		—		(20,006)		(20,006)
Net loss attributable to Coupa Software Incorporated, including adjustment to redeemable non-controlling interests	—	—		(4,943)		—		(151,799)		(156,742)
Settlement of convertible senior notes (Note 8)	13,071	—		(1)		—		—		(1)
Balance at July 31, 2022	75,928,377	$	8	$	1,154,891	$	7,333	$	(844,921)	$	317,311
Other comprehensive loss	—	—		—		(2,638)		—		(2,638)
Net loss attributable to Coupa Software Incorporated, including adjustment to redeemable non-controlling interests	—	—		(5,514)		—		(235,903)		(241,417)
Balance at October 31, 2022	76,110,711	$	8	$	1,225,829	$	7,005	$	(949,031)	$	283,811

See Notes to Condensed Consolidated Financial Statements.

COUPA SOFTWARE INCORPORATED

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in thousands, except share amounts)

(unaudited)

	Three Months Ended July 31, 2021
	Three Months Ended October 31, 2021
	Common Stock			Additional Paid-In Capital		Accumulated Other Comprehensive Income (Loss)		Accumulated Deficit		Total Stockholders' Equity
	Shares	Amount
Balance at April 30, 2021	73,464,780	$	7	$	1,617,223	$	9,019	$	(626,163)	$	1,000,086
Exercise of stock options	208,951	—		2,470		—		—		2,470
Stock-based compensation expense	—	—		47,837		—		—		47,837
Vested restricted stock units	317,735	—		—		—		—		—
Settlement of convertible senior notes (Note 8)	146	—		—		—		—		—
Temporary equity reclassification	—	—		(8)		—		—		(8)
Other comprehensive loss	—	—		—		(261)		—		(261)
Net loss attributable to Coupa Software Incorporated, including adjustment to redeemable non-controlling interests	—	—		(4,718)		—		(86,749)		(91,467)
Balance at July 31, 2021	73,991,612	$	7	$	1,662,804	$	8,758	$	(712,912)	$	958,657
	Six Months Ended July 31, 2021
Issuance of common stock for employee share purchase plan	74,348	—		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, 2021	74,613,605	$	7	$	1,724,042	$	8,748	$	(800,950)	$	931,847
	Nine Months Ended October 31, 2021
	Common Stock			Additional Paid-In Capital		Accumulated Other Comprehensive Income (Loss)		Accumulated Deficit		Total Stockholders' Equity
	Shares	Amount
Balance at January 31, 2021	72,753,659	$	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	82156,~~462~~810	—		1021,~~477~~626		—		—		1021,~~477~~626
Exercise of stock options	~~411~~597,~~863~~586	—		47,~~718~~431		—		—		47,~~718~~431
Stock-based compensation expense	—	—		95145,~~341~~982		—		—		95145,~~341~~982
Vested restricted stock units	~~664~~951,~~185~~082	—		—		—		—		—
Settlement of convertible senior notes (Note 8)	57132,~~073~~098	—		(~~240~~348)		—		—		(~~240~~348)
Temporary equity reclassification	—	—		~~361~~369		—		—		~~361~~369
Other comprehensive loss	—	—		—		(~~407~~417)		—		(~~407~~417)
Net loss attributable to Coupa Software Incorporated, including adjustment to redeemable non-controlling interests	—	—		(47,~~718~~883)		—		(~~187~~275,~~106~~144)		(~~191~~283,~~824~~027)
Balance at July 31, 2021	73,991,612	$	7	$	1,662,804	$	8,758	$	(712,912)	$	958,657
Balance at October 31, 2021	74,613,605	$	7	$	1,724,042	$	8,748	$	(800,950)	$	931,847

See Notes to Condensed Consolidated Financial Statements.

COUPA SOFTWARE INCORPORATED

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)

	Six Months EndedJuly 31,
	Nine Months EndedOctober 31,
	2022		2021
Cash flows from operating activities
Net loss attributable to Coupa Software Incorporated	$	(~~156~~241,~~742~~417)	$	(~~191~~283,~~824~~027)
Net loss and adjustment attributable to redeemable non-controlling interests (Note 3)	45,~~943~~514		47,~~718~~883
Net loss	(~~151~~235,~~799~~903)		(~~187~~275,~~106~~144)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization	71107,~~804~~399		73109,~~146~~900
Amortization (accretion) of premium (discount) on marketable securities, net	(~~721~~1,118)		~~755~~625
Amortization of deferred commissions	1117,~~413~~567		813,~~554~~335
Amortization of debt discount and issuance costs	35,~~596~~435		5685,~~262~~716
Stock-based compensation	~~108~~172,~~224~~254		94145,~~792~~251
Loss on conversion of convertible senior notes	—		~~129~~357
Repayments of convertible senior notes attributable to debt discount (Note 8)	—		(~~517~~1,338)
Other	(1,~~581~~682)		(3,~~176~~204)
Changes in operating assets and liabilities net of effects from acquisitions:
Accounts receivable	625,~~414~~004		3021,~~444~~433
Prepaid expenses and other current assets	27,~~917~~743		14,~~396~~529
Other assets	1016,~~438~~156		913,~~585~~968
Deferred commissions	(1323,~~804~~023)		(1322,~~394~~445)
Accounts payable	~~4,146~~511		~~(248)~~500
Accrued expenses and other liabilities	1133,~~801~~987		56,~~703~~795
Deferred revenue	1525,~~988~~804		(3,~~432)~~630
Net cash provided by operating activities	78150,~~836~~134		72103,~~893~~908
Cash flows from investing activities
Purchases of marketable securities	(~~152~~287,~~349~~218)		(72116,~~392~~583)
Maturities of marketable securities	88166,~~586~~181		6994,~~523~~142
Sales of marketable securities	4,597		8394,~~630~~916
Acquisitions, net of cash acquired	—244		(4546,~~766~~719)
Purchases of other investments	(2,000)		(710,~~500~~000)
Purchases of property and equipment	(814,~~241~~005)		(610,~~662~~256)
Net cash (used in) provided by investing activities	(69132,~~407~~201)		205,~~833~~500
Cash flows from financing activities
Investment from redeemable non-controlling interests	2,111		2,223
Repayments of convertible senior notes	—(1,750)		(25,~~446~~748)
Proceeds from the exercise of common stock options	~~959~~1,223		47,~~727~~444
Proceeds from issuance of common stock for employee stock purchase plan	917,~~973~~194		1021,~~477~~626
Net cash provided by financing activities	13,043		14,981
Repurchases of common stock	(20,006)		—
Effects of foreign currency exchange rates on cash, cash equivalents, and restricted cash	(1,075)		(41)
Net cash (used in) provided by financing activities	(1,228)		25,545
Net increase in cash, cash equivalents, and restricted cash	21,397		108,666
Effects of foreign currency exchange rates on cash, cash equivalents, and restricted cash	(1,912)		(178)
Net increase in cash, cash equivalents, and restricted cash	14,793		134,775
Cash, cash equivalents, and restricted cash at beginning of year	510,339		327,589
Cash, cash equivalents, and restricted cash at end of period	$	~~531~~525,~~736~~132	$	~~436~~462,~~255~~364
Reconciliation of cash, cash equivalents, and restricted cash to the condensed consolidated balance sheets
Cash and cash equivalents	$	~~527~~521,~~963~~598	$	~~432~~458,~~009~~195
Restricted cash included in other assets	3,~~773~~534		4,~~246~~169
Total cash, cash equivalents, and restricted cash	$	~~531~~525,~~736~~132	$	~~436~~462,~~255~~364

See Notes to Condensed Consolidated Financial Statements.

COUPA SOFTWARE INCORPORATED

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)

	Six Months EndedJuly 31,
	Nine Months EndedOctober 31,
	2022		2021
Supplemental disclosure of cash flow data
Cash paid for income taxes	$	35,~~193~~332	$	23,~~638~~181
Cash paid for interest	$	3,094	$	3,101
Supplemental disclosure of non-cash investing and financing activities
Property and equipment included in accounts payable and accrued expenses and other current liabilities	$	~~363~~1,427	$	~~446~~468

See Notes to Condensed Consolidated Financial Statements.

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, 2022 filed with the SEC on March 16, 2022 (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, 2022, 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, 2022, other than the adoption of accounting pronouncements as described in the “Recently Adopted Accounting Pronouncements” section below.

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~~ valuation of acquired intangible assets and the recoverability or impairment of intangible assets, including goodwill, revenue recognition, stock-based compensation, redemption value of redeemable non-controlling interests, the benefit period of deferred commissions, and provision for (benefit from) income taxes. Management bases its estimates and assumptions 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 ~~six~~nine months ended ~~July~~October 31, 2022. 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 expense, net, in the condensed consolidated statements of operations for the period.

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 debt securities and non-marketable debt 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.

Subscription Revenues

The Company offers subscriptions to its cloud-based business spend management platform, including procurement, invoicing, expense management and payment solutions. 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.

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 ~~July~~October 31, 2022 and January 31, 2022, the balance of accounts receivable, net of the allowance for credit losses, was $~~219~~200.58 million and $226.2 million, respectively. Of these balances, $109.17 million and $13.9 million represent unbilled receivable amounts as of ~~July~~October 31, 2022 and January 31, 2022, respectively. In addition, as of ~~July~~October 31, 2022 and January 31, 2022, the balance of long-term unbilled receivables was approximately $~~400~~220,000 and $1.9 million, respectively, which were included in other assets on the Company's condensed consolidated balance sheet.

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 ~~July~~October 31, 2022, approximately $1,~~424~~452.76 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 ~~six~~nine months ended ~~July~~October 31, 2022, the revenue recognized from performance obligations satisfied in prior periods was approximately $2.1.7 million and $2.45 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 ~~July~~October 31, 2022 and January 31, 2022.

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 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 ~~six~~nine months ended ~~July~~October 31, 2022. 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.

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. Of the total deferred revenue balance, subscription deferred revenue was $~~499~~507.30 million and $484.1 million as of ~~July~~October 31, 2022 and January 31, 2022, respectively. During the three and ~~six~~nine months ended ~~July~~October 31, 2022, the Company recognized revenue of $~~182~~190.90 million and $~~308~~408.37 million that was included in the deferred revenue balance as of ~~April~~July 3031, 2022 and January 31, 2022, respectively. During the three and ~~six~~nine months ended ~~July~~October 31, 2021, the Company recognized revenue of $~~141~~153.1 million and $~~238~~314.78 million that was included in the deferred revenue balance as of ~~April~~July 3031, 2021 and January 31, 2021, 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 $89.12 million and $89.71 million, and amortized $56.82 million and $4.48 million to sales and marketing expense in the accompanying condensed consolidated statements of operations during the three months ended ~~July~~October 31, 2022 and 2021, respectively. The Company capitalized commission costs of $1323.80 million and $1322.4 million, and amortized $1117.46 million and $813.63 million to sales and marketing expense in the accompanying condensed consolidated statements of operations during the ~~six~~nine months ended ~~July~~October 31, 2022 and 2021, respectively.

Redeemable Non-Controlling Interests

In March 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 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 ~~July~~October 31, 2022, 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 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 ~~July~~October 31, 2022, the Company was not a material lessor in leasing arrangements or a party to material sublease arrangements.

Recent Accounting Guidance

Recently Adopted Accounting Pronouncements

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) (“ASU 2020-06”), 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 Company adopted the new guidance effective on February 1, 2022, using the modified retrospective approach. The adoption of this new guidance resulted in an increase of $541.9 million to the total carrying value of the Convertible Notes to reflect the full principal amount of the Convertible Notes outstanding net of unamortized issuance costs, a decrease of $738.9 million to additional paid-in capital to remove the equity component separately recorded for the conversion features associated with the convertible notes, a decrease of $201.8 million to accumulated deficit, and a decrease of $4.8 million to deferred tax liabilities. The adoption of this new guidance also decreased the amount of non-cash interest expense to be recognized in future periods as a result of eliminating the debt discount associated with the equity component.

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. The Company early adopted this new guidance effective on February 1, 2022, using the prospective approach, and the adoption did not have a material impact on the Company’s condensed consolidated financial statements.

Note 3. Redeemable Non-Controlling Interests

In March 2021, the Company established a joint venture with Japan Cloud Computing L.P. and M30 LLC (the “Investors”) in Coupa K.K., which is a variable interest entity. This joint venture is intended to enable the Company to support the growing number of Japanese companies looking to gain greater efficiency and agility through BSM. On March 15, 2021, the Company initially contributed approximately $2.4 million in cash in exchange for a 51% controlling interest, and the Investors initially contributed approximately $2.2 million. Accordingly, the Company consolidated the financial results of the joint venture. On March 11, 2022, the Company contributed approximately $2.2 million in cash, and the Investors contributed approximately $2.1 million. ~~The share of the loss in the joint venture attributable to the redeemable non-controlling interests was not material during both the three and six months ended July 31, 2022 and 2021, respectively.~~

The following table summarizes the activity in the redeemable non-controlling interest for the period indicated below (in thousands):

	Three Months EndedJuly 31,				Six Months EndedJuly 31,
	Three Months EndedOctober 31,				Nine Months EndedOctober 31,
	2022		2021		2022		2021
Balance at beginning of period	$	1418,~~164~~775	$	26,~~223~~930	$	12,084	$	—
Investment by redeemable non-controlling interests	—		—		2,111		2,223
Net loss attributable to redeemable non-controlling interests	(~~462~~353)		(~~517~~273)		(~~666~~1,019)		(~~517~~790)
Foreign currency translation adjustments, net of tax	(60194)		(1151)		(~~363~~557)		(1162)
Adjustment to redeemable non-controlling interest	~~5,133~~924		53,~~235~~438		56,~~609~~533		58,~~235~~673
Balance at end of period	$	1819,~~775~~152	$	610,~~930~~044	$	1819,~~775~~152	$	610,~~930~~044

Note 4. 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):

	July 31, 2022
	October 31, 2022
	Amortized Costs		Unrealized Gains		Unrealized Losses		Fair Value
U.S. treasury securities	$	~~283~~335,~~770~~923	$	~~103~~12	$	(2,~~503~~919)	$	~~281~~333,~~370~~016
Total marketable securities	$	283,770	$	103	$	(2,503)	$	281,370
U.S. agency obligations	5,520		—		(6)		5,514
Total marketable securities	$	341,443	$	12	$	(2,925)	$	338,530


	January 31, 2022
	Amortized Costs		Unrealized Gains		Unrealized Losses		Fair Value
U.S. treasury securities	$	223,950	$	23	$	(941)	$	223,032




Total marketable securities	$	223,950	$	23	$	(941)	$	223,032

As of ~~July~~October 31, 2022, the fair values of available-for-sale marketable securities, by remaining contractual maturity, were as follows (in thousands):

Due within one year	$	~~220~~277,~~518~~695
Due in one year through five years	60,~~852~~835
Total	$	~~281~~338,~~370~~530

The Company’s ~~marketable securities consist of U.S. treasury securities only. 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 ~~six~~nine months ended ~~July~~October 31, 2022 and 2021, 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, 2022, the unrealized losses and the related risk of expected credit losses were not significant.

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 July 31, 2022, the unrealized losses and the related risk of expected credit losses were not significant.

Note 5. 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 ~~July~~October 31, 2022 (in thousands):

	Level 1		Level 2		Level 3		Total
Cash equivalents:(1)
Money market funds	$	~~116~~125,~~792~~132	$	—	$	—	$	~~116~~125,~~792~~132
Marketable securities:
U.S. treasury securities	—		~~281~~333,~~370~~016		—		~~281~~333,~~370~~016
U.S. agency obligations	—		5,514		—		5,514
Other investments:
Non-marketable debt investments	—		—		2,~~628~~653		2,~~628~~653
Total assets	$	~~116~~125,~~792~~132	$	~~281~~338,~~370~~530	$	2,~~628~~653	$	~~400~~466,~~790~~315

(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, 2022 (in thousands):


	Level 1		Level 2		Level 3		Total
Cash equivalents:(1)
Money market funds	$	233,705	$	—	$	—	$	233,705

Marketable securities:
U.S. treasury securities	—		223,032		—		223,032




Other investments:
Non-marketable debt investments	—		—		6,434		6,434
Total assets	$	233,705	$	223,032	$	6,434	$	463,171

(1)Included in cash and cash equivalents.

Other Investments

The Company’s non-marketable debt investments are recorded at fair value on a recurring basis. The estimation of fair value for non-marketable debt investments is based on valuation methods using an observable transaction price, if available and other unobservable inputs, including the volatility, rights, and obligations of the securities the Company holds; as a result, the Company classifies these assets as Level 3 within the fair value hierarchy.

As of ~~July~~October 31, 2022, the balance of non-marketable debt investments was $2.67 million. There have been no impairments to the amortized cost of the non-marketable debt investments during the three and ~~six~~nine months ended ~~July~~October 31, 2022.

The table above does not include the Company’s non-marketable equity investments. The non-marketable equity investments are measured under the measurement alternative on a non-recurring basis. The Company classifies these assets as Level 3 within the fair value hierarchy as only an impairment or adjustment is recognized from observable price changes in orderly transactions for the identical or a similar investment of the same issuer and other unobservable inputs. As of ~~July~~October 31, 2022 and January 31, 2022, the carrying value of the Company’s non-marketable equity investments was $10.9 million and $5.0 million, respectively. There have been no impairments or adjustments to the carrying amount of the equity investments during the three and ~~six~~nine months ended ~~July~~October 31, 2022.

During the quarter ended April 30, 2022, the Company’s investment in a non-marketable convertible note converted to preferred stock, which is classified as a non-marketable equity investment. At the time of conversion, the Company recognized a gain of $1.3 million.

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~~an ~~million~~immaterial 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 ~~July~~October 31, 2022. Refer to Note 8, “Convertible Senior Notes” for further details on the Convertible Notes.

The estimated fair value of the 2026 Notes, 2025 Notes and 2023 Notes, based on a market approach as of ~~July~~October 31, 2022, was approximately $1,~~107~~098.5 million, $~~701~~691.1 million and ~~$2.6~~not ~~million~~material, 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, 2022, was approximately $1,277.1 million, $895.0 million and $5.3 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 6. Property and Equipment, Net

Property and equipment consisted of the following (in thousands):

	July 31,2022		January 31,2022
	October 31,2022		January 31,2022
Furniture and equipment	$	1619,~~980~~501	$	15,584
Software development costs	6366,~~254~~267		55,733
Leasehold improvements	7,~~577~~813		7,193
Construction in progress	13,~~200~~006		471
Total property and equipment	8996,~~011~~587		78,981
Less: accumulated depreciation and amortization	(5761,~~022~~589)		(48,405)
Property and equipment, net	$	3134,~~989~~998	$	30,576

Depreciation and amortization expense related to property and equipment, excluding software development costs, was approximately $1.46 million and $1.23 million for the three months ended ~~July~~October 31, 2022 and 2021, respectively and $24.84 million and $23.58 million for the ~~six~~nine months ended ~~July~~October 31, 2022 and 2021, respectively.

Amortization expense related to software development costs was approximately $3.0 million and $2.46 million for the three months ended ~~July~~October 31, 2022 and 2021, respectively and $58.8 million and $47.62 million for the ~~six~~nine months ended ~~July~~October 31, 2022 and 2021, respectively.

Note 7. Goodwill and Other Intangible Assets

Goodwill

There have been no changes to the Company's goodwill balance during the three months ended ~~July~~October 31, 2022.

Other Intangible Assets

The following table summarizes the other intangible assets balances (in thousands):

	As of
	July 31, 2022							January 31, 2022
	October 31, 2022							January 31, 2022
	WeightedAverageRemainingUsefulLives(in Years)	GrossCarryingAmount		AccumulatedAmortization		NetCarryingAmount		GrossCarryingAmount		AccumulatedAmortization		NetCarryingAmount
Developed technology	4.75	$	484,510	$	(~~190~~209,~~108~~303)	$	~~294~~275,~~402~~207	$	484,510	$	(150,910)	$	333,600
Customer relationships	3.20	256,082		(~~104~~116,~~361~~951)		~~151~~139,~~721~~131		256,082		(79,019)		177,063
Trademarks	0.0	2,419		(2,419)		—		2,419		(2,419)		—
Total other intangible assets		$	743,011	$	(~~296~~328,~~888~~673)	$	~~446~~414,~~123~~338	$	743,011	$	(232,348)	$	510,663

Amortization expense related to other intangible assets was approximately $31.8 million and $33.5 million for the three months ended ~~July~~October 31, 2022 and 2021, respectively and $6496.53 million and $67100.06 million for the ~~six~~nine months ended ~~July~~October 31, 2022 and 2021, respectively.

As of ~~July~~October 31, 2022, the future amortization expense of other intangible assets is as follows (in thousands):

Year Ending January 31,
2023 (remaining six months)	$	63,571
2023 (remaining three months)	$	31,786
2024	121,994
2025	102,849
2026	78,559
2027	45,157
Thereafter	33,993
Total	$	~~446~~414,~~123~~338

Note 8. Convertible Senior Notes

2026 Notes

In June 2020, the Company issued the 2026 Notes in aggregate principal amount of $1,380.0 million in a private placement to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended. The net proceeds from the issuance of the 2026 Notes were $1,162.3 million, net of debt issuance costs, including the underwriting discount and the cash used to purchase the capped call discussed below. The 2026 Notes have an initial conversion rate of 3.3732 shares of common stock per $1,000 principal (equivalent to an initial conversion price of approximately $296.45 per share of common stock). The interest rate is fixed at 0.375% per annum for the 2026 Notes and is payable semi-annually in arrears on June 15 and December 15 of each year, which commenced on December 15, 2020. Refer to the Company’s consolidated financial statements for the year ended January 31, 2021 for details of the issuance and accounting of 2026 Notes.

The 2026 Notes were not convertible at ~~July~~October 31, 2022, as none of the 2026 Notes conversion conditions were met. Accordingly, the 2026 Notes were classified as noncurrent liabilities on the condensed consolidated balance sheet as of ~~July~~October 31, 2022.

The Company may redeem for cash all or any portion of the 2026 Notes, at its option, on or after June 20, 2023 and prior to the 21st scheduled trading day immediately preceding the maturity date, if the last reported sale price of the Company’s common stock has been at least 130% of the conversion price then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period (including the last trading day of such period) ending on, and including, the trading day immediately preceding the date on which the Company provides notice of redemption at a redemption price equal to 100% of the principal amount of the 2026 Notes to be redeemed, plus any accrued and unpaid interest to, but excluding, the redemption date.

2025 Notes

In June 2019, the Company issued the 2025 Notes in aggregate principal amount of $805.0 million in a private placement to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended. The net proceeds from the issuance of the 2025 Notes were $667.4 million, net of debt issuance costs, including the underwriting discount and the cash used to purchase the capped call, discussed below. The 2025 Notes have an initial conversion rate of 6.2658 shares of common stock per $1,000 principal (equivalent to an initial conversion price of approximately $159.60 per share of common stock). The interest rate is fixed at 0.125% per annum for the 2025 Notes and is payable semi-annually in arrears on June 15 and December 15 of each year, which commenced on December 15, 2019. The accounting for 2025 Notes was substantially consistent with the accounting for 2026 Notes as described in the Company’s consolidated financial statements for the year ended January 31, 2022. Refer to the Company’s consolidated financial statements for the year ended January 31, 2020 for details of the issuance and accounting of 2025 Notes.

The 2025 Notes were convertible from August 1, 2020 through January 31, 2022 as a result of meeting the conversion condition for the respective periods. Beginning with the three months ended January 31, 2022, the conversion condition was not met and continued to not be met during the three months ended ~~July~~October 31, 2022. Therefore, the 2025 Notes have not been convertible commencing on February 1, 2022 and for the ~~six~~nine months ended ~~July~~October 31, 2022. Accordingly, the 2025 Notes were classified as noncurrent liabilities on the condensed consolidated balance sheet as of ~~July~~October 31, 2022.

As of ~~July~~October 31, 2022, approximately $805.0 million principal amount of 2025 Notes remained outstanding.

The Company may redeem for cash all or any portion of the 2025 Notes, at its option, on or after June 20, 2022, if the last reported sale price of the Company’s common stock has been at least 130% of the conversion price then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period (including the last trading day of such period) ending on, and including, the trading day immediately preceding the date on which the Company provides notice of redemption at a redemption price equal to 100% of the principal amount of the 2025 Notes to be redeemed, plus any accrued and unpaid interest to, but excluding, the redemption date.

2023 Notes

In January 2018, the Company issued the 2023 Notes in aggregate principal amount of $230.0 million in a private placement to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended. The net proceeds from the issuance of the 2023 Notes were $200.4 million, net of debt issuance costs, including the underwriting discount and the cash used to purchase the capped call, discussed below. The 2023 Notes have an initial conversion rate of 22.4685 shares of common stock per $1,000 principal (equivalent to an initial conversion price of approximately $44.51 per share of common stock). The interest rate is fixed at 0.375% per annum for the 2023 Notes and is payable semi-annually in arrears on July 15 and January 15 of each year, which commenced on July 15, 2018. The accounting for 2023 Notes was substantially consistent with the accounting for 2026 Notes as described in the Company’s consolidated financial statements for the year ended January 31, 2022. Refer to the Company’s consolidated financial statements for the year ended January 31, 2019 for details of the issuance of 2023 Notes.

The conversion condition for the 2023 Notes was initially met during the three months ended July 31, 2018, and has been met for each subsequent fiscal quarter. On or after October 15, 2022 until the close of business on the second scheduled trading day immediately preceding the maturity date, holders may convert all or any portion of their 2023 Notes, in multiples of $1,000 principal amount, at the option of the holder regardless of the conversion condition. As a result, the 2023 Notes were convertible at the option of the holders and remained classified as current liabilities on the condensed consolidated balance sheet as of ~~July~~October 31, 2022. ~~During~~For the ~~three~~nine ~~and six~~ months ended ~~July~~October 31, 2022, the Company ~~received~~settled conversion requests on the principal amount of the 2023 Notes totaling approximately $1.8 million by paying cash for the principal amount of ~~conversion~~$1.8 ~~requests~~million ~~that~~and ~~will~~issuing be13,071 ~~settled~~shares ~~during~~of the ~~subsequent~~Company’s ~~quarter~~common stock, bearing a fair value of approximately $800,000.

As of ~~July~~October 31, 2022, ~~approximately~~the ~~$1.8 million principal~~ amount of 2023 Notes that remained outstanding. Inwas ~~addition, from August 1, 2022 to the date of this filing, the Company has~~ not ~~received any additional conversion requests for the remaining 2023 Notes~~material.

The Company may redeem for cash all or any portion of the 2023 Notes, at its option, on or after January 20, 2021, if the last reported sale price of the Company’s common stock has been at least 130% of the conversion price then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period (including the last trading day of such period) ending on, and including, the trading day immediately preceding the date on which the Company provides notice of redemption at a redemption price equal to 100% of the principal amount of the 2023 Notes to be redeemed, plus any accrued and unpaid interest to, but excluding, the redemption date. During the ~~six~~nine months ended ~~July~~October 31, 2022, the Company did not redeem any of the 2023 Notes.

The Company adopted ASU 2020-06 on February 1, 2022, using the modified retrospective approach. Prior to the adoption of the standard, in accounting for the issuance of the Convertible Notes, the Company separated each series of notes into liability and equity components. The carrying amount of the liability component was calculated by measuring the fair value of similar liabilities that do not have associated convertible features. The carrying amount of the equity component representing the conversion option was determined by deducting the fair value of the liability component from the par value of the Convertible Notes. This difference represented a debt discount that was amortized to interest expense over the term of the Convertible Notes using the effective interest rate method. The gross carrying amount of the equity component for the Convertible Notes was included in additional paid-in capital on the condensed consolidated balance sheets upon issuance. The effective interest rate of the liability component of the 2026 Notes, 2025 Notes and 2023 Notes were 8.83%, 7.05% and 7.66%, respectively. Additionally, the Company separated the total issuance costs incurred into liability and equity components in proportion to the allocation of the initial proceeds. Issuance costs attributable to the liability component were amortized on a straight-line basis, which approximated the effective interest rate method, to interest expense over the respective terms of the Convertible Notes. The issuance costs attributable to the equity component were netted against the equity component in additional paid-in capital.

Upon adoption of ASU 2020-06, the Company recombined the liability and equity components for each of the Convertible Notes, assuming that the instrument was accounted for as a single liability component from inception to the date of adoption. The Company similarly recombined the liability and equity components of the debt issuance costs. The Company reversed the allocation of the issuance costs to the equity component and accounted for the entire amount as debt issuance cost that will be amortized as interest expense for each of the respective terms of the Convertible Notes, with a cumulative adjustment to retained earnings on the adoption date.

The Convertible Notes consisted of the following (in thousands):

As of

July 31, 2022

October 31, 2022

2026 Notes

2025 Notes

2023 Notes

Liability:

Principal

1,380,000

804,990

~~1,752~~2

Unamortized debt issuance costs (1)

(1615,~~224~~179)

(98,~~083~~292)

~~(5)~~—

Net carrying amount

1,~~363~~364,~~776~~821

~~795~~796,~~907~~698

~~1,747~~2


	As of
	January 31, 2022
	2026 Notes		2025 Notes		2023 Notes
Liability:
Principal	$	1,380,000	$	804,990	$	1,752
Unamortized debt discount and issuance costs (1)	(408,467)		(162,266)		(113)
Net carrying amount	$	971,533	$	642,724	$	1,639
Carrying amount of the equity component (2)	$	501,053	$	246,966	$	460

(1)Included in the condensed consolidated balance sheets within Convertible senior notes, net and amortized over the remaining lives of the convertible senior notes. The 2026 Notes and 2025 Notes were classified as noncurrent liabilities, and the 2023 Notes were classified as current liabilities.

(2)Included in the condensed consolidated balance sheets within additional paid-in capital and temporary equity.

