Concur Reports Strong Revenue and Earnings For Third Quarter of Fiscal 2010

Company continues to focus investments on strategic priorities including mobile innovation, increased presence in the SMB segment and geographic expansion

REDMOND, Wash., July 28 -- Concur (Nasdaq: CNQR), the world's leading provider of on-demand Employee Spend Management services, today reported financial results for its third fiscal quarter ended June 30, 2010.

Concur reported total revenue for the third quarter of fiscal 2010 of $75.0 million. Total revenue for the quarter was up 20% from the year-ago quarter and up 3% from the prior quarter. Fiscal 2010 third quarter net income was $3.7 million, or $0.07 per share, exceeding company expectations. This compares to net income of $7.2 million, or $0.14 per share, in the year-ago quarter.

“We see a variety of opportunities to continue to grow our business substantively over the next five years," said Steve Singh, chairman and CEO of Concur. "These opportunities include growing our customer base in the markets we currently serve, geographic expansion, addressing the emerging business sector with new solutions like Concur Breeze, and providing a platform within which our customers, partners and suppliers can work together to drive greater efficiency into the corporate travel supply chain. We are committed to investing aggressively against each of these long-term growth opportunities and driving compelling value for our long-term shareholders.”

Singh continued, "We executed exceptionally well across the business in the third quarter of fiscal 2010, resulting in revenue, earnings and cash flow coming in ahead of our expectations. Driven largely by accelerated implementations, our 20% year-over-year revenue growth in the third quarter was particularly satisfying, as it is on top of the 13% year-over-year revenue growth for the same quarter last year, when macro-economic circumstances were especially challenging. Our core market opportunity and the expansion opportunities in which we are investing afford us the opportunity to continue to grow our business substantively over the next decade, as we work to drive compelling value into the corporate travel ecosystem.”

Financial Highlights

  • Total revenue was $75.0 million for the third quarter of fiscal 2010, up 20% compared to the year-ago quarter, and up 3% sequentially.
  • Net income was $3.7 million, or $0.07 per share, for the third quarter of fiscal 2010, compared to $7.2 million, or $0.14 per share, for the year-ago quarter.
  • Non-GAAP pretax income was $16.1 million, or $0.31 per share, for the third quarter of fiscal 2010, compared to $16.5 million, or $0.32 per share, for the year-ago quarter. Non-GAAP net income was $10.1 million, or $0.19 per share, for the third quarter of fiscal 2010, compared to $10.5 million, or $0.20 per share, for the year-ago quarter. Please refer to "About Concur's Non-GAAP Financial Measures" below for an explanation of our non-GAAP financial measures used in this press release.
  • Non-GAAP operating margin was 24% for the third quarter of fiscal 2010, compared to 26% for the year-ago quarter.
  • Cash flows from operations were $24.8 million for the third quarter of fiscal 2010, up 37% from the year-ago quarter. Cash flows from operations were $57.2 million year-to-date for fiscal 2010, up 25% compared to the same period of last year.
  • Concur announced the closing of its offering of $287.5 million aggregate principal amount of 2.5% senior convertible notes due in 2015. The company expects to use the net proceeds from the senior convertible note offering for general corporate purposes, including potential acquisitions and strategic transactions.
  • American Express Company announced that it exercised a warrant to acquire 1.28 million shares of common stock of Concur, which increased American Express’ ownership of Concur common stock from 13 to 15 percent. This exercise yielded proceeds to Concur of approximately $50 million.

Recent Business Highlights

  • Concur and American Express extended their partnership with the launch of a co-branded version of Concur® Breeze, an online expense reporting service for American Express Commercial Card mid-market clients that automates and streamlines the submission, review and approval of all business expenses.
  • Concur announced that Concur Breeze is now available for all users as a mobile application for Android™, BlackBerry® and iPhone smartphones.
  • Concur announced a new agreement with HRS- Hotel Reservation Service that gives mutual clients access to the full HRS hotel content through Concur® Cliqbook Travel and Concur® Travel & Expense.
  • Concur announced a new agreement to integrate hotel content from hotel.info into Concur Travel & Expense and Concur Cliqbook Travel.
  • Concur announced that it extended its partnership with OAG, the global leader in aviation intelligence, for real time flight status information in Concur’s smartphone application, Concur Travel & Expense, and Concur Cliqbook Travel.
  • For the fourth consecutive year, Concur was recognized by Seattle Business Magazine as one of the best 100 companies to work for in Washington. The company was ranked the #3 mid-sized company this year – moving up from #5 last year, #8 in 2008 and #14 in 2007.

