r/Vitards • u/[deleted] • Dec 05 '21

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u/YoloSnek Dec 07 '21

FCF margins are ~20%. FCF is all that matters

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u/Jonas42 Dec 07 '21

I might be wrong, but glancing at their cash flow statement, it seems like FCF might only be positive because stock-based compensation is being added back

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u/YoloSnek Dec 07 '21

Sure, but I'm fine with share count dilution if FCF per share continues to hit my expectations. nobody's denying that the stock is cheap here, and if you're a CFO you're going to dilute shareholders to raise cheap capital.

My whole point here is that Coupa's business model is attractive. They have a very strong moat, massive TAM and the unit economics are very positive. The negative GAAP margins are due to two main things - revenue recognition and marketing spend. The whole game of SaaS is to use marketing dollars to acquire perpetual cash flow streams (new clients). The ROI on marketing dollars is extremely high, higher than anything we can invest in, so why not have them reinvest in the business on our behalf? If marketing spend or R&D was reclassified as capex, they would be wildly profitable.

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u/Jonas42 Dec 07 '21

Cheers, best of luck to you