After the adoption of ASU No. 2020-06, the effective interest rate for the 2026 Notes, 2025 Notes, and 2023 Notes was 0.68%, 0.52%, and 1.00%, respectively. As of ~~July~~October 31, 2022 and January 31, 2022, the if-converted value of the 2026 Notes and 2025 Notes did not exceed the principal amount. As of ~~July~~October 31, 2022 and January 31, 2022, the if-converted value of the 2023 Notes exceeded the principal amount by ~~$0.8~~an ~~million~~immaterial amount and $3.5 million, respectively.

During the three and ~~six~~nine months ended ~~July~~October 31, 2022, the Company recognized $1.8 million and $35.64 million, respectively, of interest expense related to the amortization of debt issuance costs, and $1.65 million and $34.16 million, respectively, of coupon interest expense. During the three and ~~six~~nine months ended ~~July~~October 31, 2021, the Company recognized $2829.95 million and $5685.37 million, respectively, of interest expense related to the amortization debt discount and issuance costs, and $1.5 million and $34.16 million, respectively, of coupon interest expense.

As of ~~July~~October 31, 2022, the remaining life of the 2026 Notes, 2025 Notes and 2023 Notes is approximately 3.96 years, 2.96 years and 0.52 years, respectively.

Capped Calls

In conjunction with the issuance of the 2026 Notes, 2025 Notes and 2023 Notes, the Company entered into capped call transactions (the “Capped Calls”) on the Company’s common stock with certain counterparties at a price of $192.8 million, $118.7 million and $23.3 million, respectively.

The Capped Calls exercise price is equal to the initial conversion price of each of the Convertible Notes, and the cap price is $503.415 per share for 2026 Notes, $295.550 per share for 2025 Notes and $63.821 per share for 2023 Notes, each subject to certain adjustments under the terms of the Capped Call transactions. If any tranche of Convertible Notes’ conversion option is exercised, the corresponding convertible note capped call will become exercisable on the same date. As of the date of filing, the Company has not exercised the Capped Calls in relation to the conversion of 2023 Notes, and the Capped Calls relating to the 2025 Notes and 2026 Notes were not exercisable.

By entering into the Capped Calls, the Company expects to reduce the potential dilution to its common stock (or, in the event the conversion is settled in cash, to reduce its cash payment obligation) in the event that at the time of conversion its stock price exceeds the conversion price.

The cost of the Capped Calls is not expected to be tax-deductible as the Company did not elect to integrate the Capped Calls into the respective Convertible Notes for tax purposes. The cost of the Capped Calls was recorded as a reduction of the Company’s additional paid-in capital in the accompanying condensed consolidated financial statements.

Note 9. Commitments and Contingencies

Commitments

The Company leases office space under non-cancelable operating leases with various expiration dates through February 2030. For the three months ended ~~July~~October 31, 2022 and 2021, lease costs in relation to long-term leases were approximately $34.93 million and $3.67 million, respectively, and $712.70 million and $710.17 million for the ~~six~~nine months ended ~~July~~October 31, 2022 and 2021, respectively. For the three months ended ~~July~~October 31, 2022 and 2021, short-term lease costs were approximately $~~800~~700,000 and $~~400~~500,000, respectively, and $12.52 million and $1.05 million for the ~~six~~nine months ended ~~July~~October 31, 2022 and 2021, respectively. Variable lease costs were immaterial for the three and ~~six~~nine months ended ~~July~~October 31, 2022 and 2021. Certain lease agreements include options to renew or terminate the lease, which are not reasonably certain to be exercised and therefore are not factored into the determination of lease payments or the lease right-of-use asset/lease liability.

For the three months ended ~~July~~October 31, 2022 and 2021, cash paid for operating lease liabilities was approximately $34.90 million ~~and~~for ~~$3.6~~both ~~million~~periods, ~~respectively,~~ and $711.7 million and $711.2 million for the ~~six~~nine months ended ~~July~~October 31, 2022 and 2021, respectively. For the three months ended ~~July~~October 31, 2022 and 2021, right-of-use assets obtained in exchange of lease obligations was approximately $12.36 million and $2.17 million, respectively, and $1.4.0 million and $35.07 million for the ~~six~~nine months ended ~~July~~October 31, 2022 and 2021, respectively. As of ~~July~~October 31, 2022, the weighted-average remaining lease term was 3.31 years, and the weighted-average discount rate was 7.65%.

As of ~~July~~October 31, 2022, the remaining maturities of operating lease liabilities and future purchase obligations are as follows (in thousands):

Year Ending January 31,	Operating Lease Obligations		Future Purchase Obligations
2023 (remaining six months)	$	7,828	$	17,300
2023 (remaining three months)	$	4,037	$	11,125
2024	1415,~~850~~507		4948,~~266~~568
2025	9,~~302~~613		5957,~~674~~289
2026	6,~~110~~442		5349,~~883~~112
2027	4,~~440~~812		—
Thereafter	~~466~~693		—
Total payments	4241,~~996~~104		$	~~180~~166,~~123~~094
Less imputed interest	(54,~~055~~575)
Total	$	3736,~~941~~529

The Company’s future purchase obligations in the table above primarily includes contractual purchase obligations for hosting services and other services to support the Company’s business operations.

Contingencies

On June 10, 2021, the Company was served with notice of a complaint filed in U.S. District Court for the Southern District of Florida by DCR Workforce, Inc., as plaintiff, against Coupa Software Incorporated, as defendant. The complaint alleged breach of contract and other claims, and sought various damages from the Company including 206,065 shares of the Company’s common stock. The complaint related to the Company’s purchase of DCR’s vendor management software (VMS) business in August 2018. Under the purchase agreement, the Company agreed to issue additional stock to DCR as contingent (earn-out) consideration if the VMS business achieved certain revenue-related milestones during three measurement periods that continue through December 31, 2022. The VMS business met the target for the first measurement period and DCR was issued stock. It did not meet the target for the second measurement period. After DCR was notified, it filed the complaint.

On August 4, 2021, pursuant to a forum selection provision in the purchase agreement, the district court granted the Company’s motion to transfer venue to the U.S. District Court for the Northern District of California. On October 13, 2021, the court granted the Company’s motion to dismiss in its entirety and dismissed the case with prejudice. On November 11, 2021, DCR filed a notice of appeal of the district court’s decision. ~~Upon~~On ~~appeal~~November 22, ~~DCR~~2022 ~~filed~~a ~~their~~panel ~~opening~~of ~~brief~~the onNinth ~~March~~Circuit ~~24,~~Court ~~2022~~of Appeals issued a decision that affirmed in part, and reversed in part, the ~~Company~~District ~~filed~~Court’s ~~its~~dismissal ~~answering~~of ~~brief~~the oncomplaint. ~~June~~The ~~30,~~case ~~2022~~will now be remanded to U. S. District Court for the Northern District of California for further proceedings. Given the early stage of the appeal, the amount of any loss or range of loss that may occur cannot be reasonably estimated as of the date of this filing.

In addition, the Company may become involved in other legal proceedings or be subject to claims arising in the ordinary course of business. Although the results of litigation and claims cannot be predicted with certainty, the Company currently believes that the final outcome of these current matters will not have a material adverse effect on the Company’s business, operating results, financial condition or cash flows. The Company accrues estimates for resolution of legal and other contingencies when losses are probable and estimable. Regardless of the outcome, litigation can have an adverse impact on the Company because of defense and settlement costs, diversion of management resources and other factors. Additionally, for any potential gain contingencies, the Company does not recognize the gain until the period in which contingencies have been resolved and the amounts are realizable.

Warranties and Indemnifications

The Company’s cloud-based software platform and applications are typically warranted against material decreases in functionality and to perform in a manner consistent with general industry standards and in accordance with the Company’s online documentation under normal use and circumstances.

The Company includes service level commitments to its customers, typically regarding certain levels of uptime reliability and performance and if the Company fails to meet those levels, customers can receive credits and, in some cases, terminate their relationship with the Company. To date, the Company has not incurred any material costs as a result of such commitments.

The Company generally agrees to defend and indemnify its customers against legal claims that the Company’s platform infringes patents, copyrights or other intellectual property rights of third parties. To date, the Company has not been required to make any payment resulting from such infringement claims and has not recorded any related liabilities. In addition, the Company has indemnification agreements with its directors and certain of its officers that require the Company to indemnify them against certain liabilities that may arise by reason of their status or service as directors or officers. To date, the Company has not incurred any material costs, and not accrued any liabilities in its condensed consolidated financial statements, as a result of these obligations.

Note 10. Common Stock and Stockholders’ Equity

Common Stock

Each share of common stock has the right to one vote. The holders of the common stock are also entitled to receive dividends whenever funds are legally available and when declared by the board of directors of the Company (the “Board of Directors”), subject to the prior rights of holders of all classes of stock outstanding having priority rights as to dividends. No dividends have been declared or paid since inception.

Preferred Stock

As of ~~July~~October 31, 2022, the Company had authorized 25,000,000 shares of preferred stock, par value $0.0001, of which no shares were issued and outstanding.

Share Repurchase Program

In August 2022, the Board of Directors authorized a program to repurchase up to $100.0 million of the Company’s common stock (the “Share Repurchase Program”). Under the Share Repurchase Program, shares of common stock may be repurchased from time to time until September 1, 2023 through open market transactions in compliance with applicable securities laws. The timing, manner, price and amount of any repurchases, as well as the capital resources to fund the repurchases, are determined by the Company at its discretion and depend on a variety of factors, including legal requirements, price and economic and market conditions.

During the three and nine months ended October 31, 2022, the Company repurchased and subsequently retired 325,292 shares of common stock at an average price of $61.48, for an aggregate $20.0 million. As of October 31, 2022, $80.0 million remained available and authorized for repurchases under the Share Repurchase Program.

2016 Equity Incentive Plan

The 2016 Equity Incentive Plan (the “2016 Plan”) provides for the grant of incentive stock options, nonstatutory stock options, restricted stock, restricted stock units, stock appreciation rights and performance cash awards. The 2016 Plan replaced the Company’s 2006 Stock Plan; however, awards outstanding under the 2006 Stock Plan will continue to be governed by their existing terms. As of ~~July~~October 31, 2022, the Company had 1211,~~485~~484,~~746~~828 shares of its common stock available for future issuance under the 2016 Plan.

In addition, the Company has the 2016 Employee Stock Purchase Plan (the “ESPP”). The ESPP allows eligible employees to purchase shares of common stock through payroll deductions and is intended to qualify under Section 423 of the Internal Revenue Code. The purchase price for each share of common stock purchased under the ESPP will be 85% of the lower of the fair market value per share on the first day of the applicable offering period or the fair market value per share on the applicable purchase date. As of ~~July~~October 31, 2022, the Company had 2,~~915~~795,~~413~~088 shares of its common stock available for future issuances under the ESPP. As of ~~July~~October 31, 2022, the total unrecognized compensation cost related to the 2016 ESPP was $1731.13 million, which will be amortized over a weighted-average period of approximately 1.69 years.

Restricted Stock Units (“RSUs”)

The following table summarizes the activity related to the Company’s RSUs during the ~~six~~nine months ended ~~July~~October 31, 2022:

	Number ofRSUsOutstanding	Weighted-AverageGrant DateFair Value
Awarded and unvested at January 31, 2022	2,124,649	$	184.56
Awards granted	45,~~307~~495,~~268~~441	$	~~101~~93.4534
Awards vested	(~~617~~962,~~300~~660)	$	~~136~~139.3233
Awards forfeited	(~~343~~530,~~287~~542)	$	~~163~~155.3553
Awarded and unvested at July 31, 2022	5,471,330	$	125.91
Awarded and unvested at October 31, 2022	6,126,888	$	112.36

(1)The above table includes restricted share units with market and service-based conditions.

As of July 31, 2022, there was approximately $622.6 million of total unrecognized compensation cost related to unvested restricted stock units granted to employees under the 2016 Plan. This unrecognized compensation cost is expected to be recognized over an estimated weighted-average amortization period of approximately 3.1 years.

As of October 31, 2022, there was approximately $611.2 million of total unrecognized compensation cost related to unvested restricted stock units granted to employees under the 2016 Plan. This unrecognized compensation cost is expected to be recognized over an estimated weighted-average amortization period of approximately 3.0 years.

Performance-based and Market-based Options and Awards

In July 2022, the Board of Directors of the Company approved a multi-year special equity incentive grant to the Chief Executive Officer (the “2022 Special CEO Award”), which was granted in lieu of any future equity awards to the ~~CEO~~Chief Executive Officer until fiscal 2028. The 2022 Special CEO Award is comprised of two components: (i) an award of 585,000 performance-based restricted stock units (the “2022 CEO PSUs”), with vesting contingent on service and achievement of both performance and market conditions, and (ii) 390,000 time-based RSUs that vest over a five-year period.

The 2022 CEO PSUs are eligible to vest in six equal tranches based on achieving stock price and subscription revenue growth milestones (the “performance and market conditions”) and a three-year service-based requirement (the “service requirement”). The performance and market conditions for a particular tranche may be achieved at different points in time and in any order, but will become eligible to vest only when the service requirement and all applicable performance and market conditions for the respective tranche are met (but no earlier than three years). The performance and market conditions must be achieved by June 28, 2027 (the “Performance Period”).

The total grant date fair value of the 2022 Special CEO PSUs was determined to be approximately $26.0 million, using a Monte Carlo simulation approach. Stock-based compensation expense is recognized on a graded vesting basis over the requisite service period on a tranche-by-tranche basis, which is the longer of the explicit service period, derived service period, and implied service period, and therefore at minimum, will be recognized over the three-year minimum service requirement. Expense for each tranche is only recognized when it is probable the performance condition will be achieved which involves subjective assessment of the Company’s future financial projections.

In March 2022, the Board of Directors of the Company granted market-based restricted stock unit awards (the “2022 PSU Grant”) to certain members of management. The target number of market-based restricted stock unit awards granted was 172,814. The number of shares that could be earned will range from 0% to 200% of the target number of shares, based on the relative growth of the per share price of the Company’s common stock as compared to the Nasdaq Composite Index over the three-year performance period ending on the third anniversary of the date of grant and subject to continuous employment through such date. The fair value of the 2022 PSU Grant was determined using a Monte Carlo simulation approach. The Company amortizes the fair value of the 2022 PSU Grant using the straight-line method over the three-year performance term.

In March 2021, the Board of Directors of the Company granted market-based restricted stock unit awards (the “2021 PSU Grant”) to certain members of management. In March 2020, the Board of Directors of the Company granted market-based restricted stock unit awards (the “2020 PSU Grant”) to certain members of management. As of ~~July~~October 31, 2022, the three-year performance period related to the 2020 PSU Grant and 2021 PSU Grant had not been completed. Refer to the Company’s fiscal 2022 Form 10-K for further information.

In September 2016 and March 2018, certain service and market-based options were granted to the Chief Executive Officer. Refer to the Company's fiscal 2021 Form 10-K for further information. As of ~~July~~October 31, 2022, all market-based milestones of the stock options granted to the Chief Executive Officer were achieved.

Stock-based compensation expense recognized for performance-based and market-based awards was approximately $4.6.4 million and $3.74 million for the three months ended ~~July~~October 31, 2022 and 2021, respectively, and approximately $814.15 million and $69.27 million for the ~~six~~nine months ended ~~July~~October 31, 2022 and 2021, respectively.

Stock Options

The following table summarizes stock option activity under the Company’s 2006 Stock Plan and the 2016 Plan during the ~~six~~nine months ended ~~July~~October 31, 2022 (aggregate intrinsic value in thousands):

	Options Outstanding
	OutstandingStockOptions	Weighted-AverageExercisePrice		Weighted-AverageRemainingContractual Life(in Years)	AggregateIntrinsicValue
Balance at January 31, 2022	1,840,947	$	23.82	4.7	$	203,339
Option grants	—	$	—	—	$	—
Options exercised	(89118,~~210~~080)	$	10.7538
Options forfeited	(6,192)	$	13.91
Balance at July 31, 2022	1,745,545	$	24.52	4.3	$	74,276
Balance at October 31, 2022	1,716,675	$	24.78	4.1	$	52,937
Exercisable at July 31, 2022	1,725,461	$	23.71	4.3	$	74,276
Exercisable at October 31, 2022	1,704,122	$	24.26	4.1	$	52,937

(1)The above table includes 711,839 stock options with market and service-based conditions.

The aggregate intrinsic value of exercised options was $68.72 million and $~~104~~144.06 million for the ~~six~~nine months ended ~~July~~October 31, 2022 and 2021, respectively, and is calculated based on the difference between the exercise price and the fair value of the Company’s common stock as of the exercise date.

As of ~~July~~October 31, 2022, there was approximately $~~700~~400,000 of total unrecognized compensation cost related to unvested stock options, which is expected to be recognized over an estimated weighted-average amortization period of approximately ~~seven~~five months.

Stock Based Compensation

The Company’s total stock-based compensation expense was as follows (in thousands):

Three Months EndedJuly 31,

Six Months EndedJuly 31,

Three Months EndedOctober 31,

Nine Months EndedOctober 31,

2022

2021

2022

2021

Cost of revenue:

Subscription

45,~~819~~253

34,~~596~~162

914,~~333~~586

611,~~901~~063

Professional services and other

5,~~375~~781

4,~~357~~729

1016,~~227~~008

812,~~255~~984

Research and development

1415,~~054~~591

11,~~055~~357

2642,~~820~~411

2133,~~718~~075

Sales and marketing

1719,~~356~~727

1213,~~230~~217

3353,~~290~~017

2336,~~451~~668

General and administrative

1417,~~228~~675

16,~~262~~994

2846,~~554~~229

3451,~~467~~461

Total

5564,~~832~~027

4750,~~500~~459

~~108~~172,~~224~~251

94145,~~792~~251

Note 11. Income Taxes

The Company is subject to federal and various state income taxes in the United States as well as income taxes in foreign jurisdictions in which it conducts business. The Company does not provide for federal income taxes on the undistributed earnings of its foreign subsidiaries as such earnings are reinvested indefinitely.

The Company recorded a tax provision of approximately $23.6 million and a tax benefit of approximately $0.25 million for the three months ended ~~July~~October 31, 2022 and 2021, respectively. The Company recorded a tax provision of approximately $59.40 million for the ~~six~~nine months ended ~~July~~October 31, 2022, representing an effective tax rate of (3.6895)%, which was primarily attributable to an increase in the Company’'s U.S. deferred tax liability and income taxes related to foreign and state jurisdictions in which the Company conducts business.

The Company recorded a tax benefit of approximately $2.2 million for the six months ended July 31, 2021, representing an effective tax rate of 1.17%, which was primarily attributable to a reversal of a U.S. deferred tax liability, foreign excess tax benefits

The Company recorded a tax benefit of approximately $2.7 million for the nine months ended October 31, 2021, representing an effective tax rate of 0.97%, which was primarily attributable to a reversal of a U.S. deferred tax liability, foreign excess tax benefits related to stock-based compensation, and remeasurement of deferred tax assets due to tax rate changes in the UK, offset by income taxes related to foreign and state jurisdictions in which the Company conducts business.

The difference between the U.S. federal statutory rate of 21% and the Company's effective tax rate in the current period presented is primarily due to a full valuation allowance related to the Company's U.S. deferred tax assets, foreign expense on the Company's profitable jurisdictions, and state tax expense.

The Company's material income tax jurisdictions are the United States (federal) and California. As a result of net operating loss carryforwards, the Company is subject to audits for tax years 2006 and onward for federal purposes and 2009 and onward for California purposes. There are tax years which remain subject to examination in various other state and foreign jurisdictions that are not material to the Company's financial statements.

The 2017 Tax Cuts and Jobs Act requires research and development expenditures incurred for the tax year beginning after December 31, 2021, to be capitalized and amortized ratably over five years for domestic research and fifteen years for international research. The mandatory capitalization requirement has no material impact to the Company's fiscal 2023 income tax provision due to the Company's tax attributes carryover and full valuation allowance position.

The final foreign tax credit (“FTC”) regulations were published in the Federal Register on January 4, 2022. There are significant changes and updates for allocation and apportionment of foreign taxes, creditability of foreign taxes and other provisions affecting FTC calculation. These provisions are generally effective for foreign taxes paid or accrued in tax years beginning on or after December 28, 2021. Due to the full valuation allowance position for the U.S. jurisdiction, the Company does not believe this provision has a material impact on its financial statements.

The Inflation Reduction Act was enacted on August 16, 2022 and includes a number of provisions that may impact the Company in the future. The Company is assessing these impacts, but does not believe they will have a material impact on the Company’s fiscal 2023 financial statements.

Note 12. Net Loss per Share

Basic net loss per share is calculated by dividing the net loss by the weighted-average number of shares of common stock outstanding during the period, without consideration for potentially dilutive securities as they do not share in losses. During periods when the Company is in a net loss position, basic net loss per share is the same as diluted net loss per share as the effects of potentially dilutive securities are antidilutive given the net loss of the Company.

The following table sets forth the computation of the basic and diluted net loss per share attributable to Coupa Software Incorporated (in thousands, except per share amounts):

	Three Months EndedJuly 31,				Six Months EndedJuly 31,
	Three Months EndedOctober 31,				Nine Months EndedOctober 31,
	2022		2021		2022		2021
Numerator:
Net loss attributable to Coupa Software Incorporated	$	(7584,~~269~~675)	$	(91,~~467~~203)	$	(~~156~~241,~~742~~417)	$	(~~191~~283,~~824~~027)
Denominator:
Weighted-average common shares outstanding	7576,~~669~~040		7374,~~526~~133		75,~~429~~635		73,~~200~~514
Net loss per share, basic and diluted, attributable to Coupa Software Incorporated	$	(01.9911)	$	(1.2423)	$	(23.0819)	$	(23.6285)

Since the Company was in a loss position for all periods presented, basic net loss per share is the same as diluted net loss per share for all periods as the inclusion of all potential common shares outstanding would have been anti-dilutive. Potentially dilutive securities that were not included in the diluted per share calculations because they would be anti-dilutive were as follows:

	As of July 31,
	As of October 31,
	2022	2021
Convertible senior notes	9,~~738~~698,~~247~~967	9,~~830~~738,~~793~~266
Options to purchase common stock	1,~~745~~716,~~545~~675	2,~~196~~006,~~777~~211
RSUs	56,~~471~~126,~~330~~888	2,~~452~~348,~~513~~624
Unvested common shares subject to repurchase	53,~~360~~573	137,143
Shares committed under the ESPP	~~124~~77,~~242~~614	7522,~~200~~498
Contingent stock consideration for DCR acquisition	171,073	171,073
Coupa K.K. redeemable non-controlling interest	~~207~~240,~~904~~310	—
Total	1718,~~463~~035,~~701~~100	14,~~863~~423,~~499~~815

The number of potentially dilutive shares from the Convertible Notes are subject to adjustment up to approximately 6.2 million, 6.8 million and ~~52,000~~an immaterial number of shares for the 2026 Notes, 2025 Notes and 2023 Notes, respectively, if certain corporate events occur prior to the maturity date or if the Company issues a notice of redemption.

Note 13. Business Segment Information

The Company’s chief operating decision maker is the Chief Executive Officer (“CEO”). The CEO reviews the financial information presented on a consolidated basis for purposes of allocating resources and evaluating the Company’s financial performance. Accordingly, the Company has determined that it operates in a single reporting segment: cloud platform.

Note 14. Significant Customers and Geographic Information

No customer balance comprised 10% or more of total accounts receivable at ~~July~~October 31, 2022 or January 31, 2022.

During the three and ~~six~~nine months ended ~~July~~October 31, 2022 and ~~July~~October 31, 2021, revenues by geographic area, based on billing addresses of the customers, were as follows (in thousands):

Three Months EndedJuly 31,

Six Months EndedJuly 31,

Three Months EndedOctober 31,

Nine Months EndedOctober 31,

2022

2021

2022

2021

United States

~~131~~137,~~073~~637

~~106~~112,~~190~~808

~~252~~390,~~601~~238

~~205~~318,~~209~~017

Foreign countries

8079,~~030~~699

73,~~056~~008

~~154~~234,~~873~~572

~~140~~213,~~966~~974

Total revenues

~~211~~217,~~103~~336

~~179~~185,~~246~~816

~~407~~624,~~474~~810

~~346~~531,~~175~~991

No single foreign country represented more than 10% of the Company’s revenues in any period. Additionally, no single customer represented more than 10% of the Company’s revenues in any period.

Note 15. Subsequent Events

InProposed August 2022, the Board of Directors authorized a program to repurchase up to $100 million of the Company’s common stock (the “Share Repurchase Program”). Under the Share Repurchase Program, shares of common stock may be repurchased from time to time until September 1, 2023 through open market transactions in compliance with applicable securities laws. The timing, manner, price and amount of any repurchases, as well as the capital resources to fund the repurchases, are determined by the Company at its discretion and depend on a variety of factors, including legal requirements, price and economic and market conditions. Share repurchases will be funded by available cash and cash equivalents.Merger

On December 11, 2022, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Project CS Parent, LLC, a Delaware limited liability company (“Parent”), and Project CS Merger Sub, Inc., a Delaware corporation and a direct wholly owned subsidiary of Parent (“Merger Sub”). Parent and Merger Sub are affiliates of Thoma Bravo Fund XV, L.P. (“Thoma Bravo”), an investment fund managed by Thoma Bravo, L.P.

The Merger Agreement provides that, among other things and on the terms and subject to the conditions of the Merger Agreement, (a) Merger Sub will merge with and into the Company (the “Merger”), with the Company surviving the Merger as a wholly owned subsidiary of Parent, and (b) at the effective time of the Merger (the “Effective Time”), each issued and outstanding share (immediately prior to the Effective Date) of common stock of the Company, par value $0.0001 per share (the “Company Common Stock”) (except as otherwise provided in the Merger Agreement) will be cancelled and converted into the right to receive $81.00 per share in cash, without interest (the “Merger Consideration”).

The Merger, which has been unanimously approved by the Company’s board of directors, is expected to close in the first half of 2023. Upon consummation of the Merger, the Company will cease to be a publicly traded company and the Company Common Stock will be delisted from the Nasdaq Global Select Market.

The completion of the Merger is subject to the satisfaction or, if permitted, waiver of certain customary mutual closing conditions set forth in the Merger Agreement, including (a) the adoption of the Merger Agreement by the affirmative vote of holders of a majority of the outstanding shares of Company Common Stock (the “Company Stockholder Approval”) and (b) the expiration or termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the receipt of certain other regulatory approvals. The obligation of each party to consummate the Merger is also conditioned on the other party’s representations and warranties being true and correct (subject to certain customary materiality exceptions) and the other party having performed in all material respects its obligations under the Merger Agreement, and the obligation of Parent to consummate the Merger is additionally conditioned on no material adverse effect on the Company having occurred since the execution of the Merger Agreement. The consummation of the Merger is not subject to any financing condition.

The Merger Agreement contains termination rights for each of the Company and Parent, including, among others, (1) if the consummation of the Merger does not occur on or before September 11, 2023 (subject to extension until December 11, 2023 under specified circumstances), (2) if the Company Stockholder Approval is not obtained following the meeting of the Company’s stockholders for purposes of obtaining such Company Stockholder Approval and (3) subject to certain conditions, (a) by Parent if the Board of Directors of the Company changes its recommendation in favor of the Merger or (b) by the Company in connection with the entry into a definitive agreement with respect to a Superior Proposal (as defined by the Merger Agreement). The Company and Parent may also terminate the Merger Agreement by mutual written consent.

The Company is required to pay Parent a termination fee of $200 million in cash upon termination of the Merger Agreement under specified circumstances, including, among others, termination by Parent in the event that the Board of Directors of the Company changes its recommendation in favor of the Merger or termination by the Company to enter into an agreement in connection with a Superior Proposal. The Merger Agreement also provides that a reverse termination fee of $435 million will be payable by Parent to the Company under specified circumstances, including, among others, if (1) Parent fails to consummate the Merger following satisfaction or waiver of certain closing conditions and the Company’s irrevocable confirmation that it is ready, willing and able to consummate the closing or (2) Parent otherwise breaches its obligations under the Merger Agreement such that there is a failure of certain conditions to the Merger.

Parent has obtained equity and debt financing commitments for the purpose of financing the transactions contemplated by the Merger Agreement.

The foregoing summary of the Merger Agreement and the transactions contemplated thereby does not purport to be complete and is subject to, and qualified in its entirety by, the full text of the Merger Agreement, which is filed as Exhibit 2.1 of our Current Report on Form 8-K filed on December 12, 2022.

In connection with the Merger, the Company expects to incur significant expenses, such as transaction, professional services, and other costs. An estimate of these expenses cannot be made at this time.

Settlement Agreement

In December 2022, the Company reached a settlement agreement with an insurance carrier to indemnify the Company for losses incurred in connection with an acquisition completed in a prior year. The total amount of insurance proceeds are approximately $17.5 million, of which $1.9 million was recorded as a receivable as of October 31, 2022 for loss recoveries. The remaining $15.6 million which is in excess of the amount of losses previously incurred will be recognized during the three months ended January 31, 2023 as a gain contingency.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our condensed consolidated financial statements and related notes appearing elsewhere in this Quarterly Report ~~on Form 10-Q~~. As discussed in the section titled “Note About Forward-Looking Statements,” the following discussion and analysis contains forward-looking statements that involve risks and uncertainties, as well as assumptions that, if they never materialize or prove incorrect, could cause our results to differ materially from those expressed or implied by such forward-looking statements. Factors that could cause or contribute to these differences include, but are not limited to, impacts on our business and general economic conditions due to the ongoing COVID-19 pandemic, the Russia-Ukraine conflict, inflationary pressures and rising interest rates, those identified below, those discussed in “Note About Forward-Looking Statements” and those discussed in the section titled “Risk Factors” under Part II, Item 1A in this Quarterly Report ~~on Form 10-Q~~.