Business Outlook

The following statements are based on our current expectations and we do not undertake any duty to update them. These statements are forward-looking and inherently uncertain. Actual results may differ materially as a result of the factors identified below, the factors identified in our public filings made with the Securities and Exchange Commission, or other factors. Please also refer to "About Concur's Non-GAAP Financial Measures" below for an explanation of our non-GAAP financial measures and a reconciliation of those measures to GAAP equivalents.

  • Concur expects revenue for fiscal 2010 to grow 18% year-over-year from fiscal 2009.
  • For the fourth quarter of fiscal 2010, Concur expects net income per share to be $0.06, non-GAAP pre-tax income per share to be $0.29, and non-GAAP net income per share to be $0.18. Non-GAAP pre-tax income for the quarter is expected to include approximately $2.1 million or $0.04 per share of interest expense and fees related to the recently issued 2.5% senior convertible notes. Net income per share is expected to include an additional $2.4 million or $0.04 per share ($1.5 million or $0.03 per share including the impact of income taxes) of non-cash accretion of discount on our recently issued senior convertible notes. All of the above assumes an estimated effective tax rate of 37.5% for the year as a whole.
  • For fiscal 2010, Concur expects net income per share to be $0.39, non-GAAP pre-tax income per share to be $1.20, and non-GAAP earnings per share to be $0.76. Non-GAAP pre-tax income for the fiscal year is expected to include approximately $4.1 million or $0.08 of interest expense and fees related to the recently issued 2.5% senior convertible notes. Net income per share is expected to include an additional $4.7 million or $0.09 per share ($2.9 million or $0.05 per share including the impact of income taxes) of non-cash accretion of discount on our recently issued 2.5% senior convertible notes. All of the above assumes an estimated effective tax rate of 37.5% for the year as a whole.
  • Concur expects fiscal 2010 non-GAAP operating margin to be 23% or more for the year as a whole.
  • Concur expects cash flows from operations in fiscal 2010 to be between $76 million and $78 million, and capital expenditures to be approximately $18 million.

All company or product names are trademarks and/or registered trademarks of their respective owners. iPhone is a trademark of Apple. Other company and product names may be trademarks of their respective owners.

This press release contains forward-looking statements that are inherently uncertain. These forward-looking statements, such as the statements made by Mr. Singh, are based on Concur’s current expectations and involve many risks and uncertainties that could cause actual results to differ materially from current expectations. Factors that could cause or contribute to actual results differing from current expectations include, but are not limited to: adverse economic or market conditions, such as the recent broad recession, which may cause customers and prospects to delay or reduce purchases of our products and services, cause customers to reduce business travel and correspondingly reduce the use of our products and services, reduce the ability of customers, channel partners, vendors and suppliers to fulfill their obligations to us, increase volatility of our stock price and foreign exchange rates, and otherwise adversely affect our operations and financial performance; potential delays in market adoption and penetration of our subscription service offerings; potential difficulties associated with our deployment and support of our products and services; our ability to manage expected growth of our subscription service offerings; the scalability of the hosting infrastructure for our subscription service offerings; potential increases in the rate of attrition of customers of our subscription service offerings; the level of investment in information technology by our customers; the level of business travel that may reduce the use of our products and services or inhibit new sales of our products and services; potential difficulties associated with strategic relationships and with development of new products and services; risks associated with expansion into new geographic markets; uncertain market acceptance of recently-introduced or future products and services; and risks associated with our recent offering of convertible senior notes. Please refer to the company’s public filings made with the Securities and Exchange Commission at www.sec.gov for additional and more detailed information on risk factors that could cause actual results to differ materially from current expectations.Concur assumes no obligation to update the forward-looking information contained in this press release.

 

CONCUR TECHNOLOGIES, INC.

About Concur's Non-GAAP Financial Measures

This release contains non-GAAP financial measures. The tables above reconcile the non-GAAP financial measures to the most directly comparable financial measures prepared in accordance with accounting principles generally accepted in the United States ("GAAP").

Non-GAAP financial measures should not be considered as a substitute for, or as superior to, measures of financial performance prepared in accordance with GAAP. Concur's non-GAAP financial measures do not reflect a comprehensive system of accounting, and they differ from GAAP measures with similar names and from non-GAAP financial measures with the same or similar names that are used by other companies. We strongly urge investors and potential investors in our securities to review the reconciliation of our non-GAAP financial measures to the comparable GAAP financial measures that are included in this release, and our consolidated financial statements, including the notes thereto, and the other financial information contained in our periodic filings with the Securities and Exchange Commission and not to rely on any single financial measure to evaluate our business.