Overview

We are a leading provider of Business Spend Management (“BSM”) solutions. We offer a comprehensive, cloud-based BSM platform that has connected our customers with more than eight million suppliers globally. Our platform provides greater visibility into and control over how companies spend money, optimize supply chains, and manage liquidity. Using our platform, businesses are able to achieve real, measurable value and savings that drive their profitability.

We refer to the process companies use to purchase goods and services as business spend management and to the money that they manage with this process as spend under management. Our BSM platform delivers a broad range of capabilities that would typically require the purchase and use of multiple disparate point applications. The core of our platform consists of procurement, invoicing, expense management, and payment solutions that form the transactional engine for managing a company’s business spend. In addition, our platform offers specialized solutions targeted for power users, to help companies manage more technical and strategic areas of BSM, including areas such as strategic sourcing, contract management, contingent workforce, supplier risk management, supply chain design and planning, treasury management, and spend analysis.

We also provide purchasing programs, such as Coupa Instant Advantage, which offers access to pre-negotiated discounts from various suppliers, and Coupa Sourcing Advantage, which connects community members to engage in group sourcing events, allowing them to leverage pooled buying power to achieve better contracting terms and capture greater savings. Moreover, through our Coupa Open Business Network, suppliers of all sizes can list their goods and services, establish pricing, and interact with buyers electronically, thus significantly reducing paper, improving operating efficiencies, and reducing costs.

We offer access to our platform under a Software-as-a-Service (“SaaS”) business model. At the time of initial deployment, our customers often make a set of common functions available to the majority of their licensed employees, as well as incremental solutions for select employees and procurement specialists, whom we refer to as power users. Therefore, we are typically able to capture a majority of the expected annual recurring revenue opportunity at the inception of our customer relationships, rather than targeting specific power users at the outset of the customer relationship with the intention of expanding and capturing more annual recurring revenue at later stages of the customer relationship. Customers can rapidly implement our platform, with implementation periods typically ranging from a few weeks to several months. Customers also benefit from software updates that typically require little downtime.

We market and sell our solutions to a broad range of enterprises worldwide. We have a diverse, multi-national customer base spanning various sizes and industries and no significant customer concentration. No customer accounted for more than 10% of our total revenues for the three and ~~six~~nine months ended ~~July~~October 31, 2022 and 2021, respectively.

We market our platform primarily through a direct sales force and also benefit from leveraging the referral resources of our partner ecosystem. Our initial contract terms are typically three years, although some customers commit for longer or shorter periods. The large majority of our customers pay annually, one year in advance. Our subscription fee includes access to our service, technical support and management of the hosting infrastructure. We generally recognize revenues from our subscription fees ratably over the contractual term of the arrangement. We do not charge suppliers who are on our platform to transact with our customers. We believe this approach helps attract more suppliers to our platform and increases the value of our platform to customers.

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We have continued to make significant expenditures and investments for long-term growth, including investment in our platform and infrastructure to deliver new functionality and solutions to meet the evolving needs of our customers and to take advantage of our market opportunity. We intend to continue to increase our investment in sales and marketing, as we further expand our sales teams, increase our marketing activities, and grow our international operations. Internationally, we currently offer our platform in Europe, the Middle East and Africa, Latin America and Asia-Pacific, including Japan. The combined revenues from non-U.S. regions, as determined based on the billing address of our customers, constituted 38% and 4140% of our total revenues for each of the ~~six~~nine months ended ~~July~~October 31, 2022 and 2021, respectively. We believe there is further opportunity to increase our international revenues in absolute dollars and as a percentage of our total revenues. As a result, we are increasingly investing in our international operations and we intend to expand our footprint in international markets.

We may face exposure to foreign currency exchange rate fluctuations, which could adversely affect our business, results of operations and financial condition. A portion of our revenue contracts is denominated in foreign currencies, and as a result, fluctuations in foreign currency exchange rates may cause variability in our total revenues, deferred revenues and accounts receivable. In addition, as our international operations expand, our exposure to the effects of fluctuations in currency exchange rates grows and may also cause variability in our cost of revenues, operating expenses and other operating results.

Operating in international markets requires significant resources and management attention and will subject us to regulatory, economic and political risks that are different from those in the United States. While we are gaining additional experience with international operations, our international expansion efforts may not be successful in creating additional demand for our platform outside of the United States or in effectively selling subscriptions to our platform in any or all of the international markets we enter.

COVID-19 Pandemic

The extent to which the COVID-19 pandemic will continue to impact our financial condition or results of operations in future periods remains uncertain. We may experience decreased customer demand, reduced customer spend, customer bankruptcies and other non-payment situations, shorter contract duration, longer sales cycles and extended payment terms, any of which could materially adversely impact our business, results of operations and overall financial performance in future periods. The spread of COVID-19 has also caused us to modify our business practices. Working remotely has made our workforce more reliant on certain cloud-based communication and collaboration services, and any disruption to these services would likely have an adverse impact on employee productivity. The impact, if any, of these and any additional operational changes we may implement is uncertain, but changes we have implemented to date have not materially impaired and are not expected to materially impair our ability to maintain operations, including financial reporting systems, internal control over financial reporting and disclosure controls and procedures.

Recent Economic and Other Events

The Russia-Ukraine conflict and resulting sanctions and other actions against Russia and Belarus (as well as counter-actions that have been or may be taken by Russia and Belarus) have led to uncertainty and disruption in the global economy. Although the conflict has not had a direct material adverse impact on our revenues or other financial results, we are closely monitoring the events of the Russian-Ukraine conflict and its impact on Europe and throughout the rest of the world. It is not clear at this time how long the conflict will endure, or if it will escalate further, which could further compound the adverse impact to the global economy and consequently affect our results of operations.

Rates of inflation have been rising across many jurisdictions around the world, including the United States, and as a result various national central banks have adopted tighter monetary policies and implemented interest rate hikes in an attempt to combat rising inflation. For example, the Federal Reserve has increased its benchmark interest rate multiple times so far in 2022 and may do so again in the future. Rising interest rates have caused, and may continue to cause, short- and long-term borrowing costs to increase which in turn may create a more challenging environment for us (and/or our existing and prospective customers) to refinance current debt obligations or obtain new debt financing on favorable terms, if at all.

The Inflation Reduction Act was enacted on August 16, 2022 and includes a number of provisions that may impact us in the future. We are assessing these impacts, but do not believe they will have a material impact on our fiscal 2023 financial statements.

Certain other worldwide events and factors, such as international trade relations, new legislation and regulations, taxation or monetary policy changes, political and civil unrest, and inflationary pressures, among other factors, also increase volatility in the global economy.

See the section “Risk Factors” for further discussion of the possible impact of the COVID-19 pandemic, the Russia-Ukraine conflict, and rising interest rates on our business.

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Our Business Model

Our business model focuses on maximizing the lifetime value of a customer relationship, and we continue to make significant investments in order to grow our customer base. Due to our subscription model, we recognize subscription revenues ratably over the term of the subscription period. As a result, the profitability of a customer to our business in any particular period depends in part upon how long a customer has been a subscriber on our platform. In general, the associated upfront costs with respect to new customers are higher in the first year than the aggregate revenues we recognize from those new customers in the first year. We believe that, over time, as our customer base grows and a relatively higher percentage of our subscription revenues are attributable to renewals versus new customers or upsells to existing customers, associated sales and marketing expenses and other allocated upfront costs as a percentage of revenues will decrease, subject to investments we plan to make in our business. Over the lifetime of the customer relationship, we also incur sales and marketing costs to manage the account, renew or upsell the customer to more solutions and more users. However, these costs are significantly less than the costs initially incurred to acquire the customer. We calculate the lifetime value of our customers and associated customer acquisition costs for a particular year by comparing (i) gross profit from net new subscription revenues for the year multiplied by the inverse of the estimated subscription renewal rate to (ii) total sales and marketing expense incurred in the preceding year. On this basis, we estimate that for each of fiscal 2022 and 2021, the calculated lifetime value of our customers has exceeded six times the associated cost of acquiring them. Other companies may calculate lifetime value and customer acquisition costs differently than our chosen method and, therefore, may not be directly comparable.

Recent Business Developments

Proposed Merger

The Merger is expected to close in the first half of 2023. Upon consummation of the Merger, the Company will cease to be a publicly traded company. See Note 15 in the Notes to Unaudited Condensed Consolidated Financial Statements included in this Quarterly Report for more information.

Stock Repurchase Program

In August 2022, the Board of Directors authorized a program to repurchase up to $100.0 million of our common stock (the “Share Repurchase Program”). Under the Share Repurchase Program, shares of common stock may be repurchased from time to time until September 1, 2023 through open market transactions in compliance with applicable securities laws. The timing, manner, price and amount of any repurchases, as well as the capital resources to fund the repurchases, are determined by us at our discretion and depend on a variety of factors, including legal requirements, price and economic and market conditions.

Inspire Conference

During April and May 2022, we hosted our annual BSM community conference Inspire that returned to an in-person event after two years. The conferences were held in both North America and EMEA, welcoming a significant number of attendees and awarding its community of partner and customers to recognize leaders revolutionizing BSM.

Key Metrics

We review the following key metrics to evaluate our business, measure our performance, identify trends affecting our business, formulate business plans and make strategic decisions:

	As of July 31,
	As of October 31,
	2022		2021
Cumulative spend under management (in billions)	$	34,~~860~~118.89	$	23,~~803~~032.71
Remaining performance obligations (in millions)	$	1,~~424~~452.76	$	1,~~114~~182.57
Deferred revenue (in millions)	$	~~507~~516.15	$	~~359~~366.23
Trailing twelve months calculated billings (in millions)	$	~~934~~968.4	$	~~752~~805.9
Trailing twelve months subscription calculated billings (in millions)	$	~~856~~890.65	$	~~659~~707.28
Customers with annualized subscription revenue above $100,000	1,~~519~~560		1,~~230~~315

Cumulative Spend Under Management

Cumulative spend under management represents the aggregate dollar value of transactions through our core platform for all of our customers collectively since we launched our core platform. We define our core platform for purposes of this metric as our procurement, invoicing and expense management modules. We calculate this metric by aggregating the actual transaction data for purchase orders, invoices and expenses from customers using our core platform. Cumulative spend under management does not include spending data or transactions associated with modules from acquired companies. We regularly review our process for calculating this metric and periodically make adjustments to improve its accuracy. We believe that any such adjustments are immaterial unless otherwise stated.

The cumulative spend under management metric presented above does not directly correlate to our revenue or results of operations because we do not generally charge our customers based on actual usage of our core platform. However, we believe the cumulative spend under management metric does illustrate the adoption, scale and value of our platform, which we believe enhances our ability to maintain existing customers and attract new customers.

Remaining Performance Obligations and Deferred Revenue

Remaining performance obligations represent the amount of consideration allocated to unsatisfied performance obligations related to non-cancelable contracts, which includes both the deferred revenue balance and amounts that will be invoiced and recognized as revenue in future periods. In calculating the remaining performance obligation amount, we elected to apply the two expedients under the revenue standard to exclude remaining performance obligations amounts related to contracts that are twelve months or less and contracts where revenue is being recognized under the as-invoiced method.

We generally execute multiple year subscription contracts for our platform and invoice an initial amount at contract signing followed by subsequent annual invoices. At any point in the contract term, there might be amounts that are not due for billing yet. These amounts are not recorded in our condensed consolidated financial statements, and are considered to be part of the remaining performance obligations amount.

The remaining performance obligations amount is intended to provide visibility into future revenue streams. We expect remaining performance obligations to fluctuate up or down from period to period for several possible reasons, including amounts, timing, and duration of customer contracts, timing of contract renewals, timing of billing cycles for each order, as well as fluctuations in foreign currency exchange rates.

Our deferred revenue consists of non-cancelable amounts that have been invoiced but not yet recognized as revenues as of the end of a reporting period. The majority of our deferred revenue balance consists of subscription revenues that are recognized ratably over the related contractual period.

Trailing Twelve Months Calculated Billings

Trailing twelve months calculated billings represents total revenues recognized during the period of consecutive twelve months ended ~~July~~October 31, 2022 and ~~July~~October 31, 2021 plus the change in deferred revenue for each of those same periods. Trailing twelve month calculated billings is comprised of subscription contracts with existing customers (including renewal contracts and add-on contracts), subscription contracts with new customers, term-based license contracts, and contracts for professional services, training and other revenues.

The trailing twelve months calculated billings is intended to provide information about our subscription revenue growth over time, and can typically be seen as an early indicator of trends in revenue growth. While trailing twelve months calculated billings can increase as our revenues grow, it may fluctuate up or down from period to period for several reasons, including amounts, timing, and duration of customer contracts, timing of contract renewals, timing of billing cycles for each order, as well as fluctuations in foreign currency exchange rates.

Trailing Twelve Months Subscription Calculated Billings

Trailing twelve months subscription calculated billings represents total subscription revenues recognized during the period of consecutive twelve months ended ~~July~~October 31, 2022 and ~~July~~October 31, 2021 plus the change in subscription deferred revenue for each of those same periods. Trailing twelve month subscription calculated billings is comprised of subscription contracts with existing customers (including renewal contracts and add-on contracts), and subscription contracts with new customers.

The trailing twelve months subscription calculated billings is intended to provide information about our subscription revenue growth over time, and can typically be seen as an early indicator of trends in revenue growth. While trailing twelve months subscription calculated billings can increase as our subscription revenues grow, it may fluctuate up or down from period to period for several reasons, including amounts, timing, and duration of customer contracts, timing of contract renewals, timing of billing cycles for each order, as well as fluctuations in foreign currency exchange rates.

Customers with Annualized Subscription Revenue Above $100,000

We define customers with annualized subscription revenue above $100,000 as the total number of customers that contributed subscription revenues in excess of $25,000 during the relevant fiscal quarter, which corresponds to $100,000 on an annualized basis. For purposes of this metric, we generally define a customer as a separate and distinct entity (such as a company or an educational or government institution), a distinct business unit of a large corporation or a partner organization, in each case that has a distinctive active contract with us to access our services. Most of the subscription revenue we recognize each quarter is attributable to customers that accounted for more than $25,000 of that revenue during the quarter, and our sales and marketing strategy focuses heavily on the acquisition of customers that have the potential to contribute at least $100,000 in subscription revenues annually. Accordingly, we believe that this metric is a useful tool to aid investors in understanding a key factor that drives changes in our subscription revenues from period to period and in assessing trends in our growth, penetration of our core customer market, and our overall performance. Because the dollar threshold is tied to the actual revenue recognized during a particular quarter, customers that we acquired midway through or at the end of the quarter may not yet be included in this count, even if they have placed orders representing more than $100,000 in annual subscription revenue. Customers with annualized subscription revenue above $100,000 for the three months ended October 31, 2022 represented approximately 93% and 92% of subscription revenue for the three and nine months ended October 31, 2022, respectively, and approximately 91% and 89% for the three and nine months ended October 31, 2021, respectively.

Components of Results of Operations

Revenues

We primarily offer subscriptions to our cloud-based BSM platform, including procurement, invoicing and expense management and pay. We derive our revenues primarily from subscription fees, professional services fees and other.

Subscription revenues consist primarily of fees to provide our customers access to our cloud-based platform, which includes routine customer support at no additional cost. Term-based licenses are sold as bundled arrangements that include the rights to a term license and post-contract customer support (“PCS”). Accordingly, we allocate 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 fees and other include deployment services, optimization services, training, and revenues allocated to license component for the sales of term-based licenses. Subscription revenues are a function of renewal rates, the number of customers, the number of users at each customer, the number of solutions subscribed to by each customer, and the price of our solutions.

Generally, subscription fees are recognized ratably as revenues over the contract term beginning on the date the application is made available to the customer. Our new business subscriptions typically have a term of three years, although some customers commit for longer or shorter periods. We generally invoice our customers in annual installments at the beginning of each year in the subscription period. Amounts that have been invoiced are initially recorded as deferred revenue and are recognized ratably over the subscription period. Amounts that will be invoiced and recognized as revenue in future periods are reflected as remaining performance obligations within the notes to our condensed consolidated financial statements.

Professional services revenues and other consist primarily of fees associated with the implementation and configuration of our subscription service and revenues allocated to the license component for sales of term-based licenses. Professional services are generally sold on a time-and-materials or fixed-fee basis. Revenue for both time-and-material and fixed-fee arrangements are recognized over-time as the services are performed. We have the ability to reasonably measure progress towards completion of the professional services arrangements. For fixed-fee and time-and-material arrangements, we recognize revenue on the basis of performed hours relative to the total estimated hours to complete satisfaction of the professional service arrangement. For the license component from the sales of term-based licenses, we recognize revenues at the start of the license term when delivery is complete.

Our professional services engagements typically span from a few weeks to several months. For this reason, our professional services revenues may fluctuate significantly from period to period. The terms of our typical professional services arrangements provide that our customers pay us within 30 days from the invoice date. Fixed-fee services arrangements are generally invoiced in advance. We have made significant investments in our professional services business that are designed to ensure customer success and adoption of our platform. We are continuing to invest in expanding our professional services partner ecosystem to further support our customers. As the professional services practices of our partner firms continue to develop, we expect them to increasingly contract directly with our subscription customers and we incentivize our sales force to further this objective.

Cost of Revenues

Subscription

Cost of subscription consists primarily of expenses related to hosting our service and providing customer support. Significant expenses are comprised of data center capacity costs; personnel and related costs directly associated with our cloud infrastructure and customer support, including salaries, benefits, bonuses and stock-based compensation; allocated overhead; and amortization of acquired developed technology and capitalized software development costs.

Professional Services and Other Cost of Revenues

Cost of professional services and other cost of revenues consist primarily of personnel and related costs directly associated with our professional services and training departments, including salaries, benefits, bonuses and stock-based compensation; the costs of contracted third-party vendors, amortization of acquired developed technology; and allocated overhead. These costs are generally expensed in the period incurred.

Professional services associated with the implementation and configuration of our subscription platform are performed directly by our services team, as well as by contracted third-party vendors. In cases in which third-party vendors invoice us for services performed for our customers, those fees are accrued over the requisite service period.

Operating Expenses

Research and Development

Research and development expenses consist primarily of personnel costs of our development team, including salaries, benefits, bonuses, stock-based compensation expense and allocated overhead costs. Our cycle of frequent updates has facilitated rapid innovation and the introduction of new solutions throughout our history. We have aggressively invested, and intend to continue to invest, in developing technology to support our growth. We capitalize certain software development costs that are attributable to developing new solutions and features and adding incremental functionality to our platform, and we amortize such costs as costs of subscription revenues over the estimated life of the new application or incremental functionality, which is typically three years.

Sales and Marketing

Sales and marketing expenses consist primarily of personnel and related costs directly associated with our sales and marketing staff, including salaries, benefits, bonuses, commissions and stock-based compensation. Commissions earned by our sales force that are considered incremental costs for obtaining a non-cancelable subscription contract are deferred and amortized over a period of benefit that we have determined to be five years. For commissions earned from the sale of term-based license contracts, we allocate the costs of commission in proportion to the allocation of the 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. Other sales and marketing costs include promotional events to promote our brand, including our Inspire conferences, web advertising, television media, events, allocated overhead and amortization of customer relationships and trademark.

General and Administrative

General and administrative expenses consist of personnel costs and related expenses for executive, finance, legal, human resources, recruiting, and administrative personnel, including salaries, benefits, bonuses and stock-based compensation expense; professional fees for external legal, accounting, recruiting and other consulting services and allocated overhead costs.

Interest Expense

Interest expense consists primarily of interest expense associated with our outstanding convertible senior notes.

Other Income (Expense), Net

Other income (expense), net consists primarily of interest income earned on our investments in marketable securities and cash and cash equivalents, gain or loss on our non-marketable equity investments, gain or loss on conversion of convertible senior notes, in addition to the effects of exchange rates on our foreign currency-denominated asset and liability balances which are recorded as foreign currency gains (losses) in the condensed consolidated statements of operations.

Provision for (Benefit From) Income Taxes

The provision for income taxes is primarily related to an increase in our U.S. deferred tax liability and income taxes related to foreign and state jurisdictions in which we conduct business. We maintain a full valuation allowance on net deferred tax assets of our U.S. entities as we have concluded that it is not more likely than not that the deferred assets will be utilized.

Results of Operations

The following tables set forth selected condensed consolidated statements of operations data and such data as a percentage of total revenues for each of the periods indicated:

	Three Months EndedJuly 31,								Six Months EndedJuly 31,
	2022				2021				2022				2021
	(in thousands, except percentages)
Revenues:
Subscription	$	192,670	91	%	$	156,230	87	%	$	371,140	91	%	$	296,334	86	%
Professional services and other	18,433		9		23,016		13		36,334		9		49,841		14
Total revenues	211,103		100		179,246		100		407,474		100		346,175		100
Cost of revenues:
Subscription	60,808		28		51,398		29		118,937		29		102,423		30
Professional services and other	22,501		11		27,822		16		45,200		11		56,524		16
Total cost of revenues	83,309		39		79,220		44		164,137		40		158,947		46
Gross profit	127,794		61		100,026		56		243,337		60		187,228		54
Operating expenses:
Research and development	46,266		22		41,799		23		89,976		22		85,636		25
Sales and marketing	103,215		49		76,279		43		204,168		50		154,122		44
General and administrative	41,942		20		36,248		20		84,080		21		75,625		22
Total operating expenses	191,423		91		154,326		86		378,224		93		315,383		91
Loss from operations	(63,629)		(30)		(54,300)		(30)		(134,887)		(33)		(128,155)		(37)
Interest expense	(3,619)		(2)		(30,621)		(17)		(7,095)		(2)		(59,724)		(18)
Other expense, net	(709)		—		(1,983)		(1)		(4,425)		(1)		(1,448)		0
Loss before provision for (benefit from) income taxes	(67,957)		(32)		(86,904)		(48)		(146,407)		(36)		(189,327)		(55)
Provision for (benefit from) income taxes	2,641		1		(155)		—		5,392		1		(2,221)		(1)
Net loss	(70,598)		(33)		(86,749)		(48)		(151,799)		(37)		(187,106)		(54)
Net loss attributable to redeemable non-controlling interests	(462)		—		(517)		—		(666)		—		(517)		—
Adjustment attributable to redeemable non-controlling interests	5,133		3		5,235		3		5,609		1		5,235		1
Net loss attributable to Coupa Software Incorporated	$	(75,269)	(36)	%	$	(91,467)	(51)	%	$	(156,742)	(38)	%	$	(191,824)	(55)	%


	Three Months Ended October 31,								Nine Months Ended October 31,

	2022				2021				2022				2021
	(in thousands, except percentages)
Revenues:
Subscription	$	198,409	91	%	$	164,745	89	%	$	569,549	91	%	$	461,079	87	%
Professional services and other	18,927		9		21,071		11		55,261		9		70,912		13
Total revenues	217,336		100		185,816		100		624,810		100		531,991		100
Cost of revenues:
Subscription	65,427		30		52,279		28		184,364		30		154,701		29
Professional services and other	22,289		10		25,341		14		67,489		11		81,865		15
Total cost of revenues	87,716		40		77,620		42		251,853		40		236,566		44
Gross profit	129,620		60		108,196		58		372,957		60		295,425		56
Operating expenses:
Research and development	49,158		23		39,990		21		139,134		22		125,625		24
Sales and marketing	111,599		51		83,779		45		315,767		51		237,902		45
General and administrative	46,248		21		40,513		22		130,328		21		116,139		22
Total operating expenses	207,005		95		164,282		88		585,229		94		479,666		91
Loss from operations	(77,385)		(36)		(56,086)		(30)		(212,272)		(34)		(184,241)		(35)
Interest expense	(3,547)		(1)		(31,130)		(17)		(10,642)		(2)		(90,854)		(17)
Other income (expense), net	393		—		(1,298)		(1)		(4,032)		(1)		(2,746)		(1)
Loss before provision for (benefit from) income taxes	(80,539)		(37)		(88,514)		(48)		(226,946)		(37)		(277,841)		(53)
Provision for (benefit from) income taxes	3,565		2		(476)		—		8,957		1		(2,697)		(1)
Net loss	(84,104)		(39)		(88,038)		(48)		(235,903)		(38)		(275,144)		(52)
Net loss attributable to redeemable non-controlling interests	(353)		—		(273)		—		(1,019)		—		(790)		—
Adjustment attributable to redeemable non-controlling interests	924		—		3,438		1		6,533		1		8,673		1
Net loss attributable to Coupa Software Incorporated	$	(84,675)	(39)	%	$	(91,203)	(49)	%	$	(241,417)	(39)	%	$	(283,027)	(53)	%

~~Three Months Ended July 31, 2022 and July 31, 2021~~36

Three Months Ended October 31, 2022 and October 31, 2021

Revenues

	Three Months EndedJuly 31,
	Three Months EndedOctober 31,
	2022		2021		% Change
	(in thousands)
Subscription	$	~~192~~198,~~670~~409	$	~~156~~164,~~230~~745	2320	%
Professional services and other	18,~~433~~927		2321,~~016~~071		(2010)	%
Total revenues	$	~~211~~217,~~103~~336	$	~~179~~185,~~246~~816	1817	%

Total revenues were $~~211~~217.13 million for the three months ended ~~July~~October 31, 2022 compared to $~~179~~185.28 million for the three months ended ~~July~~October 31, 2021, an increase of $31.95 million, or 1817%. Subscription revenues were $192.7 million, or 91% of total revenues, for the three months ended July 31, 2022, compared to $156.2 million, or 87% of total revenues, for the three months ended July 31, 2021. This increase in absolute dollars was predominantly driven by the increase in the number of customers with annualized subscription revenue above $100,000, which was 1,519 as of July 31, 2022, compared to 1,230 as of July 31, 2021. Professional services and other revenues were $18.4 million for the three months ended July 31, 2022 compared to $23.0 million for the three months ended July 31, 2021. The decrease of $4.6 million, or 20%, was primarily due to migration from Coupa-led implementations to partner-led implementations.

Subscription revenues were $198.4 million, or 91% of total revenues, for the three months ended October 31, 2022, compared to $164.7 million, or 89% of total revenues, for the three months ended October 31, 2021. The increase of $33.7 million was fully ascribed to the increase in the number of customers with annualized subscription revenue above $100,000, which was 1,560 as of October 31, 2022, compared to 1,315 as of October 31, 2021.

Professional services and other revenues were $18.9 million for the three months ended October 31, 2022 compared to $21.1 million for the three months ended October 31, 2021. The decrease of $2.2 million, or 10%, was primarily due to the migration from Coupa-led implementations to partner-led implementations.

Cost of Revenues

	Three Months EndedJuly 31,
	Three Months EndedOctober 31,
	2022		2021		% Change
	(in thousands)
Subscription	$	6065,~~808~~427	$	5152,~~398~~279	1825	%
Professional services and other	22,~~501~~289		2725,~~822~~341		(1912)	%
Total cost of revenues	$	8387,~~309~~716	$	7977,~~220~~620	513	%

Cost of subscription was $6065.84 million for the three months ended ~~July~~October 31, 2022 compared to $5152.43 million for the three months ended ~~July~~October 31, 2021, an increase of $913.41 million, or 1825%. The increase in cost of subscription was primarily due to an increase of $34.73 million in employee compensation costs related to higher headcount, including stock-based compensation costs, an increase of $34.2 million in ~~amortization~~hosting offees ~~developed~~and ~~technology~~other ~~assets~~costs ~~related~~ to ~~acquisitions~~accommodate and manage increased customer spend, an increase of $01.87 million in ~~hosting~~amortization ~~fees~~of todeveloped ~~accommodate~~technology ~~increased~~assets ~~customer~~related ~~spend~~to acquisitions, an increase of $01.6 million in third party services, such as contractors and consulting fees, and an increase of $1.13 million in travel and other costs driven by our overall growth.

Cost of professional services and other was $22.53 million for the three months ended ~~July~~October 31, 2022 compared to $2725.83 million for the three months ended ~~July~~October 31, 2021, a decrease of $5.3.0 million, or 1912%. The decrease in cost of professional services was primarily due to a decrease of $42.38 million in amortization of developed technology assets, and a decrease of $1.0.8 million in employee compensation costs asdue to a ~~result~~reduction of ~~migrating~~headcount, ~~implementation~~partially ~~services~~offset ~~that~~by wean ~~directly~~increase ~~led~~of to$0.6 ~~those~~million ~~led~~in bytravel ~~our implementation partners~~costs.

3537

Gross Profit

	Three Months EndedJuly 31,
	Three Months EndedOctober 31,
	2022		2021		% Change
	(in thousands)
Gross profit	$	~~127~~129,~~794~~620	$	~~100~~108,~~026~~196	2820	%

Gross profit was $~~127~~129.86 million for the three months ended ~~July~~October 31, 2022, compared to $~~100~~108.02 million for the three months ended ~~July~~October 31, 2021, an increase of $2721.84 million, or 2820%. The increase in gross profit was primarily due to the acquisition of new customers with annualized subscription revenue above $100,000. Gross margin was 6160% for the three months ended ~~July~~October 31, 2022, compared to 5658% for the three months ended ~~July~~October 31, 2021. The increase in gross margin was primarily due to the overall growth in total revenues coupled with the rationalization in cloud hosting expenses.

Operating Expenses

Research and Development

	Three Months EndedJuly 31,
	Three Months EndedOctober 31,
	2022		2021		% Change
	(in thousands)
Research and development	$	4649,~~266~~158	$	4139,~~799~~990	1123	%

Research and development expenses were $4649.32 million for the three months ended ~~July~~October 31, 2022 compared to $4140.80 million for the three months ended ~~July~~October 31, 2021, an increase of $49.52 million. The increase was primarily due to an increase of $57.18 million in employee compensation costs, including stock-based compensation costs, ~~partially~~and ~~offset~~an byincrease ~~a decrease~~ of $01.64 million in other costs driven by our overall growth.

Sales and Marketing

	Three Months EndedJuly 31,
	Three Months EndedOctober 31,
	2022		2021		% Change
	(in thousands)
Sales and marketing	$	~~103~~111,~~215~~599	$	7683,~~279~~779	3533	%

Sales and marketing expenses were $~~103~~111.26 million for the three months ended ~~July~~October 31, 2022 compared to $7683.38 million for the three months ended ~~July~~October 31, 2021, an increase of $2627.98 million, or 3533%. The increase was primarily due to an increase of $2023.52 million in employee compensation costs related to higher headcount, including stock-based compensation costs, an increase of $34.64 million in travel costs, and from an increase of $1.97 million in ~~marketing~~other ~~events~~costs driven by our overall growth, ~~and~~partially ~~from~~offset anby ~~increase~~a decrease of $01.95 million in ~~other~~marketing ~~costs driven by our overall growth~~activities.

General and Administrative

	Three Months EndedJuly 31,
	Three Months EndedOctober 31,
	2022		2021		% Change
	(in thousands)
General and administrative	$	4146,~~942~~248	$	3640,~~248~~513	1614	%

General and administrative expenses were $41.9 million for the three months ended July 31, 2022 compared to $36.2 million for the three months ended July 31, 2021, an increase of $5.7 million, or 16%. The increase was primarily due to a non-recurring prior year benefit of $1.6 million as a result of a reversal of allowances for credit losses, an increase of $1.4 million in third party services, such as recruiting expenses and legal service fees, an increase of $0.9 million in employee compensation costs related to higher headcount, including stock-based compensation costs, and an increase of $1.8 million in travel costs and in other costs driven by our overall growth.38

36General and administrative expenses were $46.2 million for the three months ended October 31, 2022 compared to $40.5 million for the three months ended October 31, 2021, an increase of $5.7 million, or 14%. The increase was primarily due to an increase of $4.6 million in employee compensation costs related to higher headcount, including stock-based compensation costs, an increase of $1.0 million in third party services, such as recruiting expenses and legal service fees, an increase of $2.0 million in travel and other costs driven by our overall growth, partially offset by $1.9 million of insurance proceeds receivable for loss recoveries in connection with an acquisition made in a prior period.

Interest Expense

	Three Months EndedJuly 31,
	Three Months EndedOctober 31,
	2022		2021		% Change
	(in thousands)
Interest expense	$	3,~~619~~547	$	3031,~~621~~130	(8889)	%

Interest expense was $3.65 million for the three months ended ~~July~~October 31, 2022 compared to $3031.61 million for the three months ended ~~July~~October 31, 2021. The decrease in interest expense was primarily due to lower non-cash interest expense related to eliminating the amortization of debt discount associated with our convertible notes as a result of the adoption of ASU 2020-06. Refer to Note 8, “Convertible Senior Notes” and the description under the heading “Recent Accounting Guidance” in Note 2, “Significant Accounting Policies” of the notes to our condensed consolidated financial statements included elsewhere in this Quarterly Report ~~on Form 10-Q~~ for more information.

Other Income (Expense), Net

	Three Months EndedJuly 31,
	Three Months EndedOctober 31,
	2022		2021		% Change
	(in thousands)
Other expense, net	$	(709)	$	(1,983)	(64)	%
Other income (expense), net	$	393	$	(1,298)	(130)	%

Other ~~expense~~income, net was $0.74 million for the three months ended ~~July~~October 31, 2022 compared to other expense, net of $21.03 million for the three months ended ~~July~~October 31, 2021. The fluctuation of $1.37 million was primarily due to an increase of $03.80 million in interest income from our short-term investments, ~~and~~partially ~~from~~offset by $01.53 million in fluctuations related to foreign currency exchange rates.

Provision for (Benefit from) Income Taxes

Three Months EndedJuly 31,

Three Months EndedOctober 31,

2022

2021

% Change

(in thousands)

Provision for (benefit from) income taxes

23,~~641~~565

(~~155~~476)

NM(849)

The provision for income taxes was $23.6 million for the three months ended ~~July~~October 31, 2022 compared to a tax benefit of $0.25 million for the three months ended ~~July~~October 31, 2021. The provision for income taxes for the three months ended ~~July~~October 31, 2022 was primarily related to an increase in our U.S. deferred tax liability and income taxes related to foreign and state jurisdictions in which we conduct business. We maintain a full valuation allowance on net deferred tax assets of our U.S. entities as we have concluded that it is unlikely that these deferred income tax assets will be utilized. The benefit from income taxes for the three months ended ~~July~~October 31, 2021 was primarily related to the reversal of a U.S. deferred tax liability, and foreign excess tax benefits related to stock-based compensation, ~~and remeasurement of deferred tax assets due to tax rate changes in the U.K.,~~ offset by income taxes related to foreign and state jurisdictions in which the Company conducts business.

3739

~~Six~~Nine Months Ended ~~July~~October 31, 2022 and ~~July~~October 31, 2021

Revenues

	Six Months EndedJuly 31,
	Nine Months EndedOctober 31,
	2022		2021		% Change
	(in thousands)
Subscription	$	~~371~~569,~~140~~549	$	~~296~~461,~~334~~079	2524	%
Professional services and other	3655,~~334~~261		4970,~~841~~912		(2722)	%
Total revenues	$	~~407~~624,~~474~~810	$	~~346~~531,~~175~~991	1817	%

Total revenues were $~~407~~624.58 million for the ~~six~~nine months ended ~~July~~October 31, 2022 compared to $~~346~~532.20 million for the ~~six~~nine months ended ~~July~~October 31, 2021, an increase of $6192.3 million, or 18%. Subscription revenues were $371.1 million, or 91% of total revenues, for the six months ended July 31, 2022, compared to $296.3 million, or 86% of total revenues, for the six months ended July 31, 2021. This increase in absolute dollars was predominantly driven by the increase in the number of customers with annualized subscription revenue above $100,000, which was 1,519 as of July 31, 2022, compared to 1,230 as of July 31, 2021. Professional services and other revenues were $36.3 million for the six months ended July 31, 2022 compared to $49.8 ~~million for the six months ended July 31, 2021. The decrease of $13.5~~ million, or 2717%~~, was primarily due to the migration from certain term-based licenses to subscription services~~.

Subscription revenues were $569.5 million, or 91% of total revenues, for the nine months ended October 31, 2022, compared to $461.1 million, or 87% of total revenues, for the nine months ended October 31, 2021. The increase of $108.4 million was fully ascribed to the increase in the number of customers with annualized subscription revenue above $100,000, which was 1,560 as of October 31, 2022, compared to 1,315 as of October 31, 2021.

Professional services and other revenues were $55.3 million for the nine months ended October 31, 2022 compared to $70.9 million for the nine months ended October 31, 2021. The decrease of $15.6 million, or 22%, was primarily due to the migration from certain term-based licenses to subscription services, and to a similar extent, the migration from Coupa-led implementations to partner-led implementations.

Cost of Revenues

	Six Months EndedJuly 31,
	Nine Months EndedOctober 31,
	2022		2021		% Change
	(in thousands)
Subscription	$	~~118~~184,~~937~~364	$	~~102~~154,~~423~~701	1619	%
Professional services and other	4567,~~200~~489		5681,~~524~~865		(2018)	%
Total cost of revenues	$	~~164~~251,~~137~~853	$	~~158~~236,~~947~~566	36	%

Cost of subscription was $~~118~~184.94 million for the ~~six~~nine months ended ~~July~~October 31, 2022 compared to $~~102~~154.47 million for the ~~six~~nine months ended ~~July~~October 31, 2021, an increase of $1629.57 million, or 1619%. The increase in cost of subscription was primarily due to an increase of $710.46 million in ~~amortization~~employee ofcompensation ~~developed~~costs ~~technology assets~~ related to ~~acquisitions~~higher headcount, including stock-based compensation costs, an increase of $69.30 million in ~~employee~~amortization ~~compensation~~of ~~costs~~developed technology assets related to ~~higher headcount~~acquisitions, ~~including~~an ~~stock-based~~increase ~~compensation~~of ~~costs~~$2.8 million in third party services, an increase of $13.24 million in ~~third~~hosting ~~party~~fees ~~services,~~and ~~such~~other ascosts ~~contractors~~to accommodate and ~~consulting~~manage ~~fees~~increased customer spend, an increase of $01.87 million in ~~software~~amortization of capitalized development costs, tosuch ~~manage~~as ~~our~~contractors ~~platform~~and consulting fees, and an increase of $02.82 million in travel and other costs driven by our overall growth.

Cost of professional services was $4567.25 million for the ~~six~~nine months ended ~~July~~October 31, 2022 compared to $5681.59 million for the ~~six~~nine months ended ~~July~~October 31, 2021, an decrease of $1114.34 million, or 2018%. The decrease in cost of professional services was primarily due to a decrease of $811.98 million in amortization of developed technology assets, ~~and~~ a decrease of $23.41 million in employee compensation costs asdue to a ~~result~~reduction of ~~migrating~~headcount, ~~implementation~~partially ~~services~~offset ~~that~~by wea ~~directly~~net ~~led~~increase toof ~~those~~$0.5 ~~led~~million byin ~~our~~travel ~~implementation~~and ~~partners~~other costs.

Gross Profit

	Six Months EndedJuly 31,
	Nine Months EndedOctober 31,
	2022		2021		% Change
	(in thousands)
Gross profit	$	~~243~~372,~~337~~957	$	~~187~~295,~~228~~425	3026	%

Gross profit was $~~243~~373.30 million for the ~~six~~nine months ended ~~July~~October 31, 2022, compared to $~~187~~295.24 million for the ~~six~~nine months ended ~~July~~October 31, 2021, an increase of $5677.16 million, or 3026%. The increase in gross profit was primarily due to the acquisition of new customers with annualized subscription revenue above $100,000. Gross margin was 60% for the ~~six~~nine months ended ~~July~~October 31, 2022, compared to 5456% for the ~~six~~nine months ended ~~July~~October 31, 2021. The increase in gross margin was primarily due to the overall growth in total revenues coupled with the rationalization in cloud hosting expenses.

Operating Expenses

Research and Development

	Six Months EndedJuly 31,
	Nine Months EndedOctober 31,
	2022		2021		% Change
	(in thousands)
Research and development	$	89139,~~976~~134	$	85125,~~636~~625	511	%

Research and development expenses were $90139.01 million for the ~~six~~nine months ended ~~July~~October 31, 2022 compared to $85125.6 million for the ~~six~~nine months ended ~~July~~October 31, 2021, an increase of $413.45 million, or 511%. The increase was primarily due to an increase of $413.49 million in employee compensation costs, including stock-based compensation costs, an increase of $01.93 million in travel costs, partially offset by a decrease of $01.97 million in other costs for research and development activities.

Sales and Marketing

	Six Months EndedJuly 31,
	Nine Months EndedOctober 31,
	2022		2021		% Change
	(in thousands)
Sales and marketing	$	~~204~~315,~~168~~767	$	~~154~~237,~~122~~902	3233	%

Sales and marketing expenses were $~~204~~315.28 million for the ~~six~~nine months ended ~~July~~October 31, 2022 compared to $~~154~~237.19 million for the ~~six~~nine months ended ~~July~~October 31, 2021, an increase of $4977.9 million, or 3233%. The increase was primarily due to an increase of $3659.02 million in employee compensation costs related to higher headcount, including stock-based compensation costs, an increase of $610.59 million in travel costs, an increase of $52.48 million in marketing events, primarily driven by our annual Inspire conferences that returned to an in-person event after two years, an increase of $1.1 million in marketing related subscription costs, and an increase of $23.09 million in other costs driven by our overall growth.

General and Administrative

	Six Months EndedJuly 31,
	Nine Months EndedOctober 31,
	2022		2021		% Change
	(in thousands)
General and administrative	$	84130,~~080~~328	$	75116,~~625~~139	1112	%

General and administrative expenses were $84130.13 million for the ~~six~~nine months ended ~~July~~October 31, 2022 compared to $75116.61 million for the ~~six~~nine months ended ~~July~~October 31, 2021, an increase of $814.52 million, or 1112%. The increase was primarily due to aan ~~non-recurring~~increase ~~prior year benefit~~ of $34.13 million asin aemployee ~~result~~compensation ofcosts arelated ~~reversal~~to ofhigher ~~allowances~~headcount, ~~for~~including ~~credit~~stock-based ~~losses~~compensation costs, an increase of $34.3 million in third party services, such as recruiting expenses and legal service fees, a non-recurring prior year benefit of $3.2 million as a result of a reversal of allowances for credit losses, an increase of $2.1.6 million in ~~travel~~higher ~~costs~~investment spend on software, and an increase of $2.7 million in travel and other costs driven by our overall growth, partially offset by $1.9 million of insurance proceeds receivable for loss recoveries in connection with an acquisition made in a prior period.

Interest Expense

	Six Months EndedJuly 31,
	Nine Months EndedOctober 31,
	2022		2021		% Change
	(in thousands)
Interest expense	$	710,~~095~~642	$	5990,~~724~~854	(88)	%

Interest expense was $710.16 million for the ~~six~~nine months ended ~~July~~October 31, 2022 compared to $5990.79 million for the ~~six~~nine months ended ~~July~~October 31, 2021. The decrease in interest expense was primarily due to lower non-cash interest expense related to eliminating the amortization of debt discount associated with our convertible notes as a result of the adoption of ASU 2020-06. Refer to Note 8, “Convertible Senior Notes” and the description under the heading “Recent Accounting Guidance” in Note 2, “Significant Accounting Policies” of the notes to our condensed consolidated financial statements included elsewhere in this Quarterly Report ~~on Form 10-Q~~ for more information.

Other Expense, Net

Six Months EndedJuly 31,

Nine Months EndedOctober 31,

2022

2021

% Change

(in thousands)

Other expense, net

(4,~~425~~032)

(12,~~448~~746)

~~206~~47

Other expense, net was $4.40 million for the ~~six~~nine months ended ~~July~~October 31, 2022 compared to $12.47 million for the ~~six~~nine months ended ~~July~~October 31, 2021. The fluctuation of $31.03 million was primarily due to $56.98 million in unfavorable fluctuations related to foreign currency exchange rates, partially offset by an increase of $4.2 million in interest income from our short-term investments due to higher interest rates, and from a gain of $1.3 million from the conversion of a non-marketable convertible note to preferred stock, which is classified as a non-marketable equity investment~~, and an increase of $1~~.~~6 million in interest income from our short-term investments.~~

Provision for (Benefit from) Income Taxes

Six Months EndedJuly 31,

Nine Months EndedOctober 31,

2022

2021

% Change

(in thousands)

Provision for (benefit from) income taxes

58,~~392~~957

(2,~~221~~697)

NM(432)

The provision for income taxes was $59.40 million for the ~~six~~nine months ended ~~July~~October 31, 2022 compared to a tax benefit of $2.27 million for the ~~six~~nine months ended ~~July~~October 31, 2021. The provision for income taxes for the ~~six~~nine months ended ~~July~~October 31, 2022 was primarily related to an increase in our U.S. deferred tax liability and income taxes related to foreign and state jurisdictions in which we conduct business. We maintain a full valuation allowance on net deferred tax assets of our U.S. entities as we have concluded that it is unlikely that these deferred income tax assets will be utilized. The benefit from income taxes for the six months ended July 31, 2021 was primarily related to the reversal of a U.S. deferred tax liability, foreign excess tax benefits related to stock-based compensation, and remeasurement of deferred tax assets due to tax rate changes in the U.K., offset by income taxes related to foreign and state jurisdictions in which the Company conducts business.

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was primarily related to an increase in our U.S. deferred tax liability and income taxes related to foreign and state jurisdictions in which we conduct business. We maintain a full valuation allowance on net deferred tax assets of our U.S. entities as we have concluded that it is unlikely that these deferred income tax assets will be utilized. The benefit from income taxes for the nine months ended October 31, 2021 was primarily related to the reversal of a U.S. deferred tax liability, foreign excess tax benefits related to stock-based compensation, and remeasurement of deferred tax assets due to tax rate changes in the U.K., offset by income taxes related to foreign and state jurisdictions in which the Company conducts business.

Liquidity and Capital Resources

Our principal sources of liquidity are cash, cash equivalents, marketable securities, and cash generated from operations. As of ~~July~~October 31, 2022, we had cash and cash equivalents of $~~528~~521.06 million, and marketable securities of $~~281~~338.45 million.

Our cash equivalents are comprised primarily of bank deposits and money market funds. Cash from operations could be affected by various risks and uncertainties, including those detailed in Part II, Item 1A titled “Risk Factors.” However, we believe our existing cash and cash equivalents and marketable securities will be sufficient to meet our projected operating requirements for at least the next 12 months from the filing of this Quarterly Report.

Our material cash requirements from known contractual and other obligations consists of our Convertible Notes, obligations under operating leases for office space, ~~and~~ contractual purchase obligations for hosting services and other services to support the Company’s business operations, and repurchases of common stock under our share repurchase program.

We had outstanding 2023 Notes, 2025 Notes and 2026 Notes with principal amounts ofthat ~~$1.8~~were ~~million~~not material, $805.0 million and $1,380.0 million, respectively, as of ~~July~~October 31, 2022. We have the ability to settle the conversion of Convertible Notes in cash, shares of our common stock, or a combination of cash and shares of our common stock at our own election. As of ~~July~~October 31, 2022, there ~~were~~was ~~$1.8~~an ~~million~~immaterial principal amount of unsettled conversion requests with respect to the 2023 Notes.

In conjunction with the issuance of the Convertible Notes, we entered into capped call transactions that reduce our exposure to additional cash payments above principal balances in the event of a cash conversion of the Convertible Notes. We may owe additional cash to the noteholders upon early conversion if our stock price exceeds $63.821 per share for the 2023 Notes, $295.550 for the 2025 Notes, or $503.415 for the 2026 Notes. Although our incremental exposure to the additional cash payment above the principal amount of the Convertible Notes is reduced by the capped calls, conversion of the Convertible Notes by noteholders and our related settlement of any portion thereof in shares of our common stock may cause dilution to the ownership interests of existing stockholders. As of ~~July~~October 31, 2022, all the capped calls for the 2023 Notes, 2025 Notes and 2026 Notes remained outstanding.

We lease office space under non-cancelable operating leases with various expiration dates through February 2030. As of ~~July~~October 31, 2022, the value of our current and noncurrent operating lease obligations was approximately $16.68 million and $2725.62 million, respectively. Our non-cancelable purchase obligations consists of hosting services and other services that support our business operations. As of ~~July~~October 31, 2022, the value of our current and noncurrent purchase obligations was approximately $4448.65 million and $~~135~~117.56 million, respectively. Information regarding our operating lease obligations and contractual purchase obligations can be found in Note 9, “Commitments and Contingencies” in the notes to our condensed consolidated financial statements included elsewhere in this Quarterly Report ~~on Form 10-Q~~.

In August 2022, the Board of Directors authorized a program to repurchase up to $100 .0 million of our common stock (the “Share Repurchase Program”). Under the Share Repurchase Program, shares of common stock may be repurchased from time to time until September 1, 2023 through open market transactions in compliance with applicable securities laws. The timing, manner, price and amount of any repurchases, as well as the capital resources to fund the repurchases, are determined by us at our discretion and depend on a variety of factors, including legal requirements, price and economic and market conditions. ~~Share repurchases will be funded by available cash and cash equivalents.~~

During the three and nine months ended October 31, 2022, we repurchased and subsequently retired 325,292 shares of common stock at an average price of $61.48, for an aggregate $20.0 million. As of October 31, 2022, $80.0 million remained available and authorized for repurchases under the Share Repurchase Program.

Our future capital requirements will depend on many factors, including our pace of growth, subscription renewal activity, the timing and extent of spend to support development efforts, the expansion of sales and marketing activities, the introduction of new and enhanced services offerings and the continuing market acceptance of our services. We continually assess potential acquisitions and expect to continue to pursue acquisitions of or investments in complementary businesses, services and technologies and intellectual property rights. We may be required to seek additional equity or debt financing. In the event that additional financing is required from outside sources, we may not be able to raise it on terms acceptable to us, or at all. If we are unable to raise additional capital when desired, our business, operating results and financial condition would be adversely affected.

Operating Activities

Cash provided by operating activities for the ~~six~~nine months ended ~~July~~October 31, 2022 was $78150.81 million, compared to $72103.9 million for the ~~six~~nine months ended ~~July~~October 31, 2021. The increase was primarily driven by the timing of our billings and related cash collections from customers.

Investing Activities

Cash used in investing activities for the ~~six~~nine months ended ~~July~~October 31, 2022 of $69132.42 million was primarily related to $59116.24 million of net cash disbursements from purchases, maturities and sales of short-term marketable securities, $814.20 million for the purchases of property and equipment, and a $2.0 million investment in a new portfolio company through our Coupa Ventures fund, partially offset by a $0.2 million release of holdback purchase consideration related to a previous business acquisition.

Financing Activities

Cash ~~provided~~used byin financing activities for the ~~six~~nine months ended ~~July~~October 31, 2022 of $131.02 million was primarily due to approximately $1020.90 million in share repurchases, $1.8 million of repayments for the conversions of the 2023 Notes, partially offset by $18.5 million of proceeds from the issuance of common stock under the ESPP and exercise of stock options, and $2.1 million of cash received from the non-controlling shareholder of Coupa K.K.

Critical Accounting Estimates

Our management’s discussion and analysis of our financial condition and results of operations is based on our financial statements, which have been prepared in accordance with GAAP. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported revenues generated and expenses incurred during the reporting periods. Our estimates are based on our historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

We no longer consider estimates related to our convertible senior notes to be a critical accounting policy due to the adoption of ASU No. 2020-06 effective February 1, 2022, which simplified the accounting for convertible instruments.

There have been no other material changes to our critical accounting policies and estimates as compared to the critical accounting policies and estimates disclosed in our Annual Report on Form 10-K for the fiscal year ended January 31, 2022.

Recent Accounting Pronouncements

Refer to Note 2, “Significant Accounting Policies - Recent Accounting Guidance” in the notes to our condensed consolidated financial statements included elsewhere in this Quarterly Report ~~on Form 10-Q~~ for analysis of recent accounting pronouncements that are applicable to our business.

Non‑GAAP Financial Measures

In addition to our results determined in accordance with U.S. generally accepted accounting principles, or GAAP, we believe the following non‑GAAP measures are useful in evaluating our operating performance:

•Non-GAAP operating income;

•Non-GAAP net income attributable to Coupa Software Incorporated; and

•Adjusted free cash flows.

We regularly review and consider these measures when we evaluate our business and for internal planning and forecasting purposes.

The following tables provide a reconciliation of loss from operations to non‑GAAP operating income, from net loss attributable to Coupa Software Incorporated to non-GAAP net income attributable to Coupa Software Incorporated, and from net cash provided by operating activities to adjusted free cash flows (in thousands):

	Three Months EndedJuly 31,				Six Months EndedJuly 31,
	2022		2021		2022		2021
Loss from operations	$	(63,629)	$	(54,300)	$	(134,887)	$	(128,155)
Stock-based compensation	55,832		47,500		108,224		94,792
Amortization of acquired intangible assets	31,832		33,518		64,539		67,058
Non-GAAP operating income	$	24,035	$	26,718	$	37,876	$	33,695


	Three Months Ended October 31,				Nine Months Ended October 31,

	2022		2021		2022		2021
Loss from operations	$	(77,385)	$	(56,086)	$	(212,272)	$	(184,241)
Stock-based compensation	64,027		50,459		172,251		145,251
Amortization of acquired intangible assets	31,786		33,518		96,325		100,575
Insurance proceeds for loss recoveries	(1,929)		—		(1,929)		—
Non-GAAP operating income	$	16,499	$	27,891	$	54,375	$	61,585

	Three Months EndedJuly 31,				Six Months EndedJuly 31,
	Three Months EndedOctober 31,				Nine Months EndedOctober 31,
	2022		2021		2022		2021
Net loss attributable to Coupa Software Incorporated	$	(7584,~~269~~675)	$	(91,~~467~~203)	$	(~~156~~241,~~742~~417)	$	(~~191~~283,~~824~~027)
Stock-based compensation	5564,~~832~~027		4750,~~500~~459		~~108~~172,~~224~~251		94145,~~792~~251
Amortization of acquired intangible assets	31,~~832~~786		33,518		6496,~~539~~325		67100,~~058~~575
Amortization of debt discount and issuance costs	1,~~831~~839		2829,~~872~~454		35,~~596~~435		5685,~~262~~716
Loss on conversion of convertible senior notes	—		—228		—		~~129~~357
Gain on non-marketable investments	—		—		(1,288)		—
Income tax effects and adjustments	(2,875)		(3,404)		(1,949)		(6,381)
Insurance proceeds for loss recoveries	(1,929)		—		(1,929)		—
Adjustment attributable to redeemable non-controlling interests	5,133		5,235		5,609		5,235
Income tax effects and adjustments	(324)		(2,362)		(2,273)		(8,744)
Non-GAAP net income attributable to Coupa Software Incorporated	$	16,484	$	20,254	$	21,989	$	25,271
Adjustment attributable to redeemable non-controlling interests	924		3,438		6,533		8,673
Non-GAAP net income attributable to Coupa Software Incorporated	$	11,648	$	23,532	$	33,637	$	48,801

	Three Months EndedJuly 31,				Six Months EndedJuly 31,
	Three Months EndedOctober 31,				Nine Months EndedOctober 31,
	2022		2021		2022		2021
Net cash provided by operating activities	$	2971,~~094~~298	$	4031,~~811~~015	$	78150,~~836~~134	$	72103,~~893~~908
Less: purchases of property and equipment	(45,~~128~~764)		(3,~~908~~594)		(814,~~241~~005)		(610,~~662~~256)
Add: repayments of convertible senior notes attributable to debt discount	—		—821		—		~~517~~1,338
Adjusted free cash flows	$	2465,~~966~~534	$	3628,~~903~~242	$	70136,~~595~~129	$	6694,~~748~~990

We define non-GAAP operating income as loss from operations before stock-based compensation, insurance proceeds for loss recoveries, and amortization of acquired intangible assets. We define non-GAAP net income attributable to Coupa Software Incorporated as net loss attributable to Coupa Software Incorporated before stock-based compensation, amortization of acquired intangible assets, amortization of debt issuance costs, gain or loss on conversion of convertible senior notes, gain or loss on non-marketable investments, insurance proceeds for loss recoveries, the adjustment attributable to redeemable non-controlling interests, non-recurring income tax adjustments, and income tax effects, and prior to the adoption of ASU 2020-06 on February 1, 2022, amortization of debt discount costs.

Beginning in the three months ended April 30, 2022, we utilize a fixed long-term projected tax rate in our computation of the non-GAAP income tax provision to provide better consistency across the reporting periods. In projecting this long-term non-GAAP tax rate, we utilize a three-year financial projection that excludes the direct impact of stock-based compensation, amortization of acquired intangible assets, and amortization of debt issuance costs. The projected rate considers other factors such as our current operating structure, and existing tax positions in various jurisdictions. Additionally, due to historic profitability on a non-GAAP basis, there are no valuation allowances recorded against the non-GAAP deferred tax assets globally. We will periodically reevaluate the projected long-term tax rate, as necessary, for significant events, based on our ongoing analysis of relevant tax law changes, material changes in the forecasted geographic earnings mix, and any significant acquisitions.

We define adjusted free cash flows as net cash provided by operating activities, less purchases of property and equipment, and prior to the adoption of ASU 2020-06 on February 1, 2022, plus repayments of convertible senior notes attributable to debt discount.

We believe non-GAAP operating income and non-GAAP net income attributable to Coupa Software Incorporated provide investors and other users of our financial information consistency and comparability with our past financial performance and facilitate period to period comparisons of operations. We believe non-GAAP operating income and non-GAAP net income attributable to Coupa Software Incorporated are also useful in evaluating our operating performance compared to that of other companies in our industry, as these metrics generally eliminate the effects of certain items that may vary between companies for reasons unrelated to overall operating performance.

We believe adjusted free cash flows provides useful information to investors because it is an indicator of our capital strength and liquidity, and we also use it to measure performance of our business operations. Prior to adoption of ASU 2020-06 on February 1, 2022, we excluded repayment of convertible senior notes attributable to debt discount in calculating this measure in part because our use of cash to satisfy this obligation (relating to the Convertible Notes) was discretionary, and we have the ability to satisfy similar obligations in the near future through shares of our common stock, or a combination of cash and shares of our common stock, at our election. This measure does not reflect any reduction for cash settlements of our debt obligations, nor does it represent our residual cash flow available for discretionary expenditures. In addition, other companies in our industry may calculate similarly titled measures differently than we do, limiting their usefulness as comparative measures. Due to these and other limitations, you should not consider this non-GAAP measure in isolation or as a substitute for analysis of other GAAP financial measures, such as net cash provided by operating activities.

We use non-GAAP operating income, non-GAAP net income attributable to Coupa Software Incorporated and adjusted free cash flows in conjunction with traditional GAAP measures as part of our overall assessment of our performance and liquidity, including the preparation of our annual operating budget and quarterly forecasts, to evaluate the effectiveness of our business strategies and to communicate with our board of directors concerning our financial performance and liquidity. Our definitions may differ from the definitions used by other companies and therefore comparability may be limited. In addition, other companies may not publish these or similar metrics. Thus, our non-GAAP operating income, non-GAAP net income attributable to Coupa Software Incorporated and adjusted free cash flows should be considered in addition to, not as substitutes for, or in isolation from, measures prepared in accordance with GAAP.

We compensate for these limitations by providing investors and other users of our financial information a reconciliation of non-GAAP operating income to loss from operations, non-GAAP net income attributable to Coupa Software Incorporated to net loss attributable to Coupa Software Incorporated, and adjusted free cash flows to net cash provided by operating activities. We encourage investors and others to review our financial information in its entirety, not to rely on any single financial measure and to view non-GAAP operating income, non-GAAP net income attributable to Coupa Software Incorporated, and adjusted free cash flows in conjunction with loss from operations, net loss attributable to Coupa Software Incorporated, and the condensed consolidated statements of cash flows.