Concur's management believes that its non-GAAP financial measures provide useful information to investors because it allows investors to view the business through the eyes of management. Further, Concur believes that its non-GAAP financial measures provide meaningful supplemental information regarding Concur's operating results because they exclude amounts that Concur excludes as part of its monitoring of operating results and assessing the performance of the business. In addition, Concur believes that its non-GAAP financial measures facilitate the comparison of results for current periods and the business outlook for future periods with results of past periods because the measures provide a special focus on the underlying operating performance of the business relative to expectations.

Concur presents the following non-GAAP financial measures in this release: non-GAAP operating income, non-GAAP operating margin, non-GAAP pre-tax income, non-GAAP net income, non-GAAP diluted pre-tax income per share and non-GAAP diluted net income per share. Concur excludes the following items as noted from these non-GAAP financial measures:

  • Share-based compensation. Concur’s non-GAAP financial measures exclude share-based compensation, which consist of expenses for stock options and restricted stock units (“RSU”). Concur excludes these expenses from its non-GAAP financial measures primarily because they are non-cash expenses that it does not consider part of ongoing operating results when assessing the performance of our business, and the exclusion of these expenses facilitates the comparison of results and business outlook for future periods with results for prior periods.
  • Amortization of intangible assets. In accordance with GAAP, operating expenses include amortization of software and other technology assets, other purchased intangible assets such as customer lists and covenants not to compete. Concur excludes these items from its non-GAAP financial measures because they are non-cash expenses that Concur does not consider part of ongoing operating results when assessing the performance of our business, and Concur believes that doing so facilitates comparisons to its historical operating results and to the results of other companies in our industry, which have their own unique acquisition histories.
  • Accretion of discount on senior convertible notes. In accordance with GAAP, interest expense on the senior convertible notes includes the accretion of the discount, which is a non-cash expense that Concur does not consider part of ongoing operating results when assessing the performance of our business.
  • Income tax expense. Concur excludes this expense from certain non-GAAP financial measures primarily because it is largely a non-cash expense that Concur does not consider a meaningful component of our operating results when assessing the performance of our business, and the exclusion of this expense facilitates the comparison of our business outlook for future periods with results for prior periods, which did not include income tax expense.

Except as noted below, Concur believes that all of the following considerations apply equally to each of the non-GAAP financial measures that we present:

  • Concur’s management uses non-GAAP operating income (including the derived non-GAAP operating margin), non-GAAP pre-tax income, non-GAAP net income, non-GAAP diluted pre-tax income per share and non-GAAP diluted net income per share in internal reports used by management in monitoring and making decisions regarding Concur's business. For example, these measures are used in monthly financial reports prepared for management, and in quarterly reports to Concur's Board of Directors. Concur also uses non-GAAP pre-tax diluted income per share as a measure to determine executive cash incentive compensation.
  • Because share-based compensation, amortization of intangible assets, accretion of discount on senior convertible notes and income tax expense are largely non-cash in nature, Concur believes that non-GAAP operating income, non-GAAP pre-tax income, non-GAAP net income, non-GAAP diluted pre-tax income per share and non-GAAP diluted net income per share provide a more focused view of the operations of its business. In particular, share-based compensation amounts are difficult to forecast, because the magnitude of the charges depends upon the volume and timing of stock option and RSU grants – which are unpredictable and can vary dramatically from period to period – and external factors such as interest rates and the trading price and volatility of Concur’s common stock. Excluding these amounts improves comparability of the performance of the business across periods.
  • The principal limitation of Concur's non-GAAP financial measures is that they exclude significant expenses that are required by GAAP to be recorded. In addition, non-GAAP financial measures are subject to inherent limitations because they reflect the exercise of judgments by management about which charges are excluded from the non-GAAP financial measures.
  • To mitigate this limitation, Concur presents its non-GAAP financial measures in connection with its GAAP results, and recommends that investors do not give undue weight to its non-GAAP financial measures. Concur notes that the dilutive effect of outstanding stock options is reflected in fully-diluted shares outstanding used in calculating GAAP net income per share, non-GAAP diluted pre-tax income per share and non-GAAP diluted net income per share.

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