4446

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

Foreign Currency Exchange Risk

Our results of operations and cash flows are subject to fluctuations due to changes in foreign currency exchange rates, particularly changes in the Euro, British Pound Sterling, and Australian Dollar. We expect our international operations to continue to grow in the future and we are continually monitoring our foreign currency exposure to determine whether and when we should begin a formal hedging program.

We performed a sensitivity analysis and determined that if an adverse 10% foreign currency exchange rate change was applied to total monetary assets and liabilities denominated in currencies other than the functional currency at the balance sheet dates, it would have resulted in an adverse effect on our net losses attributable to Coupa Software Incorporated of approximately $86.28 million and $12.4 million as of ~~July~~October 31, 2022 and January 31, 2022, respectively. We expect our international operations to continue to grow in the near term and the effects of movements in currency exchange rates will increase as our transaction volume outside of the United States increases. The majority of our agreements have been and we expect will continue to be denominated in U.S. dollars.

Market Risk and Market Interest Risk

In June 2020, we issued $1,380.0 million aggregate principal amount of 0.375% convertible senior notes due 2026. In June 2019, we issued $805.0 million aggregate principal amount of 0.125% convertible senior notes due 2025. In January 2018, we issued $230.0 million aggregate principal amount of 0.375% convertible senior notes due 2023 of which approximately ~~228~~$230.20 million aggregate principal amount had been settled by ~~July~~October 31, 2022. The 2026 Notes, 2025 Notes and 2023 Notes have fixed annual interest rates at 0.375%, 0.125% and 0.375%, respectively, and, therefore, we do not have economic interest rate exposure on our Convertible Notes. However, the values of the Convertible Notes are exposed to interest rate risk. Generally, the fair market value of our fixed interest rate Convertible Notes will increase as interest rates fall and decrease as interest rates rise. In addition, the fair values of the Convertible Notes are affected by our stock price. The fair value of the Convertible Notes will generally increase as our common stock price increases and will generally decrease as our common stock price declines in value. Additionally, we carry the Convertible Notes at face value less unamortized issuance costs on our balance sheet, and we present the fair value for disclosure purposes only.

Our exposure to interest rate risk also is related to our interest-bearing assets, primarily our cash and cash equivalents and marketable securities. Fixed rate securities may have their market value adversely affected due to a rise in interest rates, while floating rate securities may produce less income than expected if interest rates fall. Due in part to these factors, our future investment income may fluctuate due to changes in interest rates or we may suffer losses in principal if we are forced to sell securities that decline in market value due to changes in interest rates. Our debt securities are classified as “available for sale.” When the fair value of the security declines below its amortized cost basis, any portion of that decline attributable to credit losses, to the extent expected to be nonrecoverable before the sale of the security, is recognized in our condensed consolidated statements of operations. When the fair value of the security declines below its amortized cost basis due to changes in interest rates, such amounts are recorded in other comprehensive income (loss), and are recognized in our condensed consolidated statements of operations only if we sell or intend to sell the security before recovery of its cost basis. A hypothetical 100 basis points increase in interest rates would have decreased the fair value of our cash and cash equivalents and marketable securities by approximately $1.46 million and $1.12 million ~~for~~as ~~the~~of ~~three months ended July~~ October 31, 2022 and 2021, respectively.

Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our principal executive officer and principal financial officer, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), as of the end of the period covered by this Quarterly Report ~~on Form 10-Q~~. Based on such evaluation, our principal executive officer and principal financial officer have concluded that, as of such date, our disclosure controls and procedures were effective at a reasonable assurance level.

Changes in Internal Control Over Financial Reporting

There was no change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the period covered by this Quarterly Report ~~on Form 10-Q~~ that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

4547

Inherent Limitations on Effectiveness of Controls

Our management, including our principal executive officer and principal financial officer, does not expect that our disclosure controls or our internal control over financial reporting will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people or by management override of the controls. The design of any system of controls is also based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

4648

PART II—OTHER INFORMATION

Item 1. Legal Proceedings.

Please refer to Note 9, “Commitments and Contingencies” to the Company’s condensed consolidated financial statements for the disclosure of the Company’s legal proceedings.

Item 1A. Risk Factors.

A description of the risks and uncertainties associated with our business is set forth below. You should carefully consider the risks described below, as well as the other information in this Quarterly Report ~~on Form 10-Q~~, including our condensed consolidated financial statements and the related notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” particularly before deciding whether to invest in our securities. The occurrence of any of the events or developments described below could materially and adversely affect our business, financial condition, results of operations and growth prospects. In such an event, the market price of our common stock could decline, and you may lose all or part of your investment. The risks described below are not the only ones we face. Additional risks and uncertainties not presently known to us or that we currently deem immaterial may also impair our business operations.

Summary Risk Factors

The following is a summary of key risk factors you should consider in connection with an investment in our common stock. You should read this summary together with the more detailed description of each risk factor under the bold and italicized subcaptions further below.

•Failure to complete, or delays in completing, the potential Merger with Parent and Merger Sub announced on December 12, 2022 and disruptions in our business caused by the potential Merger could materially and adversely affect our results of operations, business, financial results and/or stock price.

•We cannot be sure if or when the Merger will be completed.

•Lawsuits may be filed against the Company and members of our board of directors as a result of the Merger, which may delay or prevent the Merger and otherwise require diversion of resources and our management’s attention.

•Weakened global economic conditions, including those from macro-trends, global events and the COVID-19 pandemic, may harm our industry, business and results of operations.

•We have a limited operating history at our current scale, which makes it difficult to predict our future operating results.

•If we fail to manage our growth effectively, we may be unable to execute our business plan, maintain high levels of service, or adequately address competitive challenges.

•We may not achieve the benefits and synergies that we had expected from our acquisitions, and our business may be adversely impacted by integration challenges, assumption of unknown or unforeseen liabilities, or our inability to retain customers.

•If we are unable to attract new customers, our revenue growth will be adversely affected.

•Because we sell our services to large enterprises with complex operating environments, we tend to encounter long and unpredictable sales cycles.

•The markets in which we participate are intensely competitive.

•Our business depends in part on our existing customers renewing their subscriptions and purchasing additional subscriptions.

•We may not be successful in expanding our marketing and sales capabilities or in developing widespread brand awareness in a cost-effective manner.

•If we lose the services of our chief executive officer or one or more of our other key employees, or if we are unable to attract and retain highly skilled employees more broadly, our business could be adversely affected.

•Our international operations and sales to customers outside the United States or with international operations expose us to risks inherent in international sales.

•Our business may be adversely impacted by foreign currency exchange rates.

•If our security measures are breached, or if we fail to prevent unauthorized access to customer data, we may experience disruption in service and revenues, our reputation may be harmed and we may face contractual liability as well as fines from government agencies.

•If we fail to integrate our platform with a variety of third-party technologies, our platform may become less marketable.

•Any failure to protect our intellectual property rights could impair the value of our technology and harm our brand.

•Our quarterly results may fluctuate significantly and may not fully reflect the underlying performance of our business.

•We have a history of cumulative losses, and we do not expect to be profitable for the foreseeable future.

•Changes in privacy laws, regulations, and standards may cause our business to suffer.

•Servicing our debt will require a significant amount of cash, and we may not have sufficient cash flow from our business or the ability to raise the funds necessary to settle conversions of, or to repurchase or redeem, our convertible senior notes.

•Our stock price has been subject to fluctuations, and will likely continue to be subject to fluctuations, due to factors beyond our control.

•Sales of a substantial number of shares of our common stock in the public market, or the perception that they might occur, could cause the price of our common stock to decline.

•If securities or industry analysts do not continue to publish research or if they publish inaccurate or unfavorable research about our business, our stock price and trading volume could decline.

•Delaware law, provisions in our charter documents, and provisions in the indentures for our convertible senior notes could make a merger, tender offer or proxy contest difficult, thereby depressing the trading price of our common stock.

•We face risks related to the ~~current~~on-going COVID-19 pandemic, which could have a material adverse effect on our business and results of operations.

Risks Related to the Proposed Merger

Failure to complete, or delays in completing, the potential Merger with Parent and Merger Sub announced on December 12, 2022 and disruptions in our business caused by the potential Merger could materially and adversely affect our results of operations, business, financial results and stock price.

On December 11, 2022, we entered into the Merger Agreement with Parent and Merger Sub pursuant to which, if all of the conditions to closing are satisfied or, if permitted, waived, we will become a wholly owned subsidiary of Parent pursuant to the Merger. The completion of the Merger is subject to the satisfaction or waiver of certain customary mutual closing conditions set forth in the Merger Agreement, including (a) obtaining the Company Stockholder Approval and (b) the expiration or termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the receipt of certain other regulatory approvals. The obligation of each party to consummate the Merger is also conditioned on the other party’s representations and warranties being true and correct (subject to certain customary materiality exceptions) and the other party having performed in all material respects its obligations under the Merger Agreement, and the obligation of Parent to consummate the Merger is additionally conditioned on no material adverse effect on the Company having occurred since the execution of the Merger Agreement. We cannot predict with certainty whether or when the required closing conditions will be satisfied and cannot assure you that we will be able to successfully consummate the proposed Merger as currently contemplated under the Merger Agreement or at all.

Risks related to the failure of the proposed Merger to be consummated include, but are not limited to, the following:

•under some circumstances, we may be required to pay the Company Termination Fee of $200 million;

•we will remain liable for significant expenses, including transaction, professional services and other costs relating to the Merger regardless of whether or not the Merger is consummated;

•the attention of our management and employees may have been diverted to the Merger rather than to our own operations and the pursuit of other opportunities that could have been beneficial to us and could continue to be so diverted;

•we could be subject to litigation related to the Merger, including with respect to our entry into the Merger Agreement;

•the potential loss of key personnel during the pendency of the Merger as employees and other service providers may experience uncertainty about their future roles with us following completion of the Merger; and

•under the Merger Agreement, we are subject to certain restrictions on the conduct of our business prior to completing the Merger, which restrictions could adversely affect our ability to conduct our business as we otherwise would have done if we were not subject to these restrictions.

The occurrence of any of these events individually or in combination could materially and adversely affect our results of operations, business and stock price.

We cannot be sure if or when the Merger will be completed.

The consummation of the Merger is subject to the satisfaction or waiver of various conditions, including the approval of the Merger by our stockholders and the receipt of certain required regulatory approvals. We cannot guarantee that the closing conditions set forth in the Merger Agreement will be satisfied. If we are unable to satisfy the closing conditions or if other mutual closing conditions are not satisfied, Parent will not be obligated to complete the Merger.

Until the Merger is completed, the Merger Agreement restricts us from taking specified actions without the consent of the other party and generally requires us to operate in the ordinary course of business consistent with past practice. These restrictions may prevent us from making appropriate changes to our business or pursuing attractive business opportunities that may arise prior to the completion of the Merger.

Lawsuits may be filed against us and the members of our board of directors arising out of the proposed Merger, which may delay or prevent the proposed Merger.

Putative stockholder complaints, including stockholder class action complaints, and other complaints may be filed against us, or our board of directors, and others in connection with the transactions contemplated by the Merger Agreement. The outcome of litigation is uncertain, and we may not be successful in defending against any such future claims. Lawsuits that may be filed against us, our board of directors, or against Parent or Merger Sub could delay or prevent the Merger, divert the attention of our management and employees from our day-to-day business and otherwise adversely affect us financially.

Risks Related to Global Economic Trends

Weakened global economic conditions, including those from macro-trends, global events and the COVID-19 pandemic, may harm our industry, business and results of operations.

Our overall performance depends in part on worldwide economic conditions. Global financial developments, downturns and global health crises or pandemics seemingly unrelated to us or the enterprise software industry, may harm us, including due to disruptions or restrictions on our employees’ ability to work and travel or our ability to accurately forecast and plan our future business activity. The United States and other key international economies have been affected from time to time by falling demand for a variety of goods and services, restricted credit, poor liquidity, reduced corporate profitability, volatility in credit, equity and foreign exchange markets, bankruptcies, outbreaks of COVID-19 and the resulting impact on business continuity and travel, supply chain disruptions, inflation and overall uncertainty with respect to the economy, including with respect to tariff and trade issues.

For example, inflation rates, particularly in the United States, have increased recently to levels not seen in years, and increased inflation may result in decreased demand for our products and services, increases in our operating costs (including our labor costs), reduced liquidity and limits on our ability to access credit or otherwise raise capital. In addition, the Federal Reserve has raised, and may again raise, interest rates in response to concerns about inflation, which coupled with reduced government spending and volatility in financial markets may have the effect of further increasing economic uncertainty and heightening these risks.

Additionally, financial markets around the world experienced volatility following the invasion of Ukraine by Russia in February 2022, a conflict which continues to contribute to uncertainty and financial market volatility as of the date of this Quarterly Report. In response to the invasion, the US, UK and EU, along with others, imposed significant new sanctions and export controls against Russia, Russian banks and certain Russian individuals and may implement additional sanctions or take further punitive actions in the future. The full economic and social impact of the sanctions imposed on Russia (as well as possible future punitive measures that may be implemented), as well as the counter measures imposed by Russia, in addition to the ongoing military conflict between Ukraine and Russia, which could conceivably expand into the surrounding region, remains uncertain; however, both the conflict and related sanctions have resulted and could continue to result in disruptions to trade, commerce, pricing stability, credit availability, and/or supply chain continuity, in both Europe and globally, and has introduced significant uncertainty into global markets. In particular, the Russia-Ukraine conflict has contributed to rapidly rising costs of living (driven largely by higher energy prices) in Europe and other advanced economies. As the adverse effects of this conflict continue to develop and potentially spread, both in Europe and throughout the rest of the world, our customers may be negatively impacted, which in turn may cause them to delay purchasing decisions, affect subscription renewal rates and otherwise depress the level of spend conducted by such customers through our platform. As a result, our business and results of operations may be adversely affected by the ongoing conflict between Ukraine and Russia, particularly to the extent it escalates to involve additional countries, further economic sanctions or wider military conflict. We have operations, as well as current and potential new customers, throughout most of Europe. If economic conditions in Europe and other key markets for our platform continue to remain uncertain or deteriorate further, including as a result of the Russia-Ukraine conflict, COVID-19 or otherwise, many existing and prospective customers may delay or reduce their information technology spending.

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The factors discussed above have and may continue to influence our existing and prospective customers’ behavior, spending patterns and general demand for our platform and solutions and prompt our customers to take additional precautionary measures to limit or delay expenditures and preserve capital and liquidity as they monitor global economic conditions and the risk of a global recession. The growth of our revenues and potential profitability of our business depends on demand for our platform and solutions generally, and business spend management specifically. In addition, our revenues are dependent on the number of users of our solutions. Historically, during economic downturns there have been reductions in spending on enterprise software as well as pressure for extended billing terms or pricing discounts, which would limit our ability to grow our business and negatively affect our operating results. These conditions affect the rate of enterprise software spending and could adversely affect our existing and prospective customers’ ability or willingness to subscribe to our platform, delay prospective customers’ purchasing decisions, reduce the value or duration of their subscriptions or affect renewal rates, or otherwise cause such customers to experience financial hardship or insolvencies which adversely impact or prevent us from collecting amounts payable to us, all of which could harm our operating results.

Risks Related to Our Growth

We have a limited operating history at our current scale, which makes it difficult to predict our future operating results.

We were incorporated in 2006 and introduced our first cloud-based software solution shortly thereafter. Over time we have invested in building a comprehensive, integrated platform of business spend management (“BSM”) services, and in marketing, selling and supporting this platform. Although in recent years our quarterly and annual revenues have consistently increased on a year-over-year basis, in future periods, our revenue growth rate could slow or our revenues could decline for a number of reasons, including any reduction in demand for our platform or existing services, increased competition, contraction of our overall market, international or domestic economic instability, recessions or other events, such as the COVID-19 pandemic, our inability to accurately forecast demand for our platform or our failure, for any reason, to capitalize on growth opportunities.

As a result of our limited operating history at this scale, our ability to forecast our future operating results is limited and subject to a number of uncertainties, including our ability to plan for and model future growth. This risk is exacerbated to the extent that we enter new product areas or introduce new solutions, particularly in cases where the revenue model differs from our traditional subscription model. We have encountered and will continue to encounter risks and uncertainties frequently experienced by growing companies in rapidly changing industries, such as the risks and uncertainties described in this ~~report~~Quarterly Report. If our assumptions regarding these risks and uncertainties (which we use to plan our business) are incorrect or change, or if we do not address these risks successfully, our operating and financial results could differ materially from our expectations and our business could suffer.

We have experienced rapid growth and expect our growth to continue and if we fail to manage our growth effectively, we may be unable to execute our business plan, maintain high levels of service or adequately address competitive challenges.

We have experienced rapid growth in our business, headcount and operations in recent years. Although we cannot provide any assurance that our business will continue to grow at the same rate or at all, we anticipate that we will continue to expand our operations and headcount, including internationally, in the near future. Our success will depend in part on our ability to manage this growth effectively. The rapid growth in our headcount and operations has placed and will continue to place significant demands on our management and our administrative, operational and financial infrastructure. As we continue to grow, we must effectively integrate, develop and motivate a large number of new employees, while maintaining the effectiveness of our business execution and the beneficial aspects of our corporate culture. In particular, we intend to continue to make directed and substantial investments to expand our research and development, sales and marketing, and general and administrative organizations, as well as our international operations.

To effectively manage growth, we must continue to improve our operational, financial and management controls, risk management activities, and our reporting systems and procedures by, among other things:

•improving our key business applications, processes and IT infrastructure to support our business needs;

•enhancing information and communication systems to ensure that our employees and offices around the world are well-coordinated and can effectively communicate with each other and our growing base of customers and channel partners;

•enhancing our internal controls to ensure timely and accurate reporting of all of our operations and financial results;

•appropriately documenting our IT systems and our business processes; and

•continuing to expand our risk management activities to keep up with the growth in our relationships with partners, acquired companies, customers, suppliers, employees, and other internal and external constituencies.

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The systems enhancements and improvements necessary to support our business as we continue to scale will require significant capital expenditures and allocation of valuable management and employee resources. If we fail to implement these improvements effectively, our ability to manage our expected growth, ensure uninterrupted operation of key business systems and comply with the rules and regulations that are applicable to public reporting companies will be impaired. Additionally, failure to effectively manage growth could result in difficulty or delays in deploying customers, challenges identifying, integrating and maintaining implementation partners, declines in quality or customer satisfaction, increases in costs, difficulties in introducing new features and/or other operational difficulties, any of which could adversely affect our business performance and results of operations.

Acquisitions could be difficult to identify, pose integration challenges, divert the attention of management, disrupt our business, dilute stockholder value, and adversely affect our operating results and financial condition.

We have in the past acquired and may in the future seek to acquire or invest in businesses, products or technologies that we believe could complement or expand our platform, enhance our technical capabilities or otherwise offer growth opportunities. For example, we acquired Pana Industries, Inc. in February 2021, LLamasoft, Inc. in November 2020, Bellin Treasury International GmbH in June 2020, ConnXus, Inc. in May 2020, Yapta, Inc. in December 2019 and Exari Group, Inc. in May 2019. Acquisitions may disrupt our business, divert our resources and require significant management attention that would otherwise be available for development of our existing business.

In addition, we may not be able to integrate the acquired personnel, operations and technologies successfully, or effectively manage the combined business following the acquisition. We also may not achieve the anticipated benefits from the acquired business due to a number of factors, including:

•inability to integrate or benefit from acquired technologies or services in a profitable manner;

•unanticipated costs, accounting charges or other liabilities associated with the acquisition;

•incurrence of acquisition-related costs;

•difficulty integrating the accounting systems, internal controls, operations and personnel of the acquired business;

•difficulties and additional expenses associated with supporting legacy products and hosting infrastructure of the acquired business, including due to language, geographical or cultural differences;

•difficulty fulfilling the contractual obligations or expectations of customers of acquired businesses or transitioning the customers of the acquired business onto our platform and contract terms, including disparities in the revenues, licensing, support or professional services model of the acquired company;

•adverse effects to our existing business relationships with business partners and customers as a result of the acquisition;

•the potential loss of key employees, or large numbers of employees within key functions;

•use of resources that are needed in other parts of our business; and

•use of substantial portions of our available cash to consummate the acquisition.

In addition, acquisitions often have an adverse impact on short-term operating results (such as by diluting gross margin) even if such acquisitions are expected to be beneficial to our operating results over the medium- and long-term.

A significant portion of the purchase price of companies we acquire may be allocated to acquired goodwill and other intangible assets. In connection with our acquisition of LLamasoft, for example, $932.9 million of the purchase price was allocated to goodwill, increasing our total goodwill balance to $1.5 billion as of January 31, 2021, which was roughly three times the amount of goodwill we had as of January 31, 2020. Our acquisition of Pana, in February 2021, further increased our goodwill balance. As of ~~July~~October 31, 2022, our goodwill balance was $1.5 billion. Goodwill must be assessed for impairment at least annually, and other intangible assets are assessed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. In the future, if our acquisitions do not yield expected returns, we may be required to take charges to our operating results based on this impairment assessment process, which could adversely affect our results of operations.

In addition, our exposure to risks associated with various claims, including the use of intellectual property, may be increased as a result of acquisitions of other companies. For example, we may have a lower level of visibility into the development process with respect to intellectual property or the care taken to safeguard against infringement risks with respect to the acquired company or technology. In addition, third parties may make infringement and similar or related claims after we have acquired technology that were not asserted prior to our acquisition.

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Acquisitions could also result in dilutive issuances of equity securities or the incurrence of debt, which could adversely affect our operating results. In connection with the LLamasoft acquisition, for example, we issued approximately 2.4 million shares of our common stock as consideration, which represented over 3% of our outstanding shares of common stock at that time. In addition, if the performance of an acquired business fails to meet our expectations, our operating results, business and financial position may suffer. Some of our acquisitions include earnouts, meaning that a portion of the purchase price is payable only if the acquired business achieves certain revenue or other post-closing milestones. These contingent payment provisions can lead to disputes with the sellers of the business, such as the litigation described in Part II, Item 1—“Legal Proceedings.”

If we cannot maintain our company culture as we grow, we could lose the innovation, teamwork, passion and focus on execution that we believe contribute to our success and our business may be harmed.

We believe that a critical component of our success has been our company culture, which is based on our core values of ensuring customer success, focusing on results and striving for excellence. We have invested substantial time and resources in building our team within this company culture. As we grow, including as a result of acquiring other businesses, we may find it difficult to maintain these important aspects of our company culture. Moreover, the COVID-19 pandemic requires action to preserve culture among an employee base working predominantly remotely and facing unique personal and professional challenges. As the COVID-19 pandemic ~~evolves~~continues to evolve, hybrid working arrangements and office structure present unique challenges to maintaining our company culture. If we fail to preserve our culture, our ability to retain and recruit personnel and to effectively focus on and pursue our corporate objectives could be compromised, potentially harming our business.

Our aspirations and commitments to environmental, social and governance (“ESG”) matters expose us to risks that could adversely affect our reputation and performance.

The positions we have taken and may take on ESG matters, human capital management initiatives, and ethical issues from time to time, may impact our brand, reputation, or ability to attract and retain customers, suppliers and employees. Coupa is committed to sustainable business practices and strives for positive impacts in not just environmental matters, but also social and governance practices. We publish Coupa’s goals, progress and accomplishments annually in our Environmental, Social, and Governance Report. These statements, along with those on our website and/or from our management team, reflect our current plans and aspirations ~~and~~but are not guarantees that we will be able to achieve them.

Our ability to achieve any ESG objective is subject to numerous risks, many of which are outside of our control. Examples of such risks include:

•the availability and cost of low or non-carbon based energy sources;

•the evolving regulatory requirements affecting ESG standards or disclosures;

•the availability of suppliers that can meet our sustainability, diversity and other ESG standards;

•our ability to recruit, develop and retain diverse talent in our labor markets; and

•the success of our organic growth and acquisitions or dispositions of businesses or operations.

Standards for tracking and reporting ESG matters continue to evolve. In addition, our processes and controls may not always comply with evolving standards for identifying, measuring, and reporting ESG metrics, including ESG-related disclosures that may be required of public companies by the SEC, and such standards may change over time, which could result in significant revisions to our current goals, reported progress in achieving such goals, or ability to achieve such goals in the future. As an example of increased regulatory focus, in February 2021, the Acting Chair of the SEC issued a statement directing the Division of Corporation Finance to enhance its focus on climate-related disclosure in reporting company filings, and in March 2021, the SEC announced the creation of a Climate and ESG Task Force in the Division of Enforcement to develop initiatives which proactively identify ESG-related misconduct. In May 2022, the Chair of the SEC announced a proposal to improve disclosures by certain investment advisors and funds that purport to take ESG factors into consideration when making investing decisions. It is likely that increasing regulatory requirements and regulator scrutiny related to ESG matters will continue to expand globally and result in higher associated compliance costs.

Further, we may rely on data provided by third parties to measure and report our ESG metrics and if the data input is incorrect or incomplete, our brand, reputation, and financial performance may be adversely affected. Our failure or perceived failure to accomplish or accurately track and report on these goals on a timely basis, or at all, could adversely affect our reputation, financial performance and growth, our ability to attract or retain employees, the attractiveness of our securities as an investment, our relationships with business partners and/or service providers and expose us to increased scrutiny from the investment community, customers, suppliers, employees, as well as enforcement authorities and may also increase the risk we become subject to private litigation.

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Risks Related to Our Business and Industry

If we are unable to attract new customers, the growth of our revenues will be adversely affected.

To increase our revenues, we have historically depended more on the addition of new customers to our platform, particularly large enterprise customers, than on increasing the number of users at existing customers or selling additional solutions to them. The expansion of our customer base is critical to our ability to continue the growth of our revenues. If we do not grow our customer base, our revenues will slow in future periods or will start to decline, as a result of customers not renewing for various reasons, including those that are out of our control.

If competitors introduce lower cost or differentiated products or services that are perceived to compete with ours or are better able to adapt to changing market conditions (for example, such as by addressing shifts in existing and prospective customer needs as a result of the COVID-19 pandemic), or if competitors are willing to provide concessions such as extended billing terms or price discounts in order to win customers amidst the changing business environment, our ability to sell based on factors such as pricing, technology and functionality could be impaired. For example, economic uncertainty and the risk or occurrence of global or domestic recessions can prompt existing and prospective customers to demand such concessions with increasing frequency and significance, and our competitors may become more likely to provide such concessions. As a result, we may be unable to attract new customers at rates or on terms that would be favorable or comparable to prior periods, which could have an adverse effect on the growth of our revenues.

Because our platform is sold to large enterprises with complex operating environments and who often demand more configuration and integration services or customized features and functions, we encounter long and unpredictable sales cycles, which could adversely affect our operating results in a given period.

Our ability to increase revenues and achieve profitability depends, in large part, on our ability to continue to attract large enterprises to our platform and grow this segment of our customer base. We expect to continue to focus a substantial portion of our sales efforts on these customers in the near future. Accordingly, we will continue to face greater costs, longer sales cycles and less predictability in completing some of our sales, than would be expected from selling to a predominantly mid-market target customer base. A delay in or failure to close a large sale to one or more prospective new enterprise customers could cause us to fail to meet the expectations of management or analysts, harm our business and financial results, and cause our financial results to vary significantly from period to period.

Our typical sales cycle ranges from three to nine months. The wide range reflects a number of timing factors that can vary significantly between prospective customers, many of which we cannot control, including:

•customers’ budgetary constraints and priorities;

•the timing of customers’ budget cycles;

•customers' demands with respect to configuration and integration services or customized features and functions;

•the need by some customers for lengthy evaluations; and

•the length and timing of customers’ approval processes.

In addition, as a result of the ongoing COVID-19 pandemic, many local governments as well as enterprises have ~~limited~~in the past, and may continue as additional waves emerge, limit travel and in-person meetings and ~~implemented~~may continue to implement other restrictions that are making the sales process more lengthy and difficult, particularly for new customers.

Large enterprises tend to have more complex operating environments than smaller businesses, making it more difficult and time-consuming for us to demonstrate the value of our platform to these prospective customers. In the large enterprise market, the customer’s decision to use our platform may be an enterprise-wide decision requiring integration of our platform across operations spanning numerous jurisdictions. In addition, large enterprise customers also generally demand more configuration and integration services, as well as customized features and functions, than our mid-market customer base, which generally increases our upfront investment in related sales efforts. Therefore, these types of sales require us to access and address more frequent requests with respect to configuration, integration and customization services and to provide greater levels of education regarding the use and benefits of our platform, which causes us to expend substantial time, effort and money with respect to individual prospective enterprise customers. In addition, we have no assurance that a prospective customer will ultimately purchase any services from us at all, regardless of the amount of time or resources we have spent on the opportunity. For example, our platform does not currently permit customers to modify our code. If prospective customers require customized features or functions that we do not offer and that would be difficult for them to deploy themselves, they may decide to utilize a competing solution which allows the desired level of customization.

As a result of the variability and length of the sales cycle associated with large enterprise customers, we have only a limited ability to forecast the timing of sales, and our results of operations may differ from expectations.

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The markets in which we participate are intensely competitive, and if we do not compete effectively, our operating results could be adversely affected.

The market for business spend management software is highly competitive, with relatively low barriers to entry for some software or service organizations. Our competitors include Oracle Corporation (“Oracle”), SAP AG (“SAP”) and Workday, Inc. (“Workday”), well-established providers of enterprise resource planning solutions, including BSM software, that have long-standing relationships with many customers. Some customers may be hesitant to switch or to adopt cloud-based software such as ours for this part of their business and prefer to maintain their existing relationships with their legacy software vendors. Oracle, SAP and Workday are larger and have greater name recognition, longer operating histories, larger marketing budgets and significantly greater resources than we do. These vendors, as well as other competitors, may offer business spend management software on a standalone basis at a low price or bundled as part of a larger product sale. In order to take advantage of customer demand for cloud-based software, legacy vendors are expanding their cloud-based software through acquisitions and organic development. Legacy vendors may also seek to partner with other leading cloud providers. We also face competition from custom-built software vendors and from vendors of specific applications, some of which offer cloud-based solutions.

We may also face competition from a variety of vendors of cloud-based and on-premise software products and point solutions that may have some of the core functionality of our BSM services (such as procure-to-pay) but that address only a portion of the capabilities and features of our platform. In addition, other companies that provide cloud-based software in different target markets may develop software or acquire companies that operate in our target markets, and some potential customers may elect to develop their own internal software. With the introduction of new technologies and market entrants, we expect this competition to intensify in the future.

Some of our competitors are able to devote greater resources to the development, promotion and sale of their products and services, including with respect to concessions (such as extended billing terms or price discounts) granted in order to win customers in the challenging business environment created by the COVID-19 pandemic, global geopolitical events, rising rates of inflation and general concern regarding the possible occurrence of global and domestic recessions. Furthermore, our current or potential competitors may be acquired by third parties with greater available resources and the ability to initiate or withstand substantial price competition. In addition, many of our competitors have established marketing relationships, access to larger customer bases and major distribution agreements with consultants, system integrators and resellers. Our competitors may also establish cooperative relationships among themselves or with third parties that may further enhance their product offerings or resources. If our platform does not become more accepted relative to our competitors’, or if our competitors are successful in bringing their products or services to market earlier than ours, or if their products or services are more technologically capable than ours, then our revenues could be adversely affected. In addition, some of our competitors may offer their products and services at a lower price. If we are unable to achieve our target pricing levels, our operating results will be negatively affected. Pricing pressures and increased competition could result in reduced sales, reduced margins, losses or a failure to maintain or improve our competitive market position, any of which could adversely affect our business.

Our business depends significantly on our customers renewing their subscriptions. Any decline in our customer renewals would harm our future operating results.

In order for us to maintain or improve our operating results, it is important that our customers renew their subscriptions when the initial contract term expires and, to a lesser extent, that they add additional authorized users and additional business spend management solutions to their subscriptions. Our customers have no obligation to renew their subscriptions, and we cannot assure you that our customers will renew subscriptions with a similar contract period or with the same or a greater number of authorized users and solutions. Some of our customers have elected not to renew their agreements with us, and we may not be able to accurately predict renewal rates.

Our renewal rates may decline or fluctuate as a result of a number of factors, including our customers’ satisfaction with our subscription service, our professional services, our introduction of platform enhancements (including new features and new solutions), our customer support, our prices and contract length, the prices of and concessions offered with respect to competing solutions, mergers and acquisitions affecting our customer base, the effects of global economic conditions, reductions in our customers’ spending levels or changing customer needs due to temporary or permanent changes to their operating models and business spend management patterns adopted in response to the COVID-19 pandemic. If our customers do not renew their subscriptions, renew on less favorable terms or fail to add more authorized users or additional business spend management solutions, our revenues may decline or fail to increase in line with expectations, and we may not realize improved operating results from our customer base.

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Our customers may fail to pay us in accordance with the terms of their agreements, necessitating action by us to compel payment.

We typically enter into ~~multiple~~three year, non-cancelable arrangements with our customers. If customers fail to pay us under the terms of our agreements, we may be adversely affected both from the inability to collect amounts due and the cost of enforcing the terms of our contracts, including litigation. The risk of such negative effects increases with the term length of our customer arrangements. Furthermore, some of our customers may seek bankruptcy protection or other similar relief and fail to pay amounts due to us, or pay those amounts more slowly, either of which could adversely affect our operating results, financial position and cash flow.

If we fail to develop widespread brand awareness cost-effectively, our business may suffer.

We believe that developing and maintaining widespread awareness of our brand in a cost-effective manner is critical to achieving widespread acceptance of our platform and attracting new customers. For example, widespread awareness of our brand is critical to ensuring that we are invited to participate in requests for proposals from prospective customers. Our success in this area will depend on a wide range of factors, some of which are beyond our control, including the following:

•the efficacy of our marketing efforts;

•our ability to offer high-quality, innovative and error- and bug-free solutions;

•our ability to retain existing customers and obtain new customers;

•the ability of our customers to achieve successful results by using our platform;

•the quality and perceived value of our platform;

•our ability to successfully differentiate our offerings from those of our competitors;

•actions of competitors and other third parties;

•our ability to provide customer support and professional services;

•the satisfactory provision of services and customer support by our implementation partners;

•any misuse or perceived misuse of our platform and solutions;

•positive or negative publicity;

•interruptions, delays or attacks on our platform or solutions; and

•litigation, legislative or regulatory-related developments.

The COVID-19 pandemic and prophylactic measures adopted in response have forced us to initially suspend orand subsequently reduce some of our marketing activities as compared to pre-pandemic levels, particularly those that require travel and in-person participation. Brand promotion activities may not generate customer awareness or increase revenues, and, even if they do, any increase in revenues may not offset the expenses we incur in building our brand. If we fail to successfully promote and maintain our brand, or incur substantial expenses in doing so, we may fail to attract or retain customers necessary to realize a sufficient return on our brand-building efforts or to achieve the widespread brand awareness that is critical for broad customer adoption of our platform.

In addition, concerns about a possible or emergent global or domestic recession may cause us to reduce our marketing spend and scale back related activities in order to preserve capital amidst challenging economic conditions, and any such action may impede our brand-building efforts or otherwise adversely impact our brand awareness.

Furthermore, negative publicity (whether or not justified) relating to events or activities attributed to us, our employees, our partners or others associated with any of these parties, may tarnish our reputation and reduce the value of our brand. Damage to our reputation and loss of brand equity could reduce demand for our platform, make hiring or retention of employees more difficult, and have an adverse effect on our business, operating results and financial condition. Moreover, any attempts to rebuild our reputation and restore the value of our brands may be costly and time consuming, and such efforts may not ultimately be successful.

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Failure to effectively develop and expand our marketing and sales capabilities could harm our ability to increase our customer base and achieve broader market acceptance of our platform.

Our ability to increase our customer base and achieve broader market acceptance of our platform will depend to a significant extent on our ability to expand our marketing and sales operations, both domestically and internationally. We plan to continue expanding our direct sales force and engaging additional partners that can provide sales referrals in the near future. This expansion requires us to invest significant financial and other resources. Our business and operating results will be harmed if our efforts and related investments do not generate a corresponding increase in revenues. We may not achieve anticipated revenue growth from expanding our direct sales force if we are unable to hire and develop talented direct sales personnel, if our new direct sales personnel are unable to achieve desired productivity levels in a reasonable period of time or if we are unable to retain our existing direct sales personnel. It often takes six months or longer before our sales representatives are fully-trained and productive. We also may not achieve anticipated growth in revenues from our partners if we are unable to attract, train, support and retain additional motivated partners, if any existing or future channel partners fail to successfully market, resell, implement or support our platform for their customers, or if they represent multiple providers and devote greater resources to market, resell, implement and support the products and solutions of these other providers. For example, some of our partners also sell or provide integration and administration services for our competitors’ products, and if such partners devote greater resources to marketing, reselling and supporting competing products, this could harm our business, results of operations and financial condition.

Any failure to achieve forecasted revenue growth from the expansion of our sales activities could similarly result in our non-GAAP operating income, non-GAAP net income attributable to Coupa Software Incorporated, adjusted free cash flows and other key metrics and operating results to fall short of management forecasts and/or analysts’ expectations, which could cause our stock price to decline.

If we cannot continue to expand the use of our platform, our ability to grow our business may be harmed and the growth rate of our revenues may decline.

Our ability to grow our business depends in part on our ability to compete in the market for the additional solutions on our platform, including strategic sourcing, inventory, contracts, supplier management, spend analysis, payments, treasury management, supply chain design and planning and travel optimization. Our efforts to market these other solutions is relatively new and we have allocated significant resources to develop, acquire or otherwise bring these solutions to market, and it is uncertain whether these other solutions will ever result in significant revenues for us. In certain cases, new solutions call for the introduction of new revenue models. For example, our Coupa Pay solution involves both subscription revenue and transaction revenue. Predicting client adoption of new solutions and forecasting their contribution to operating results is inherently difficult given the lack of operating history with respect to such solutions, and actual results may differ significantly from the expectations of our management, securities analysts or investors. While we have acquired businesses in order to integrate certain of these solutions, there can be no assurance that these acquisitions will facilitate our efforts to market and sell these other solutions in a cost-effective manner, or that we will be successful in integrating these solutions into our platform in a manner that creates value for our customers and engenders widespread adoption. Further, the introduction of new solutions beyond these markets may not be successful. If we are unable to achieve satisfactory customer adoption of new solutions, our ability to expand spend under management and grow our revenues could be adversely affected.

The profitability of our customer relationships may fluctuate.

Our business model focuses on maximizing the lifetime value of our customer relationships and we need to make significant investments in order to add new customers to grow our customer base. The profitability of a customer relationship in any particular period depends in part on how long the customer has been a subscriber on our platform. In general, the upfront costs associated with new customers are higher in the first year than the aggregate revenues we recognize from those new customers in the first year. Furthermore, we focus many of our sales and marketing efforts on large enterprise customers and this customer segment commonly demands more configuration and integration services which generally increases our upfront investment in sales and deployment efforts - even for deployments that are handled primarily by one of our implementation partners - with no guarantee that these customers will increase the scope of their subscription in order to offset our greater upfront costs.

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We review the lifetime value and associated acquisition costs of our customers, as discussed further in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this Quarterly Report. The lifetime value of our customers and customer acquisition costs has and will continue to fluctuate from one period to another depending upon the amount of our net new subscription revenues (which depends on the number and segment mix of new customers in a period, upsells of additional solutions to existing customers and changes in subscription fees charged to existing customers), gross margins (which depends on investments in and other changes to our cost of customer support and allocated overhead), sales and marketing expenses and renewal rates (which depend on our ability to maintain or grow subscription fees from customers). These amounts have fluctuated from quarter to quarter and will continue to fluctuate in the future. We may not experience lifetime value to customer acquisition cost ratios in future years or periods similar to those we have achieved to date. Furthermore, as a result of the ongoing global COVID-19 pandemic, it is possible that customers may reduce the scope of their subscriptions in response to evolving operating models and related needs, may not renew their subscriptions at all or may temporarily halt paying us, which would adversely affect our lifetime value metrics.

The loss of one or more of our key customers could negatively affect our ability to market our platform.

We rely on our reputation and recommendations from key customers in order to promote subscriptions to our platform. The loss of any of our key customers could have a significant impact on our revenues, reputation and our ability to obtain new customers. We may lose customers for a variety of reasons, including the decision of a business customer to commence bankruptcy proceedings, restructure itself, dissolve or otherwise cease operations. We believe the risk of such events has increased as a result of the ongoing COVID-19 pandemic, rising rates of inflation and related interest rate hikes and will further increase if these dynamics persist and continue to create economic uncertainty. In addition, acquisitions of our customers by unrelated third parties could lead to cancellation of our contracts with those customers or by the acquiring companies, thereby reducing the number of our existing and potential customers.

Contractual disputes with our customers could be costly, time-consuming and harm our reputation.

Our business is contract intensive and we are party to contracts with our customers all over the world. Our contracts can contain a variety of terms, including service levels, security obligations, indemnification and regulatory requirements. Contract terms may not always be standardized across our customers and can be subject to differing interpretations, which could result in disputes with our customers from time to time. If our customers notify us of a contract breach or otherwise dispute our contract, the resolution of such disputes in a manner adverse to our interests could negatively affect our operating results. Furthermore, entry into adversarial legal proceedings with our customers, including in varying geographic jurisdictions, could harm our reputation and adversely impact our ability to attract new customers and retain existing customers.

Our business is subject to the risks of earthquakes, fire, floods and other natural catastrophic events, and to interruption by man-made problems such as power disruptions, computer viruses, data security breaches or terrorism.

Our corporate headquarters are located in the San Francisco Bay Area, a region known for seismic activity. A significant natural disaster, such as an earthquake, fire or flood, occurring at our headquarters, at one of our other facilities, at any of our cloud hosting provider facilities, or where a business partner is located could adversely affect our business, results of operations and financial condition.

Further, if a natural disaster or man-made problem were to affect Internet Service Providers (“ISPs”), this could adversely affect the ability of our customers to use our products and platform. Although we maintain incident management and disaster response plans, in the event of a major disruption caused by a natural disaster or man-made problem, we may be unable to continue our operations and may endure system interruptions, reputational harm, delays in our development activities, lengthy interruptions in service, breaches of data security and loss of critical data, any of which could adversely affect our business, results of operations and financial condition.

Our growth depends in part on the success of our strategic relationships with third parties.

We have established strategic relationships with a number of other companies. In order to grow our business, we anticipate that we will continue to establish and maintain relationships with third parties, such as implementation partners, system integrator partners and technology providers. Identifying partners, and negotiating and documenting relationships with them, as well as providing training and support, requires significant time and resources. Partner solutions may not continue to be available to us on commercially reasonable terms. Furthermore, our competitors may be effective in providing incentives to third parties to favor their products or services or to prevent or reduce subscriptions to our services. In addition, acquisitions of our partners by our competitors could result in a decrease in the number of our current and potential customers, as our partners may no longer facilitate the adoption of our platform by potential customers.

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If we are unsuccessful in establishing or maintaining our relationships with third parties, our ability to compete in the marketplace or to grow our revenues could be impaired and our operating results could suffer. Even if we are successful in our strategic relationships, we cannot assure you that these relationships will result in increased customer usage of our platform or increased revenues.

Our estimates of market opportunity and forecasts of market growth that we have publicly disclosed may prove to be inaccurate, and even if the market in which we compete achieves the forecasted growth, our business could fail to grow at similar rates.

Market opportunity estimates and growth forecasts are subject to significant uncertainty and are based on assumptions and estimates that may not prove to be accurate and could be adversely affected in the near term by the COVID-19 pandemic, global events (such as Russia’s invasion of Ukraine and the consequential implementation of sanctions and export controls), rising rates of inflation and related interest rate increases, and related shifts in existing and prospective customer needs as a result of evolving operating models and business spend management patterns that may persist after COVID-19 restrictions are lifted and as global events emerge, develop or resolve. This uncertainty is exacerbated by the fact that Business Spend Management is relatively new (as a distinct industry category), and our platform includes features and functionality that extend into other industry categories, such as Travel & Expense Management and Treasury Management, for example. Our estimates and forecasts relating to the size and expected growth of our market that we have publicly disclosed may prove to be inaccurate. Even if the market in which we compete meets our size estimates and forecasted growth, our business could fail to grow at similar rates.

We depend on our senior management team and the loss of our chief executive officer or one or more key employees or an inability to attract and retain highly skilled employees could adversely affect our business.

Our success depends largely upon the continued services of our key executive officers. In particular, our chief executive officer, Robert Bernshteyn, is critical to our vision, strategic direction, culture and overall business success. We also rely on our leadership team in the areas of research and development, marketing, sales, services and general and administrative functions, and on mission-critical individual contributors in research and development. From time to time, there have been and will continue to be changes in our executive management team resulting from the hiring or departure of executives, and any such changes can disrupt our business. We do not maintain key-man insurance for Mr. Bernshteyn or any other member of our senior management team. We do not have employment agreements with our executive officers or other key personnel that require them to continue to work for us for any specified period and, therefore, they could terminate their employment with us at any time. The loss of one or more of our executive officers or key employees could have a serious adverse effect on our business.

To execute our growth plan, we must attract and retain highly qualified personnel. Competition for these personnel is intense, especially for engineers with high levels of experience in designing and developing software for Internet-related services. We have from time to time experienced, and we expect to continue to experience, difficulty in hiring and retaining employees with appropriate qualifications. Many of the companies with which we compete for experienced personnel have greater resources than we have. If we hire employees from competitors or other companies, their former employers may attempt to assert that these employees or our company have breached their legal obligations, resulting in a diversion of our time and resources.

In making employment decisions, current and prospective employees consider the value of their current or potential equity awards from the Company against those of our competitors. As compensation practices of our peers evolve, we need to consider the value, timing and structure of the employee equity awards we offer to remain competitive. Declines in our stock price, particularly if sustained, adversely affect our ability to recruit and retain employees, requiring us to adjust our equity grant practices to remain competitive and may contribute to our equity dilution rate. If we fail to attract new personnel or fail to retain and motivate our current personnel, our business and future growth prospects could be adversely affected.

Our international operations and sales to customers outside the United States or with international operations expose us to risks inherent in international sales.

A key element of our growth strategy is to expand our international operations and develop a worldwide customer base. For example, in March 2021 we established a joint venture in Japan intended to enable us to support Japanese companies looking to utilize BSM solutions. The revenues from non-U.S. regions, as determined based on the billing address of our customers, constituted 38% and 4140% of our total revenues for each of the ~~six~~nine months ended ~~July~~October 31, 2022 and 2021, respectively. Operating in international markets requires significant resources and management attention and subjects us to regulatory, economic and political risks that are different from those in the United States. While we are gaining additional experience with international operations, our international expansion efforts may not be successful in creating additional demand for our platform outside of the United States or in effectively selling subscriptions to our platform in all of the international markets we enter. There can be no assurance that we will be able to grow our combined revenues from non-U.S. regions as a percentage of our total revenues. In addition, we face risks in doing business internationally that could adversely affect our business, including:

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•the need to localize and adapt our platform for specific countries, including translation into foreign languages and associated expenses;

•data privacy laws that require customer data to be stored and processed in a designated territory;

•difficulties in staffing and managing foreign operations, including identifying, training and supporting foreign partners;

•different pricing environments, longer sales cycles and longer accounts receivable payment cycles and collections issues;

•new and different sources of competition;

•weaker protection for intellectual property and other legal rights than in the United States and practical difficulties in enforcing intellectual property and other rights outside of the United States;

•laws and business practices favoring local competitors;

•compliance challenges related to the complexity of multiple, conflicting and changing governmental laws and regulations, including employment, tax, privacy and data protection laws and regulations;

•increased financial accounting and reporting burdens and complexities;

•restrictions on the transfer of funds;

•fluctuations in currency exchange rates, which could increase the price of our products outside of the United States, increase the expenses of our international operations and expose us to foreign currency exchange rate risk;

•adverse tax consequences;

•unstable regional economic and political conditions;

•uncertainty surrounding the COVID-19 pandemic and the restrictions imposed by government authorities to combat the virus, which may impact our international operations and growth prospects differently than our operations and growth prospects in the United States due to differences in, for example, virus transmission rates and prevalence of more transmissible variants, availability of vaccines in various countries, the effectiveness of government responses, the quality of the regional health care systems, and the economic resilience of the regions, among other factors; and

•the fragmentation of longstanding regulatory frameworks caused by Brexit.

As we continue to expand our business globally, our success will depend, in large part, on our ability to anticipate and effectively manage these and other risks associated with our international sales and operations. Our failure to manage any of these risks successfully, or to comply with applicable laws and regulations, could harm our operations, reduce our sales and harm our business, operating results and financial condition. For example, in certain foreign countries, particularly those with developing economies, certain business practices that are prohibited by laws and regulations applicable to us, such as the Foreign Corrupt Practices Act, may be more commonplace. Although we have policies and procedures designed to ensure compliance with these laws and regulations, our employees, contractors and agents, as well as channel partners involved in our international sales, may take actions in violation of our policies. Any such violation could have an adverse effect on our business and reputation.

Some of our business partners also have international operations and are subject to the risks described above. Even if we are able to successfully manage the risks of international operations, our business may be adversely affected if our business partners are not able to successfully manage these risks.

We may face exposure to foreign currency exchange rate fluctuations, which could adversely affect our business, results of operations and financial condition.

As our international operations expand, our exposure to the effects of fluctuations in currency exchange rates grows because our international contracts are sometimes denominated in local currencies. Over time, an increasing portion of our international contracts may be denominated in local currencies. Therefore, as exchange rates vary, revenues, cost of revenues, operating expenses and other operating results, when re-measured, may differ materially from expectations. The effects of movements in currency exchange rates will become more pronounced to the extent our transaction volume in local currencies increases. In the future, we may use foreign currency forward and option contracts and/or other derivative instruments to hedge certain exposures to fluctuations in foreign currency exchange rates. The use of such hedging activities may not offset any or more than a portion of the adverse financial effects of unfavorable movements in foreign exchange rates over the limited time the hedges are in place. Additionally, the use of hedging instruments may introduce additional risks if we are unable to structure effective hedges with such instruments. These effects of movements in currency exchange rates could also affect our customers. A strengthening of the U.S. dollar could increase the real cost of our platform to our customers outside of the United States, which could adversely affect our business, operating results, financial condition, and cash flows.

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Risks Related to Our Services and Our Platform

If our security measures are breached or unauthorized access to customer data is otherwise obtained, we may experience disruption in service, our platform may be perceived as not being secure, customers may reduce the use of or stop using our platform and we may incur significant liabilities.

Our platform involves the storage and transmission of customer data, including, for example, sensitive and proprietary information about our customers’ spending. We may become the target of cyber-attacks by third parties seeking unauthorized access to our data or customers’ data or to disrupt our platform. Computer malware, viruses, spear phishing attacks, and general hacking have become more prevalent in our industry, particularly against cloud services. Any unauthorized access or security breaches could result in the loss of sensitive customer information, prolonged disruption in services, litigation, loss of our authorization under FedRAMP, fines and penalties, liability under indemnity obligations and other economic and reputational damage. While we have security measures in place that are designed to protect customer information and prevent data loss and other security breaches, if these measures are breached as a result of third-party action, employee error, malfeasance or otherwise, and someone obtains unauthorized access to our customers’ data, we could face loss of business, regulatory investigations or orders, and our reputation could be severely damaged. In addition, we could be required to expend significant capital and other resources to alleviate the problem, as well as incur significant costs and liabilities, including due to litigation, indemnity obligations, damages for contract breach, penalties for violation of applicable laws or regulations, and costs for remediation and other incentives offered to customers or other business partners in an effort to maintain business relationships after a breach.

We cannot assure you that any limitations of liability provisions in our contracts would be enforceable or adequate or would otherwise protect us from any liabilities or damages with respect to any particular claim relating to a security lapse or breach. We also cannot be sure that our existing insurance coverage will continue to be available on acceptable terms or will be available in sufficient amounts to cover one or more large claims related to a security breach, or that the insurer will not deny coverage as to any future claim. The successful assertion of one or more large claims against us that exceed available insurance coverage, or the occurrence of changes in our insurance policies, including premium increases or the imposition of large deductible or co-insurance requirements, could have a material adverse effect on our business, including our financial condition, operating results, and reputation.

Cyber-attacks and other malicious Internet-based activities continue to increase generally. Because the techniques used to obtain unauthorized access or sabotage systems change frequently and generally are not identified until they are launched against a target, we may be unable to anticipate these techniques or to implement adequate preventative measures. In addition, third parties may attempt to fraudulently induce employees or users to disclose information to gain access to our data or our customers’ data. If any of these events occur, our or our customers’ information could be accessed or disclosed improperly. Further, heightened geopolitical tensions resulting from the military conflict between Russia and Ukraine and resulting sanctions against Russia may have the effect of increasing the threat to United States companies and infrastructure of state-sponsored cyber-attacks. Any or all of these issues could negatively affect our ability to attract new customers, cause existing customers to elect to not renew their subscriptions, result in reputational damage or subject us to third-party lawsuits, regulatory fines or other action or liability, which could adversely affect our operating results.

If we are not able to provide successful and timely enhancements, new features and modifications for our platform and solutions, we may lose existing customers or fail to attract new customers and our revenues and financial performance may suffer.

If we are unable to provide enhancements and new features for our existing solutions or new solutions that achieve market acceptance or to integrate technology, products and services that we acquire into our platform, our business and operating results could be adversely affected. The success of enhancements, new features and solutions depends on several factors, including the timely completion, introduction and market acceptance of the enhancements or new features or solutions. Failure in this regard may significantly impair the growth of our revenues. We have experienced, and may in the future experience, delays in the planned release dates of enhancements to our platform, and we have discovered, and may in the future discover, errors in new releases after their introduction. Either situation could result in adverse publicity, loss of sales, delay in market acceptance of our platform or customer claims, including, among other things, warranty claims against us, any of which could cause us to lose existing customers or affect our ability to attract new customers.

In addition, if any of our existing services or any new solutions that we introduce in the future do not achieve customer adoption at the rates that we or industry analysts have forecasted, our revenue and operating results may be adversely impacted, and our stock price may decline.

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We rely on Amazon Web Services to deliver our platform and solutions to our customers, and any disruption in service from Amazon Web Services or material change to our arrangement with Amazon Web Services could adversely affect our business.

We rely upon Amazon Web Services (“AWS”) to operate certain aspects of our platform and any disruption of or interference with our use of AWS could impair our ability to deliver our platform and solutions to our customers, resulting in customer dissatisfaction, damage to our reputation, loss of customers and harm to our business. We have architected our software and computer systems to use data processing, storage capabilities and other services provided by AWS. Currently, most of our cloud service infrastructure is run on AWS. Given this, we cannot easily switch our AWS operations to another cloud provider, so any disruption of or interference with our use of AWS would adversely affect our operations and potentially our business.

AWS provides us with computing and storage capacity pursuant to an agreement that continues until terminated by either party. AWS may terminate the agreement for cause with 30 days’ prior written notice, including any material default or breach of the agreement by us that we do not cure within the 30 day period. Additionally, AWS has the right to terminate the agreement immediately with notice to us in certain scenarios such as if AWS believes providing the services could create a substantial economic or technical burden or material security risk for AWS, or in order to comply with the law or requests of governmental entities. The agreement requires AWS to provide us their standard computing and storage capacity and related support in exchange for timely payment by us. If any of our arrangements with AWS were terminated, we could experience interruptions in our software as well as delays and additional expenses in arranging new facilities and services.

We utilize third-party data center hosting facilities operated by AWS, located in various facilities around the world. Our operations depend, in part, on AWS’s abilities to protect these facilities against damage or interruption due to a variety of factors, including infrastructure changes, human or software errors, natural disasters, power or telecommunications failures, criminal acts, capacity constraints and similar events. For instance, in February 2017, AWS suffered a significant outage in the United States that had a widespread impact on the ability of certain of our customers to fully use our solutions for a small period of time. Despite precautions taken at these data centers, the occurrence of spikes in usage volume, a natural disaster, an act of terrorism, vandalism or sabotage, a decision to close a facility without adequate notice or other unanticipated problems at a facility could result in lengthy interruptions in the availability of our platform. Even with current and planned disaster recovery arrangements, our business could be harmed. Also, in the event of damage or interruption, our insurance policies may not adequately compensate us for any losses that we may incur. These factors in turn could further reduce our revenues, subject us to liability and cause us to issue credits or cause customers to fail to renew their subscriptions, any of which could harm our business.

If we fail to manage our technical operations infrastructure, our existing customers may experience service outages and our new customers may experience delays in the implementation of our platform.

We have experienced significant growth in the number of users, transactions and data that our operations infrastructure supports. We seek to maintain sufficient excess capacity in our operations infrastructure to meet the needs of all of our customers, as well as to facilitate the rapid provision of new customer implementations and the expansion of existing customer implementations. In addition, we need to properly manage our technological operations infrastructure in order to support version control, changes in hardware and software parameters and the evolution of our platform. However, the provision of new hosting infrastructure requires significant lead time. We have experienced, and may in the future experience, website disruptions, outages and other performance problems. These problems may be caused by a variety of factors, including infrastructure changes, human or software errors, viruses, security attacks, fraud, spikes in customer usage and denial of service issues. In some instances, we may not be able to identify the cause or causes of these performance problems within an acceptable period of time. If we do not accurately predict our infrastructure requirements, our customers may experience service outages that may subject us to financial penalties, financial liabilities and customer losses. If our operations infrastructure fails to keep pace with increased sales, customers may experience delays as we seek to obtain additional capacity, which could adversely affect our revenue as well as our reputation.

Our business could be adversely affected if our customers are not successful with the implementation services provided by us or our partners.

Our business depends on our ability to make our customers successful, both with respect to our platform and solutions and the professional services that are performed to help our customers use features and functions that address their business needs. Professional services may be performed by our own staff, by a third-party partner or by a combination of the two. Our strategy is to work with partners to increase the breadth of capability and depth of capacity for delivery of these services to our customers. If a customer is not satisfied with the quality of work performed by us or a partner or with a virtual implementation or with the type of professional services or solutions delivered, we may incur additional costs in addressing the situation, the profitability of that work might be impaired and the customer’s dissatisfaction with our services or those of our partners could damage our ability to retain that customer or expand the number of solutions subscribed to by that customer. In addition, negative publicity related to our customer relationships, regardless of its accuracy, may further damage our business by affecting our ability to compete for new business with current and prospective customers.

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We typically provide service level commitments under our customer contracts. If we fail to meet these contractual commitments, we could be obligated to provide credits or refunds for prepaid amounts related to unused subscription services or face contract terminations, which could adversely affect our revenues.

Our customer agreements typically provide service level commitments on a monthly basis. If we are unable to meet the stated service level commitments or suffer extended periods of unavailability for our platform, we may be contractually obligated to provide these customers with service credits, typically 10% of the customer’s subscription fees for the month in which the service level was not met, and we could face contract terminations, in which case we would be subject to refunds for prepaid amounts related to unused subscription services. Our revenues could be significantly affected if we suffer unexcused downtime under our agreements with our customers. Any extended service outages could adversely affect our reputation, revenues and operating results.

If we fail to integrate our platform with a variety of third-party technologies, our platform may become less marketable and less competitive or obsolete and our operating results may be harmed.

Our platform must integrate with a variety of third-party technologies, and we need to continuously modify and enhance our platform to adapt to changes in cloud-enabled hardware, software, networking, browser and database technologies. Any failure of our platform to operate effectively with future technologies could reduce the demand for our platform, resulting in customer dissatisfaction and harm to our business. If we are unable to respond to these changes in a cost-effective manner or if third-party developers and technology are unable or unwilling to provide necessary or complementary integrations, our platform may become less marketable and less competitive or obsolete and our operating results may be negatively affected. In addition, an increasing number of individuals within the enterprise are utilizing mobile devices to access the Internet and corporate resources and to conduct business. If we cannot continue to effectively make our platform available on these mobile devices and offer the information, services and functionality required by enterprises that widely use mobile devices, we may experience difficulty attracting and retaining customers.

Any failure to offer high-quality technical support services may adversely affect our relationships with our customers and our financial results.

Once our solutions are implemented, our customers depend on our support organization to resolve technical issues relating to our solutions. We may be unable to respond quickly enough to accommodate short-term increases in customer demand for support services. We also may be unable to modify the format of our support services to compete with changes in support services provided by our competitors. Increased customer demand for these services, without corresponding revenues, could increase costs and adversely affect our operating results. In addition, our sales process is highly dependent on our platform and business reputation and on positive recommendations from our existing customers. Any failure to maintain high-quality technical support, or a market perception that we do not maintain high-quality support, could adversely affect our reputation, our ability to sell subscriptions to our solutions to existing and prospective customers and our business, operating results and financial position.

If our platform fails to perform properly, our reputation could be adversely affected, our market share could decline and we could be subject to liability claims.

Our platform is inherently complex and may contain material defects or errors. Any defects in functionality or that cause interruptions in the availability of our platform could result in:

•loss or delayed market acceptance and sales;

•breach of warranty claims;

•sales credits or refunds for prepaid amounts related to unused subscription services;

•loss of customers;

•loss of customer data;

•diversion of development and customer service resources; and

•negative publicity and injury to our reputation.

The costs incurred in correcting any material defects or errors might be substantial and could adversely affect our operating results.

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Because of the large amount of data that we collect and manage, it is possible that hardware failures or errors in our systems could result in data loss or corruption or cause the information that we collect to be incomplete or contain inaccuracies that our customers regard as significant. For example, our launch of Community.ai in February 2022, which utilizes proprietary artificial intelligence to aggregate and anonymize data from our customers and empower them with actionable data-driven insights. Any deficiencies or failures in the data collection and management systems underlying Community.ai which disrupt, degrade or otherwise adversely impact this process and the related data could result in customers receiving, and potentially acting on the basis of, incomplete or inaccurate information, which could in turn adversely impact our customer relationships and retention rates and harm our reputation. Additionally, data loss, breach, or unlawful or unintended disclosure, could occur as part of our Community.ai offering, which could result in the release of sensitive customer information and create liability exposure.

Furthermore, the availability or performance of our platform could be adversely affected by a number of factors, including customers’ inability to access the Internet, failure of our network or software systems, security breaches or variability in user traffic for our platform. We may be required to issue credits or refunds for prepaid amounts related to unused services or otherwise be liable to our customers for damages they incur resulting from certain of these events. For example, our customers access our solutions through their ISPs. If an ISP fails to provide sufficient capacity to support our solutions or otherwise experiences service outages, such failure could interrupt our customers’ access to our solutions and adversely affect their perception of our solutions’ reliability. In addition to potential liability, if we experience interruptions in the availability of our platform, our reputation could be adversely affected and we could lose customers.

Our errors and omissions insurance may be inadequate or may not be available in the future on acceptable terms, or at all. In addition, our policy may not cover all claims made against us and defending a suit, regardless of its merit, could be costly and divert management’s attention and result in adverse publicity which harms our reputation.

Risks Related to our Technology and Intellectual Property

We may be sued by third parties for various claims including alleged infringement of their proprietary rights.

We are involved in various legal matters arising from the normal course of business activities. These may include claims, suits, and other proceedings involving alleged infringement of third-party patents and other intellectual property rights, as well as commercial, corporate and securities, labor and employment, wage and hour, and other matters. In particular, there has been considerable activity in our industry to develop and enforce intellectual property rights. Our success depends upon our not infringing upon the intellectual property rights of others. Our competitors, as well as a number of other entities and individuals, may own or claim to own intellectual property relating to our industry. In the past third parties have claimed and in the future third parties may claim that our platform and underlying technology are infringing upon or otherwise violating their intellectual property rights, and we may be found to be infringing upon such rights.

We may be unaware of the intellectual property rights that others may claim cover some or all of our technology or services. As a result of our acquisition of businesses and technologies, we may be subject to infringement claims arising subsequent to the consummation of such acquisitions with respect to the acquired technology. Any claims or litigation could cause us to incur significant expenses and, if successfully asserted against us, could require that we pay substantial damages or ongoing royalty payments, prevent us from offering our services or require that we comply with other unfavorable terms. In the event a claim is brought against us with respect to an acquired technology, there can be no assurance that an applicable indemnification we obtained (if any) will be sufficient to cover all or any portion of liability arising under such claim. We may also be obligated to indemnify our customers and business partners or to pay substantial settlement costs, including royalty payments, in connection with any such claim or litigation and to obtain licenses, modify our platform or refund fees, which could be costly. Even if we were to prevail in such a dispute, any litigation regarding our intellectual property could be costly, distracting and time-consuming and could harm our brand, business, results of operations and financial condition.

Any failure to protect our intellectual property rights could impair the value of our proprietary technology and damage our brand.

Our success and ability to compete depend in part upon our intellectual property. We primarily rely on copyright, patent, trade secret and trademark laws, trade secret protection and confidentiality or contractual agreements with our employees, customers, partners and others to protect our intellectual property rights. However, the steps we take to protect our intellectual property rights as well as the policies and procedures implemented to detect threats (including from malfeasance by employees or contractors or other insiders with access to our technology and intellectual property, or unauthorized intrusions into our networks and systems by third parties) may be inadequate. and may fail to identify in a timely manner, if at all, every instance of infringement or attempted theft of our intellectual property. Any failure to identify, assess and expediently resolve attempted or actual theft, infringement or other unauthorized use of our technology or intellectual property could adversely impact our business and reputation.

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In addition, our international operations expose us to a variety of customers and other foreign actors that may operate in jurisdictions where it is difficult or impossible for us to assert our intellectual property rights in case of infringement or theft, either as a statutory or practical matter. We have engaged in, and may in the future engage in additional, joint ventures with strategic partners outside of the United States, which may expose our technology and intellectual property to a heightened risk of unauthorized use or theft.

In order to protect our intellectual property rights, we may be required to expend significant resources to monitor and protect such rights. Litigation brought to protect and enforce our intellectual property rights could be costly, time-consuming and distracting to management and could result in the impairment or loss of portions of our intellectual property. Furthermore, our efforts to enforce our intellectual property rights may be met with defenses, counterclaims and countersuits attacking the validity and enforceability of our intellectual property rights. Our failure to secure, protect and enforce our intellectual property rights could seriously adversely affect our brand and our business. For example, such failures could delay further sales or the implementation of our platform, impair the functionality of our platform, delay introductions of new solutions, result in our substituting inferior or more costly technologies into our platform, or injure our reputation.

Our platform utilizes open source software, and any failure to comply with the terms of one or more of these open source licenses could negatively affect our business.

Our platform utilizes software governed by open source licenses, including for example the MIT License and the Apache License. The terms of various open source licenses have not been interpreted by United States courts, and there is a risk that such licenses could be construed in a manner that imposes unanticipated conditions or restrictions on our ability to market our platform. By the terms of certain open source licenses, if we combine our proprietary software with open source software in a certain manner, we could be required to release the source code of our proprietary software and make it available under open source licenses. In the event that portions of our proprietary software are determined to be subject to an open source license, we could be required to publicly release the affected portions of our source code, or to re-engineer all or a portion of our technologies or otherwise be limited in the licensing of our technologies, each of which could reduce or eliminate the value of our technologies and services. We have established processes to help alleviate these risks, but we cannot assure you that our processes for controlling our use of open source software in our platform will be effective. In addition to risks related to license requirements, the use of open source software can lead to greater risks than use of third-party commercial software, as open source licensors generally do not provide warranties or controls on the origin of the software. Many of the risks associated with the use of open source software cannot be eliminated and could negatively affect our business.

We employ third-party licensed software for use in or with our platform, and the inability to maintain these licenses or errors in the software we license could result in increased costs, or reduced service levels, which could adversely affect our business.

Our platform incorporates certain third-party software obtained under licenses from other companies. We anticipate that we will continue to rely on such third-party software and development tools from third parties in the future. Although we believe that there are commercially reasonable alternatives to the third-party software we currently license, this may not always be the case, or it may be difficult or costly to replace. In addition, integration of the software used in our platform with new third-party software may require significant work and require substantial investment of our time and resources. Also, to the extent that our platform depends upon the successful operation of third-party software in conjunction with our software, any undetected errors or defects in this third-party software could prevent the deployment or impair the functionality of our platform, delay new solution introductions, result in a failure of our solutions and injure our reputation. Our use of additional or alternative third-party software would require us to enter into license agreements with third parties, which may be time consuming to negotiate or result in increased licensing costs and/or less favorable terms.

Risks Related to our Financial Results and Reporting

Our quarterly results may fluctuate significantly and may not fully reflect the underlying performance of our business.

Our results of operations and key metrics discussed elsewhere in this report, such as trailing twelve months calculated billings, remaining performance obligations, deferred revenue, customers with annualized subscription revenue above $100,000 and cumulative spend under management, may vary significantly in the future and period-to-period comparisons of our operating results and key metrics may not provide a full picture of our performance. Accordingly, the results of any one quarter or year should not be relied upon as an indication of future performance. Our quarterly financial results and metrics may fluctuate as a result of a variety of factors, many of which are outside of our control, as a result they may not fully reflect the underlying performance of our business. These quarterly fluctuations may negatively affect the value of our common stock. Factors that may cause these fluctuations include, without limitation:

•our ability to attract new customers and complete the sale of our platform and services to them within the range of our typical sales cycle;

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•the addition or loss of one or more of our larger customers, including as the result of acquisitions or consolidations;

•the timing of recognition of revenues;

•the amount and timing of operating expenses;

•general economic, industry and market conditions, both domestically and internationally, including the impact of increased inflation, fluctuating interest rates, market volatility and economic downturn caused by COVID-19 on our business, including but not limited to a decreased demand for our platform and services, negative impacts on our revenue results, an increasing unpredictability in expenses and cash flow, and a decreased ability by our customers to pay for our platform and services;

•the timing of our billing and collections;

•customer renewal and expansion rates;

•security breaches of, technical difficulties with, or interruptions to the delivery and use of our products on our platform;

•the amount and timing of completion of professional services engagements;

•increases or decreases in the number of users for our platform, increases or decreases in the solutions purchased for our platform or pricing changes upon any renewals of customer agreements;

•changes in our pricing policies or those of our competitors;

•seasonal variations in sales of our software subscriptions, which have historically been highest in the fourth quarter of a calendar year but may vary in future quarters;

•the timing and success of new product or solution introductions by us or our competitors or any other change in the competitive dynamics of our industry, including consolidation among competitors, customers or strategic partners;

•changes in foreign currency exchange rates;

•extraordinary expenses such as litigation or other dispute-related expenses or settlement payments;

•sales tax and other tax determinations by authorities in the jurisdictions in which we conduct business;

•the impact of new accounting pronouncements and the adoption thereof;

•fluctuations in stock-based compensation expense;

•expenses in connection with mergers, acquisitions or other strategic transactions; and

•the timing of expenses related to the development or acquisition of technologies or businesses and potential future charges for impairment of goodwill or intangibles from acquired companies.

Further, in future periods, our revenue growth could slow or our revenues could decline for a number of reasons, including slowing demand for our offerings, increasing competition, a decrease in the growth of our overall market, global economic conditions, or our failure, for any reason, to continue to capitalize on growth opportunities. In addition, our growth rate may slow in the future as our market penetration rates increase. As a result, our revenues, operating results and cash flows may fluctuate significantly on a quarterly basis and revenue growth rates may not be sustainable and may decline in the future, and we may not be able to achieve or sustain profitability in future periods, which could harm our business and cause the market price of our common stock to decline.

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Because we recognize subscription revenues over the term of the contract, fluctuations in new sales and renewals may not be immediately reflected in our operating results and may be difficult to discern.

We generally recognize subscription revenues from customers ratably over the terms of their contracts. Most of the subscription revenues we report on each quarter are derived from the recognition of deferred revenue relating to subscriptions and the PCS component of term-based license contracts entered into during previous quarters. Consequently, a decline in new or renewed subscriptions and/or term-based licenses in any single quarter would likely have only a small impact on our revenues for that quarter. However, such a decline would negatively affect our revenues in future quarters. Accordingly, the effect of significant downturns in sales and market acceptance of our platform, delays in our sales cycles as a result of economic volatility, COVID-19 or potential changes in our pricing policies, customer mix or rate of renewals, may not be fully apparent from our reported results of operations until future periods.

We may be unable to adjust our cost structure to reflect the changes in revenues. In addition, a significant majority of our costs are expensed as incurred, while subscription revenues are recognized over the life of the customer agreement. As a result, increased growth in the number of our customers, particularly large enterprise customers which tend to require larger upfront investment during the sales and implementation processes, could result in our recognition of more costs than revenues in the earlier periods of the terms of our agreements. Our subscription model also makes it difficult for us to rapidly increase our revenues through additional sales in any period, as revenues from new customers must be recognized over the applicable subscription term.

We have a history of cumulative losses, and we do not expect to be profitable for the foreseeable future.

We incurred net losses attributable to Coupa Software Incorporated of $379.0 million, $180.1 million, and $90.8 million in the fiscal years ended January 31, 2022, 2021 and 2020, respectively, and we incurred a net loss attributable to Coupa Software Incorporated of $7584.37 million in the three months ended ~~July~~October 31, 2022. We had an accumulated deficit of $~~844~~949.90 million at ~~July~~October 31, 2022. Our losses and accumulated deficit reflect the substantial investments we made to acquire new customers, maintain existing customers and develop our platform. We expect our operating expenses to increase in the future due to anticipated increases in sales and marketing expenses, research and development expenses, operations costs and general and administrative costs, and, therefore, we expect our losses to continue for the foreseeable future. A significant contributor to each of these categories of expense is stock compensation expense associated with equity awards that we grant to many of our employees at the time of hire and thereafter on an annual basis. We expect our stock compensation expenses to increase in future periods as we add more employees and seek to retain and incentivize our existing employees. Furthermore, to the extent we are successful in gaining new customers, we will also incur increased losses because many costs associated with acquiring new customers are generally incurred up front, while subscription revenues are generally recognized ratably over the terms of the agreements (typically three years, although some customers commit for longer or shorter periods). If we are unable to maintain consistent or increasing revenue or revenue growth or if our growth or growth forecasts fail to meet the expectations of investors or securities analysts, the market price of our common stock could be volatile, and it may be difficult for us to achieve and maintain profitability or maintain or increase cash flow on a consistent basis. Accordingly, we cannot assure you that we will achieve profitability in the future, or that, if we do become profitable, we will sustain profitability or achieve our target margins on a mid-term or long-term basis.

If we are unable to maintain effective internal controls over financial reporting in the future, investors may lose confidence in the accuracy and completeness of our financial reports and the market price of our common stock may be negatively affected.

As a public company, we are required to maintain internal controls over financial reporting and to report any material weaknesses in such internal controls. Section 404 of the Sarbanes-Oxley Act of 2002 (“Sarbanes-Oxley Act”) requires that we evaluate and determine the effectiveness of our internal controls over financial reporting and provide a management report on the internal controls over financial reporting, which must be attested to by our independent registered public accounting firm. If we have a material weakness in our internal controls over financial reporting (including in the control environment of our acquired companies), we may not detect errors on a timely basis and our financial statements may be materially misstated. In the future, we may not be able to complete our evaluation, testing, and any required remediation in a timely fashion, or otherwise assert that our internal controls are effective, and additionally, our independent registered public accounting firm may not be able to formally attest to the effectiveness of our internal controls over financial reporting.

If in the future we identify material weaknesses in our internal controls over financial reporting (including in the control environment of our acquired companies), if we are unable to comply with the requirements of Section 404 in a timely manner, if we are unable to assert that our internal controls over financial reporting are effective or if our independent registered public accounting firm is unable to express an opinion as to the effectiveness of our internal controls over financial reporting, investors may lose confidence in the accuracy and completeness of our financial reports and the market price of our common stock could be negatively affected, and we could become subject to investigations by the Securities and Exchange Commission (“SEC”), Nasdaq or other regulatory authorities, which could require additional financial and management resources to address.

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Our reported financial results may be adversely affected by changes in accounting principles generally accepted in the United States.

Generally accepted accounting principles in the United States are subject to interpretation by the Financial Accounting Standards Board (“FASB”), the SEC and various bodies formed to promulgate and interpret appropriate accounting principles. Accounting for revenue from sales of subscriptions to software is particularly complex, is often the subject of intense scrutiny by the SEC and will evolve as FASB continues to consider applicable accounting standards in this area. A change in accounting principles or interpretations could have a significant effect on our reported financial results for periods prior and subsequent to such change. We may adopt new accounting standards retrospectively to prior periods and the adoption may result in an adverse change to previously reported results. Additionally, the adoption of these standards may potentially require enhancements or changes in our systems and will require significant time and cost on behalf of our financial management.

Government, Regulatory and Tax-Related Risks

Changes in privacy laws, regulations, and standards may cause our business to suffer.

Our customers can use our platform to collect, use and store certain types of personal or identifying information regarding their employees and suppliers. Federal, state and foreign government bodies and agencies have adopted, are considering adopting or may adopt laws and regulations regarding the collection, use, storage and disclosure of personal information obtained from consumers and individuals, such as compliance with the Health Insurance Portability and Accountability Act in the US and General Data Protection Regulation (“GDPR”) in the European Union (“EU”). The costs of compliance with, and other burdens imposed by, such laws and regulations that are applicable to the businesses of our customers may limit the use and adoption of our platform and reduce overall demand or lead to significant fines, penalties or liabilities for any noncompliance with such privacy laws. Furthermore, privacy concerns may cause our customers’ employees to resist providing the personal data necessary to allow our customers to use our platform effectively. Even the perception of privacy concerns, whether or not valid, may inhibit market adoption of our platform in certain industries.

All of these domestic and international legislative and regulatory initiatives may adversely affect our customers’ ability to process, handle, store, use and transmit demographic and personal information from their employees, customers and suppliers, which could reduce demand for our platform. For example, the EU and many countries in Europe have stringent privacy laws and regulations, which may affect our ability to operate cost effectively in certain European countries. In particular, the EU's GDPR contains numerous requirements , including robust obligations on data processors and heavier documentation requirements for data protection compliance programs by companies. The GDPR also includes numerous privacy-related obligations for companies operating in the EU, including greater control for data subjects (e.g., the “right to be forgotten”), data portability for EU consumers, data breach notification requirements, and substantial fines. In particular, under the GDPR, fines of up to 20 million Euros or up to 4% of the annual global revenue of the noncompliant company, whichever is greater, could be imposed for violations of certain of the GDPR’s requirements. Complying with the GDPR may cause us to incur substantial operational costs or require us to change our business practices. Despite our efforts to bring practices into compliance with the GDPR, we may not be successful either due to internal or external factors such as resource allocation limitations or a lack of vendor cooperation. Non-compliance could result in proceedings against us by governmental entities, customers, data subjects or others. We may also experience difficulty retaining or obtaining new European or multi-national customers due to the compliance cost, potential risk exposure, and uncertainty for these entities, and we may experience significantly increased liability with respect to these customers pursuant to the terms set forth in our engagements with them. We may find it necessary to establish systems in the EU to maintain personal data originating from the EU, which may involve substantial expense and distraction from other aspects of our business. In the meantime, there could be uncertainty as to how to comply with EU privacy law, including with respect to transfers of personal data from the EU. Many other countries around the world also continue expanding and strengthening their data protection laws.

In addition, California enacted the California Consumer Privacy Act of 2018 (“CCPA”), which took effect on January 1, 2020, and the California Privacy Rights Act (“CPRA”), which expands upon the CCPA, was passed in the recent California election in November 2020 and comes into effect on January 1, 2023, with a “lookback” period to January 1, 2022. This legislation broadly defines personal information, gives California residents expanded privacy rights and protections, and provides for civil penalties for violations. Further, other U.S. states and federal lawmakers have adopted or are considering adopting similar privacy laws that may have broad applicability. The effects of the CCPA and CPRA are, and any similar laws enacted may be, potentially far-reaching and may require us to modify our data management practices and to incur substantial expense in an effort to comply.

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Because the interpretation and application of many privacy and data protection laws along with contractually imposed industry standards are uncertain, it is possible that these laws may be interpreted and applied in a manner that is inconsistent with our existing data management practices or the features of our products and platform capabilities. If so, in addition to the possibility of fines, lawsuits, and other claims and penalties, we could be required to fundamentally change our business activities and practices or modify our products and platform capabilities, which could have an adverse effect on our business. Any inability to adequately address privacy and security concerns, even if unfounded, or comply with applicable privacy and data security laws, regulations, and policies, could result in additional cost and liability to us, damage our reputation, inhibit sales, and adversely affect our business. Furthermore, the costs of compliance with, and other burdens imposed by, the laws, regulations, and policies that are applicable to the businesses of our customers may limit the use and adoption of, and reduce the overall demand for, our products. Privacy and data security concerns, whether valid or not valid, may inhibit market adoption of our products, particularly in certain industries and foreign countries. If we are not able to adjust to changing laws, regulations, and standards related to the Internet, our business may be harmed.

We are subject to the tax laws of various jurisdictions, which are subject to unanticipated changes and to interpretation, which could harm our future results.

We are subject to income taxes in the United States and foreign jurisdictions, and our domestic and international tax liabilities are subject to the allocation of expenses in differing jurisdictions. Our effective tax rate could be adversely affected by changes in the mix of earnings and losses in countries with differing statutory tax rates, certain non-deductible expenses as a result of acquisitions, the valuation of deferred tax assets and liabilities, and changes in federal, state, or international tax laws and accounting principles.

Further, each jurisdiction has different rules and regulations governing sales and use, value added, and similar taxes, and these rules and regulations are subject to varying interpretations that change over time. Certain jurisdictions in which we did not collect such taxes may assert that such taxes are applicable, which could result in tax assessments, penalties, and interest, and we may be required to collect such taxes in the future. In addition, we may be subject to income tax audits by many tax jurisdictions throughout the world, many of which have not established clear guidance on the tax treatment of cloud-based companies. Any tax assessments, penalties, and interest, or future requirements may adversely affect our results of operations. Moreover, imposition of such taxes on us going forward would effectively increase the cost of our products to our customers and might adversely affect our ability to retain existing customers or to gain new customers in the areas in which such taxes are imposed.

In addition, the application of the tax laws of various jurisdictions, including the United States, to our international business activities is subject to interpretation and depends on our ability to operate our business in a manner consistent with our corporate structure. As we operate in numerous taxing jurisdictions, the application of tax laws can also be subject to diverging and sometimes conflicting interpretations by tax authorities of these jurisdictions. For example, the United States has recently enacted the Inflation Reduction Act, which includes, among other provisions, a 15% alternative minimum tax on adjusted financial statement income and a 1% exercise tax on certain stock repurchases (including, potentially pursuant to our Share Repurchase Program). Our determination of our tax liability is subject to review by applicable United States and foreign tax authorities. Any adverse outcome of such a review could harm our operating results and financial condition.

We may not be able to utilize a significant portion of our net operating loss or research tax credit carryforwards, which could adversely affect our potential profitability.

We have federal and state net operating loss carryforwards due to prior period losses, which if not utilized will begin to expire in 2026 and 2029 for federal and state purposes, respectively. These net operating loss carryforwards could expire unused and be unavailable to offset future income tax liabilities, which could adversely affect our potential profitability.

In addition, under Sections 382 and 383 of the Internal Revenue Code of 1986, as amended (the “Code”), our ability to utilize net operating loss carryforwards or other tax attributes, such as research tax credits, in any taxable year may be limited if we experience an “ownership change.” Such an “ownership change” generally occurs if one or more stockholders or groups of stockholders who own at least 5% of our stock increase their ownership by more than 50 percentage points over their lowest ownership percentage within a rolling three-year period. Similar rules may apply under state tax laws. As of our initial public offering and our subsequent follow-on offering we have not had an ownership change that has triggered any material limitation on the use of our tax attributes for purposes of Section 382 of the Code. Subsequent changes in our stock ownership, however, could cause an “ownership change.” It is possible that an ownership change, or any future ownership change, could have a material effect on the use of our net operating loss carryforwards or other tax attributes, which could adversely affect our potential profitability.

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Our customers include governmental agencies and entities (at both the federal, state and local level), and as a result we are subject to risks related to government contracts and procurement regulations, as well as other challenges unique to governmental customers.

We derive a portion of our revenue from contracts with government organizations, and we believe the success and growth of our business will in part depend on adding additional public sector customers. On March 10, 2022, we obtained authorization under the Federal Risk and Authorization Management Program (“FedRAMP”), which promotes the adoption of secure cloud services across the federal government by providing a standardized approach to security and risk assessment for cloud technologies and federal agencies. We believe this FedRAMP authorization will help us increase the number of U.S. public sector customers we work with. Therefore, the loss of FedRAMP authorization could inhibit or preclude our ability to contract with certain U.S. public sector customers. In addition, some customers may rely on our authorization under FedRAMP to help satisfy their own legal and regulatory compliance requirements and our failure to maintain FedRAMP authorization would result in a breach under public sector contracts obtained on the basis of such authorization, which could subject us to liability and result in reputational harm and/or adversely impact our results of operations and financial condition.

Demand from government organizations is often unpredictable, and we cannot assure you that we will be able to maintain or grow our revenue from the public sector. Sales to government entities are subject to substantial additional risks that may not be present in sales to other customers, including, but not limited to, the following:

•it can be more competitive, expensive and time consuming to sell to public sector customers as compared to other customer segments, often requiring substantial upfront investment of time and resources without any assurance that such activities will result in a sale;

•sales to the U.S. and other national governments, as well as state and local governments, may entail compliance with applicable certification and audit requirements, including FedRAMP in the U.S., which are often difficult and costly to obtain and maintain, and failure to comply with such requirements will limit or restrict the public sector customers we can engage with;

•demand and payment for our services by public sector customers may be adversely impacted by public sector budgetary cycles, funding authorizations and/or government shutdowns;

•public sector contracts may be subject to challenge by other interested parties and such challenges, even if unsuccessful, can increase costs, cause delays and defer implementation and revenue recognition;

•public sector customers frequently engage in routine investigations and audits of government contractors’ administrative and operational processes, and any adverse findings resulting from such could result in fines, civil or criminal liability, additional investigations or administrative proceedings, damage to our reputation or restrictions on our ability to transact with public sector customers in the future; and

•contracts with public sector customers can be difficult to negotiate and frequently require extension of terms that differ from our typical customer arrangements, in some cases such terms may be more favorable than customarily provided under our standard commercial contracts (e.g., permitting early termination, pricing concessions or extended payment terms, public disclosure of sensitive information (such as pricing terms) or inclusion of high liability in case of breaches).

In addition, we must comply with laws and regulations relating to the formation, administration, and performance of contracts with public sector customers, including U.S. federal, state, and local governmental organizations, as well as foreign governmental organizations, which affect how we do business with governmental agencies. Contracts with the U.S. government also subject us to certain regulatory and contractual requirements, including expanded compliance obligations under the Federal Acquisition Regulations (“FARs”). Failure to comply with these requirements could subject us to investigations, fines, and other penalties, which could have an adverse effect on our business, results of operations, and financial condition. For example, the U.S. Department of Justice (the “DOJ”) and the General Services Administration (the “GSA”) have in the past pursued claims against and financial settlements with vendors under the False Claims Act and other statutes related to pricing and discount practices and compliance with certain provisions of GSA contracts for sales to the federal government. The DOJ and GSA continue to actively pursue such claims. Violations of certain regulatory and contractual requirements could also result in us being suspended or debarred from future government contracting. Any of these outcomes could have a material adverse effect on our reputation, revenue, results of operations, and financial condition. Any inability to address these risks and challenges could reduce the commercial benefit to us or otherwise preclude us from conducting business with public sector customers.

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Risks Related to our Indebtedness

We have incurred substantial indebtedness that may decrease our business flexibility, access to capital, and/or increase our borrowing costs, and we may still incur substantially more debt, which may adversely affect our operations and financial results.

In January 2018, we issued $230 million aggregate principal amount of 0.375% Convertible Senior Notes due 2023, which we refer to as the 2023 Notes, in June 2019, we issued $805 million aggregate principal amount of our 0.125% Convertible Senior Notes due 2025, which we refer to as the 2025 Notes, and in June 2020, we issued $1,380 million aggregate principal amount of our 0.375% Convertible Senior Notes due 2026, which we refer to as the 2026 Notes, which we collectively refer to as the Convertible Notes. As of ~~July~~October 31, 2022, we had $2,~~260~~264.72 million in total long-term liabilities, comprised primarily of $2,~~159~~161.75 million related to the net carrying amount of the 2025 Notes and 2026 Notes. Our indebtedness may:

•limit our ability to borrow additional funds for working capital, capital expenditures, acquisitions or other general business purposes;

•limit our ability to use our cash flow or obtain additional financing for future working capital, capital expenditures, acquisitions or other general business purposes;

•require us to use a substantial portion of our cash flow from operations to make debt service payments;

•limit our flexibility to plan for, or react to, changes in our business and industry;

•~~place~~limit usour atability ~~a competitive disadvantage compared~~ to ~~our~~pay ~~less~~for ~~leveraged~~other ~~competitors~~obligations; ~~and~~

•~~increase~~place ~~our~~us ~~vulnerability~~at toa ~~the~~competitive ~~impact~~disadvantage ofcompared ~~adverse~~to ~~economic~~our ~~and~~less ~~industry~~leveraged ~~conditions,~~competitors; ~~including rising interest rates (which can make refinancing existing indebtedness more difficult or costly).~~

•increase our vulnerability to the impact of adverse economic and industry conditions, including rising interest rates (which can make refinancing existing indebtedness more difficult or costly); and

•negatively impact our credit rating.

Further, the indentures governing the Convertible Notes do not restrict our ability to incur additional indebtedness and we and our subsidiaries may incur substantial additional indebtedness in the future, subject to the restrictions contained in any future debt instruments existing at the time, some of which may be secured indebtedness.

Servicing our debt will require a significant amount of cash. We may not have sufficient cash flow from our business to pay our substantial debt, and we may not have the ability to raise the funds necessary to settle conversions of the Convertible Notes in cash or to repurchase the Convertible Notes upon a fundamental change, which could adversely affect our business and results of operations.

Our ability to make scheduled payments of the principal of, to pay interest on, or to refinance our indebtedness, including the amounts payable under the Convertible Notes, depends on our future performance, which is subject to economic, financial, competitive, and other factors beyond our control. Our business may not continue to generate cash flow from operations in the future sufficient to service our indebtedness and make necessary capital expenditures. If we are unable to generate such cash flow, we may be required to adopt one or more alternatives, such as selling assets, restructuring debt, or obtaining additional equity capital on terms that may be onerous or highly dilutive. Our ability to refinance our indebtedness will depend on the capital markets and our financial condition at such time. For example, the Federal Reserve has increased its benchmark interest rate multiple times so far in 2022 in a bid to reduce rising inflation rates in the United States, and it is expected that additional rate hikes may be adopted in the future. These interest rate increases have resulted in higher short-term and long-term borrowing costs and could impact the general availability of credit. Higher prevailing interest rates and/or a tightening supply of credit will adversely affect the terms upon which we will be able to refinance our indebtedness, if at all. As a result, we may not be able to engage in any of these activities or engage in these activities on desirable terms, which could result in a default on our debt obligations.

Further, holders of the Convertible Notes have the right to require us to repurchase all or a portion of their Convertible Notes upon the occurrence of a “fundamental change” (as defined in the indentures governing the Convertible Notes (the “indentures”)) before the maturity date at a repurchase price equal to 100% of the principal amount of the Convertible Notes to be repurchased, plus accrued and unpaid interest, if any. In addition, upon conversion of the Convertible Notes, unless we elect to deliver solely shares of our common stock to settle such conversion (other than paying cash in lieu of delivering any fractional share), we will be required to make cash payments in respect of the Convertible Notes being converted. However, we may not have enough available cash or be able to obtain financing at the time we are required to make repurchases of Convertible Notes surrendered therefor or pay cash with respect to Convertible Notes being converted.

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The conditional conversion feature of the Convertible Notes, when triggered, may adversely affect our financial condition and operating results.

In the event the conditional conversion feature of the Convertible Notes is triggered, holders of the Convertible Notes will be entitled to convert their Convertible Notes at any time during specified periods at their option. If one or more holders elect to convert their Convertible Notes, unless we elect to satisfy our conversion obligation by delivering solely shares of our common stock (other than paying cash in lieu of delivering any fractional share), we would be required to settle a portion or all of our conversion obligation in cash, which could adversely affect our liquidity. AsSee ~~disclosed in~~ Note 8, “Convertible Senior Notes” infor ~~the~~more ~~notes to our condensed consolidated financial statements, the conditional conversion feature of the 2023 Notes was again triggered as of July 31, 2022~~information.

In addition, even if certain holders of Convertible Notes do not elect to convert their Convertible Notes, we could be required under applicable accounting rules to reclassify all or a portion of the outstanding principal of the Convertible Notes as a current rather than long-term liability, which would result in a material reduction of our net working capital.

The accounting method for convertible debt securities that may be settled in cash, such as the Convertible Notes, could have a material effect on our reported financial results.

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) ("ASU 2020-06"), which simplifies the accounting for convertible debt instruments. The guidance eliminates requirements to separately account for liability and equity components of such convertible debt instruments and eliminates the treasury stock method for calculating diluted earnings per share for convertible instruments whose principal amount may be settled using shares and requires the use of the if-converted method. Under the if-converted method, diluted earnings per share will generally be calculated assuming that all the Convertible Notes were converted solely into shares of common stock at the beginning of the reporting period, unless the result would be anti-dilutive, which could adversely affect our diluted earnings per share.

We adopted ASU 2020-06 on February 1, 2022, using the modified retrospective approach. As a result, we no longer separate the liability and equity components of the Convertible Notes on our balance sheet and we use the if-converted method of calculating diluted earnings per share. Under the modified retrospective basis, prior periods are not restated. Rather, the cumulative effect of initially applying the new standard was recognized as an adjustment to accumulated deficit. The elimination of the separate accounting reduces the interest expense that we recognize in the periods after adoption. See Note 8 and the description under the heading “Recent Accounting Guidance” in Note 2 of the notes to our condensed consolidated financial statements included elsewhere in this Quarterly Report ~~on Form 10-Q~~ for more information.

The capped call transactions may affect the value of the Convertible Notes and our common stock.

In connection with the pricing of the Convertible Notes, we entered into capped call transactions with certain financial institutions. The capped call transactions are expected generally to reduce or offset the potential dilution upon conversion of the Convertible Notes and/or offset any cash payments we are required to make in excess of the principal amount of converted Convertible Notes, as the case may be, with such reduction and/or offset subject to a cap.

In connection with establishing their initial hedges of the capped call transactions, these financial institutions or their respective affiliates likely purchased shares of our common stock and/or entered into various derivative transactions with respect to our common stock concurrently with or shortly after the pricing of the Convertible Notes. These financial institutions or their respective affiliates may modify their hedge positions by entering into or unwinding various derivatives with respect to our common stock and/or purchasing or selling our common stock or other securities of ours in secondary market transactions following the pricing of the Convertible Notes and prior to the maturity of the Convertible Notes (and are likely to do so during any observation period related to a conversion of Convertible Notes). This activity could also cause or avoid an increase or a decrease in the market price of our common stock or the Convertible Notes.

The potential effect, if any, of these transactions and activities on the price of our common stock or the Convertible Notes will depend in part on market conditions and cannot be ascertained at this time. Any of these activities could adversely affect the value of our common stock.

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Conversion of the Convertible Notes will dilute the ownership interest of existing stockholders, including holders who had previously converted their Convertible Notes, or may otherwise depress the price of our common stock.

The conversion of some or all of the Convertible Notes will dilute the ownership interests of existing stockholders to the extent we deliver shares of our common stock upon conversion of any of the Convertible Notes. The Convertible Notes may from time to time be convertible at the option of their holders prior to their scheduled terms under certain circumstances. Any sales in the public market of the common stock issuable upon such conversion could adversely affect prevailing market prices of our common stock. In addition, the existence of the Convertible Notes may encourage short selling by market participants because the conversion of the Convertible Notes could be used to satisfy short positions, or anticipated conversion of the Convertible Notes into shares of our common stock could depress the price of our common stock.

Risks Related to Ownership of Our Common Stock

Our stock price has been subject to fluctuations, and will likely continue to be subject to fluctuations and decline, due to factors beyond our control and you may lose all or part of your investment.

The market price of our common stock is subject to wide fluctuations in response to various factors, some of which are beyond our control. These factors, as well as the volatility of our common stock, could affect the price at which our convertible noteholders could sell the common stock received upon conversion of the Convertible Notes and could also impact the trading price of the Convertible Notes. Since shares of our common stock were sold in our initial public offering in October 2016 at a price of $18.00 per share, the reported high and low sales prices of our common stock have ranged from $22.50 to $377.04 through ~~July~~October 31, 2022. The market price of our common stock may fluctuate significantly in response to numerous factors, many of which are beyond our control, including:

•potential uncertainty over whether or not the Merger will be consummated;

•price and volume fluctuations in the overall stock market from time to time, including fluctuations due to general economic uncertainty and negative market sentiment;

•our operating performance and the performance of other similar companies;

•announcements of new and changes in our existing projected or target operating results and key metrics that we provide to the public, as well as those published by research analysts that follow our stock, our failure to meet or exceed these projections or targets or changes in recommendations by securities analysts;

•changes in our financial, operating or other metrics, regardless of whether we consider those metrics as reflective of the current state or long-term prospects of our business, and how those results compare to securities analyst and investor expectations, including whether those results fail to meet, exceed, or significantly exceed such expectations;

•failure of security analysts to initiate or maintain coverage of our company;

•announcements of technological innovations, pricing changes, new software or enhancements to services, acquisitions, strategic alliances or significant agreements by us or by our competitors;

•announcements of our intent to conduct debt or equity financings or repurchases, redemptions, conversions or the like;

•the inability to execute on our Share Repurchase Program as planned, including failure to meet internal or external expectations around the timing or price of share repurchases, and any reductions or discontinuations of repurchases thereunder;

•the sale or availability for sale of a large number of shares of our common stock in the public market;

•disruptions in our services due to computer hardware, software or network problems, including significant security breaches;

•announcements of customer additions and customer cancellations or delays in customer purchases;

•the level of success achieved with respect to international expansion and expected timeframes for realization of the related beneficial impact on operating results;

•the impact of integrated acquired businesses and technologies on our operating results in the short-term and the expected impact in the medium- and long-term;

•recruitment or departure of key personnel;

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•the economy as a whole, including changes to fiscal and monetary policy of the Federal Reserve, market conditions in our industry and the industries of our customers;

•extraordinary expenses such as litigation or other dispute-related expenses or settlement payments;

•developments with respect to patent and proprietary rights;

•conversion of the Convertible Notes;

•the impact of the COVID-19 pandemic, including on the global economy, our results of operations, enterprise software spending and business continuity;

•the size of our market float;

•environmental, social, governance, ethical, and other issues impacting our brand; and

•any other factors discussed in this Quarterly Report.

The stock markets have experienced extreme price and volume fluctuations that have affected and continue to affect the market prices of equity securities of many technology companies. Stock prices of many technology companies have fluctuated in a manner unrelated or disproportionate to the operating performance of those companies. In the past, stockholders have filed securities class action litigation following periods of market volatility. If we were to become involved in securities litigation, it could subject us to substantial costs, divert resources and the attention of management from our business and adversely affect our business. In addition, because we award restricted stock units (RSUs) to many of our employees as part of their total compensation package, and the value of those RSUs depends directly on our stock price, a sharp or prolonged decline in our stock price may make it more difficult for us to hire and retain our employees or result in us granting more awards in the aggregate to hire and retain our employees.

Sales of a substantial number of shares of our common stock in the public market, or the perception that they might occur, could cause the price of our common stock to decline.

The price of our common stock could decline if there are substantial sales of our common stock, particularly sales by our directors, executive officers, and significant stockholders. The shares held by these persons may be sold in the public market in the United States, subject to prior registration in the United States, if required, or reliance upon an exemption from United States registration, including, in the case of shares held by affiliates or control persons, compliance with the volume restrictions of Rule 144. In addition, some of our executive officers have entered into Rule 10b5-1 trading plans under which they have contracted with a broker to sell shares of our common stock on a periodic basis.

Sales of a substantial number of shares of our common stock in the public market, or the perception that these sales might occur, for whatever reason, including as a result of the conversion of the outstanding Convertible Notes, could cause the market price of our common stock to decline or make it more difficult for our stockholders to sell their common stock at a time and price that they deem appropriate and could impair our ability to raise capital through the sale of additional equity or equity linked securities. In addition, we have filed a registration statement to register shares reserved for future issuance under our equity compensation plans. Subject to the satisfaction of applicable exercise periods and, in the case of shares held by affiliates or control persons, compliance with the volume restrictions of Rule 144, the shares issued upon exercise of outstanding stock options, settlement of outstanding restricted stock units, or conversion of the Convertible Notes into common stock will be available for immediate resale in the United States in the open market.

We have also reserved a substantial amount of shares of our common stock in connection with awards issued under our equity incentive plans and upon conversion of the Convertible Notes, the issuance of which will dilute the ownership interests of existing stockholders. Any sales in the public market of the common stock issuable upon such issuance or conversion could adversely affect prevailing market prices of our common stock.

We are unable to predict the effect that sales, or the perception that our shares may be available for sale, will have on the prevailing market price of our common stock and the trading price of the Convertible Notes.

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If securities or industry analysts do not continue to publish research or publish inaccurate or unfavorable research about our business, our stock price and trading volume could decline.

The trading market for our common stock depends in part on the research and reports that securities or industry analysts publish about us or our business. If industry analysts cease coverage of us, the trading price for our common stock and the trading price of the Convertible Notes could be negatively affected. If one or more of the analysts who cover us downgrade our common stock or publish inaccurate or unfavorable research about our business or if our results fall short of the projected results published by one or more research analyst, our common stock price and the trading price of the Convertible Notes will likely decline. If one or more of these analysts ceases coverage of us or fail to publish reports on us regularly, demand for our common stock could decrease, which might cause our common stock price and trading volume, and the trading price of the Convertible Notes, to decline.

In addition, independent industry analysts, such as Gartner and Forrester, often provide reviews of our products and platform capabilities, as well as those of our competitors, and perception of our offerings in the marketplace may be significantly influenced by these reviews. We have no control over what these industry analysts report, and because industry analysts may influence current and potential customers, our brand could be harmed if they do not provide a positive review of our products and platform capabilities or view us as a market leader.

We may not realize the anticipated long-term stockholder value of our Share Repurchase Program and any failure to repurchase our common stock after we have announced our intention to do so may negatively impact our stock price.

In August 2022, our Board of Directors authorized the Share Repurchase Program under which we may repurchase up to $100 million of our common stock. Under the Share Repurchase Program, repurchases may be made from time to time until September 1, 2023, however the program may be modified, suspended, or terminated at any time. Such repurchases may be made through open market transactions in accordance with applicable securities laws.

Any failure to repurchase stock after we have announced our intention to do so may negatively impact our reputation and investor confidence in us and may negatively impact our stock price.

The existence of the Share Repurchase Program could cause our stock price to trade higher than it otherwise would and could potentially reduce the market liquidity for our stock. Although the Share Repurchase Program is intended to enhance long-term stockholder value, there is no assurance it will do so because the market price of our common stock may decline below the levels at which we repurchased shares and short-term stock price fluctuations could reduce the effectiveness of this program.

Repurchasing our common stock will reduce the amount of cash we have available to fund working capital, repayment of debt, capital expenditures, strategic acquisitions or business opportunities, and other general corporate purposes, and we may fail to realize the anticipated long-term stockholder value of the Share Repurchase Program. Furthermore, the timing and amount of any repurchases, if any, will be subject to liquidity, market and economic conditions, compliance with applicable legal requirements such as Delaware surplus and solvency tests and other relevant factors.

We do not intend to pay dividends for the foreseeable future.

We have never declared nor paid cash dividends on our capital stock. We currently intend to retain any future earnings to finance the operation and expansion of our business, and we do not expect to declare or pay any dividends in the foreseeable future. Consequently, stockholders, including holders of our Convertible Notes who receive shares of our common stock upon conversion of the Convertible Notes, must rely on sales of their common stock after price appreciation, which may never occur, as the only way to realize any future gains on their investment.

Delaware law, provisions in our amended and restated certificate of incorporation (“Restated Certificate”) and amended and restated bylaws (“Restated Bylaws”), and provisions in the indentures for our Convertible Notes could make a merger, tender offer or proxy contest difficult, thereby depressing the trading price of our common stock and Convertible Notes.

Our status as a Delaware corporation and the anti-takeover provisions of the Delaware General Corporation Law may discourage, delay or prevent a change in control by prohibiting us from engaging in a business combination with an interested stockholder for a period of three years after the person becomes an interested stockholder, even if a change of control would be beneficial to our existing stockholders. In addition, our Restated Certificate and Restated Bylaws contain provisions that may make the acquisition of our company more difficult, including the following:

•the requirement of a classified board of directors with three-year staggered terms, which could delay the ability of stockholders to change the membership of a majority of our board of directors;

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•the ability of our board of directors to issue shares of preferred stock and to determine the price and other terms of those shares, including preferences and voting rights, without stockholder approval, which could be used to significantly dilute the ownership of a hostile acquiror;

•the exclusive right of our board of directors to elect a director to fill a vacancy created by the expansion of our board of directors or the resignation, death or removal of a director, which prevents stockholders from being able to fill vacancies on our board of directors;

•a prohibition on stockholder action by written consent, which forces stockholder action to be taken at an annual or special meeting of our stockholders;

•the requirement that a special meeting of stockholders be called only by a majority vote of our entire board of directors, the chairman of our board of directors or our chief executive officer, which could delay the ability of our stockholders to force consideration of a proposal or to take action, including to remove directors;

•the requirement for the affirmative vote of holders of at least 66 2/3% of the voting power of all of the then-outstanding shares of the voting stock, voting together as a single class, to amend the provisions of our Restated Certificate relating to the management of our business or our Restated Bylaws, which may inhibit the ability of an acquiror to effect such amendments to facilitate an unsolicited takeover attempt; and

•advance notice procedures with which stockholders must comply to nominate candidates to our board of directors or to propose matters to be acted upon at a stockholders’ meeting, which may discourage or deter a potential acquiror from conducting a solicitation of proxies to elect the acquiror’s own slate of directors or otherwise attempting to obtain control of us.

In addition, as a Delaware corporation, we are subject to Section 203 of the Delaware General Corporation Law. These provisions may prohibit large stockholders, in particular those owning 15% or more of our outstanding voting stock, from merging or combining with us for a certain period of time. A Delaware corporation may opt out of this provision by express provision in its original certificate of incorporation or by amendment to its certificate of incorporation or bylaws approved by its stockholders. However, we have not opted out of this provision.

In addition, if a fundamental change occurs prior to the maturity date of the Convertible Notes, holders of the Convertible Notes will have the right, at their option, to require us to repurchase all or a portion of their Convertible Notes. If a “make-whole fundamental change” (as defined in the applicable indenture) occurs prior the maturity date, we will in some cases be required to increase the conversion rate of the Convertible Notes for a holder that elects to convert its Convertible Notes in connection with such make-whole fundamental change. These features of the Convertible Notes may make a potential acquisition more expensive for a potential acquiror, which may in turn make it less likely for a potential acquiror to offer to purchase our company, or reduce the amount of consideration offered for each share of our common stock in a potential acquisition. Furthermore, the indentures prohibit us from engaging in certain mergers or acquisitions unless, among other things, the surviving entity assumes our obligations under the Convertible Notes.

These and other provisions in our Restated Certificate, Restated Bylaws, Convertible Notes, indentures and in Delaware law could deter or prevent a third party from acquiring us or could make it more difficult for stockholders or potential acquirors to obtain control of our board of directors or initiate actions that are opposed by our then-current board of directors, including to delay or impede a merger, tender offer, or proxy contest involving our company. The existence of these provisions could negatively affect the price of our common stock and the trading price of the Convertible Notes and limit opportunities for you to realize value in a corporate transaction.

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Our Restated Certificate provides that the Court of Chancery of the State of Delaware is the exclusive forum for substantially all disputes between us and our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers or employees.

Our Restated Certificate provides that the Court of Chancery of the State of Delaware is the exclusive forum for any derivative action or proceeding brought on our behalf, any action asserting a breach of fiduciary duty, any action asserting a claim against us arising pursuant to the Delaware General Corporation Law, our Restated Certificate or our Restated Bylaws or any action asserting a claim against us that is governed by the internal affairs doctrine. This choice of forum provision may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers or other employees and may discourage these types of lawsuits. Alternatively, if a court were to find the choice of forum provision contained in our amended and restated certificate of incorporation to be inapplicable or unenforceable in an action, we might incur additional costs associated with resolving such action in other jurisdictions. For the avoidance of doubt, these choice of forum provisions may not apply to suits brought to enforce a duty or liability created by the Securities Act, the Exchange Act or any other claim for which the federal courts have exclusive jurisdiction.

General Risks

We continue to face financial and operational risks related to the COVID-19 pandemic.

The COVID-19 pandemic has had a significant impact on businesses and people around the world since it was publicly reported on or around December 2019. The duration of the pandemic, the potential for new variants, the potential need for new vaccines and the full extent of the impact of the foregoing are unknown.

Our business has been and could continue to be adversely affected by the COVID-19 pandemic. The pandemic has adversely affected the macroeconomic environment and increased economic and stock market volatility and uncertainty. Restrictions on business activities, as well as varying recommendations based on infection rates, regarding testing, personal protective equipment and quarantining, whether imposed by governments or otherwise, may continue to adversely affect our sales activities, employee morale, operations and growth prospects. These restrictions, together with changes in consumer and business spending behavior prompted by the pandemic, have caused businesses in the United States and other jurisdictions to reduce or suspend their operations, lay-off employees, and in some cases shutdown operations—a pattern of global economic phenomena for which there is little precedent in modern times.

The COVID-19 pandemic has had and may continue to have an adverse impact on us in a number of ways, any of which individually or together could have a material adverse impact on our results of operations, financial condition and growth prospects. For example, although we derive a significant portion of our revenue from sales to enterprise customers (a segment that may be more resilient to economic volatility), a prolonged economic downturn is likely to impact many of our enterprise customers adversely. The extent of the damage to this segment of our customer base may not be apparent as quickly as for other segments, and is likely to differ by industry. Certain solutions of our platform, such as those that focus on business travel spend, may not be purchased by existing or prospective customers due to operational changes they made in response to the pandemic, such as restrictions placed on business travel, which could adversely impact our sales and revenue. These trends may persist to the extent that remote working arrangements become more commonplace. In addition, the pandemic may limit the ability of our suppliers and business partners to perform under their contracts with us, and we may not be able to find and engage additional or substitute suppliers and partners in a timely manner and on terms acceptable to us.

We believe that many businesses have been and may continue to be more reluctant to invest in the purchase and implementation of a new software solution like ours in the near term because of ~~the~~ economic uncertainty associated in part with the COVID-19 pandemic. It may become more difficult for us to acquire new customers and could lead to longer sales cycles, higher acquisition costs and greater uncertainty around the timing and likelihood of closing sales opportunities to which we have already devoted meaningful time and resources. Our existing customers may reduce their subscriptions or choose not to add new users or adopt new solutions at the rate we expect based on past experience. In addition, if our results of operations or our assessment of our growth prospects or potential for future revenue and profitability fail to meet investor and analyst expectations for any particular financial period, our stock price may experience a substantial decline, even if our revenues have increased or our margins have improved relative to past periods.

The spread of COVID-19 has also caused us to modify our business practices. Working remotely has made our workforce more reliant on certain cloud-based communication and collaboration services, and any disruption to these services would likely have an adverse impact on employee productivity. In addition to the limitations imposed by an all or partially-remote environment, many of our employees must contend with additional personal and family challenges from the COVID-19 pandemic that affect employee productivity and morale.

With the re-emergence of in-office or hybrid working, any incidents of actual or perceived transmission may require us to temporarily close an impacted office, disrupt our operations, expose us to liability from employee claims, adversely impact employee productivity and morale, and result in negative publicity and reputational harm.

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In addition, the stock market has experienced periods of high volatility during the COVID-19 pandemic and such volatility may continue. As a result, our stock price may be adversely impacted for reasons unrelated to our performance. A decline in stock price may make it more difficult for us to raise capital on terms acceptable to us or at all.

The extent to which the COVID-19 pandemic continues to impact our business, results of operations and financial condition will depend on future developments, which are highly uncertain and difficult to predict, including, but not limited to, the duration and severity of the pandemic, the availability and efficacy of new and existing vaccines in limiting infection and transmission, the emergence of potential new and more virulent or contagious variants, the actions taken in the United States and globally to contain the virus or address its impact, and how quickly and to what extent normal economic and operating activities can resume. To the extent the COVID-19 pandemic adversely affects our business, results of operations and financial condition, it may also have the effect of heightening many of the other risks described in this “Risk Factors” section. Even after the pandemic has subsided, we may continue to experience an adverse impact to our business as a result of its global economic impact, including any recession that has occurred or may occur in the future. For the reasons discussed above and others that we may not have foreseen, we expect that the pandemic will continue to have adverse impacts on aspects of our business in the near term, any of which individually or together may have a material adverse impact on our results of operations, financial condition, growth prospects and stock price.

We have incurred and will continue to incur significantly increased costs and devote substantial management time as a result of operating as a public company.

As a public company, we have incurred and will continue to incur significant legal, accounting and other expenses. For example, we are subject to the reporting requirements of the Exchange Act and are required to comply with the applicable requirements of the Sarbanes-Oxley Act and the Dodd-Frank Wall Street Reform and Consumer Protection Act, as well as rules and regulations subsequently implemented by the SEC and the Nasdaq Global Select Market, including the establishment and maintenance of effective disclosure and financial controls and changes in corporate governance practices. Compliance with these requirements has increased our legal and financial compliance costs and made some activities more time consuming and costly. In addition, our management and other personnel need to divert attention from operational and other business matters to devote substantial time to these public company requirements. In particular, we are incurring significant expenses and devoting substantial management effort toward ensuring ongoing compliance with the requirements of Section 404 of the Sarbanes-Oxley Act. We have hired and may need to continue to hire additional accounting and financial staff with appropriate public company experience and technical accounting knowledge and maintain an internal audit function. We cannot predict or estimate the amount of additional costs we may incur as a result of being a public company.

The rules and regulations applicable to public companies make it more expensive for us to obtain and maintain director and officer liability insurance and we may be required to accept reduced coverage or incur substantially higher costs to obtain coverage. These factors could also make it more difficult for us to attract and retain qualified members of our board of directors, particularly to serve on our audit committee and compensation committee, and qualified executive officers.

Climate change may have a long-term negative impact on our business.

Risks related to rapid climate change and increased regulation regarding environmental, social and governance (“ESG”) matters may have an increasingly adverse impact on our business. While we seek to mitigate our business risks associated with climate change (such as drought, wildfires, hurricanes, increased storm severity and sea level rise), we recognize that there are inherent climate-related risks wherever business is conducted. The frequency and impact of climate-related events have the potential to disrupt our business, the business of our customers and third-party suppliers, and may increase our costs or cause us to experience losses in order to operate the business. Additionally, we may be subject to increased regulations, reporting requirements, standards or expectations regarding the environmental impacts of our business, including, for example with respect to greenhouse gas emissions and/or water and waste management.

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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

~~None.~~Issuer Purchases of Equity Securities

The following table summarizes the Company's share repurchase activity during the three months ended October 31, 2022 (in thousands, except per share amounts):


	Total Number of Shares Purchased (1)	Average Price Paid Per Share (2)		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1)	Maximum Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (1)
August 1 - 31, 2022	—	$	—	—	$	100,000
September 1 - 30, 2022	325	$	61.48	325	$	80,000
October 1 - 31, 2022	—	$	—	—	$	80,000
Total	325			325

(1)In August 2022, the Board of Directors authorized the Share Repurchase Program to repurchase up to $100 million of the Company’s common stock. Under the Share Repurchase Program, shares of common stock may be repurchased from time to time until September 1, 2023 through open market transactions in compliance with applicable securities laws. The timing, manner, price and amount of any repurchases, as well as the capital resources to fund the repurchases, are determined by the Company at its discretion and depend on a variety of factors, including legal requirements, price and economic and market conditions. Refer to Note 10, “Common Stock and Stockholders’ Equity” in Part I, Item 1 of this Quarterly Report for additional information related to the Company’s share repurchases.

(2)Average price paid per share includes costs associated with the repurchases.

Item 3. Defaults Upon Senior Securities.

Not applicable.

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information.

~~Refer~~Not ~~to Note 15, “Subsequent Events” for further details on the Share Repurchase Program~~applicable.

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Item 6. Exhibits.

We have filed the exhibits listed below.

Exhibit Index

Exhibit Number

Incorporated by Reference

Exhibit Description

Form

File No.

Exhibit

Filing Date

10.1*

Form of ~~Performance-Based~~Amendment ~~Restricted~~to ~~Stock~~the ~~Unit~~Company’s ~~Award~~form ~~Agreement~~of ~~(Executive~~Severance ~~Form)~~and ~~under~~Change ~~2016~~in ~~Equity~~Control ~~Incentive~~Agreement ~~Plan~~(Executive Officers)

31.1

Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2

Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1†

Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2†

Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS

Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

101.SCH

Inline XBRL Taxonomy Extension Schema Document.

101.CAL

Inline XBRL Taxonomy Extension Calculation Linkbase Document.

101.DEF

Inline XBRL Taxonomy Extension Definition Linkbase Document.

101.LAB

Inline XBRL Taxonomy Extension Label Linkbase Document.

101.PRE

Inline XBRL Taxonomy Extension Presentation Linkbase Document.

104

Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)


*			Indicates a management contract or compensatory plan.


†			The certifications attached as Exhibit 32.1 and 32.2 that accompany this Quarterly Report on Form 10-Q are not deemed filed with the Securities and Exchange Commission and are not to be incorporated by reference into any filing of Coupa Software Incorporated under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date of this Quarterly Report on Form 10-Q, irrespective of any general incorporation language contained in such filing.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Coupa Software Incorporated

Date:

~~September~~December 612, 2022

By:

/s/ Robert Bernshteyn

Robert Bernshteyn

Chief Executive Officer, Director and Chairman of the Board(Principal Executive Officer)

Date:

~~September~~December 612, 2022

By:

/s/ Anthony Tiscornia

Anthony Tiscornia

Chief Financial Officer(Principal Financial Officer)

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Filing Compare · Coupa Software Inc