2007 Concur Annual Report
Stockholder Letter
Our Opportunity
We have a unique opportunity. We are creating a new market. Concur is focused on automating the corporate travel booking and expense reporting processes – transforming manual, expensive, and labor intensive business processes into one quick, simple and efficient process that significantly lowers the cost of doing business for corporate customers. Indeed, with our recent release of Concur® Travel & Expense – featuring Smart Expense™ – Concur has ushered in the era of One Touch Business Travel™, completely transforming the notion of the traditional expense report.
More than 6,200 corporations have chosen Concur to help them manage employee spend. Large and small companies alike see the value in automating their corporate travel booking and expense reporting processes and streamlining the process of managing vendor payments. Last year, we processed more than 34 million transactions representing more than $35 billion dollars of employee spend. It is our hope that over the next decade, tens of thousands of other companies will join these “early adopters” in that choice.
We believe, that over the next decade, the Employee Spend Management market can be a multi-billion dollar market, comparable in size to the 12 billion dollar payroll processing market. Perhaps more importantly, we believe Concur can become a billion dollar company over that period of time. Today, we are the clear leader in our market and we have an opportunity to improve our leadership position as the market grows.
We have an opportunity to become a global brand – to become a company that can deliver great long-term value to our shareholders, our employees and our customers. To do so will require great day-to-day execution, relentless innovation and a long term perspective in building our business. We have been fortunate to be able to combine calculated risk taking with great execution. To understand our business, our opportunity and the nature of our company, it is useful to understand the inflection points of our business.
The Power of On-Demand
In fiscal 2000, we pioneered the idea of on-demand business applications. Today, that idea is revolutionizing the enterprise software market.
Before the advent of on-demand business applications, the use of enterprise-class applications required a significant investment of dollars and resources, and often required years to implement. Not surprisingly, the market for enterprise-class applications was limited to large corporations that could make the large scale investments of dollars and resources required to succeed. But all of that changed through a simple but powerful concept called on-demand computing – in which enterprise applications could be delivered over the web in a “sign up and consume what you need” model.
No more huge up-front costs, no more years of deployment. No more upgrades and invoices every 2 years. On-demand computing brings enterprise level business applications to companies of all sizes. Gartner group estimates that by 2011, 25% of new business applications consumed will be on-demand applications. TripleTree estimates that number to be 40% by 2009. There is no longer any debate about whether or not businesses will adopt on-demand computing. The only question is how fast.
Concur’s leadership role in popularizing on-demand computing was a key inflection point for the company.
The Travel 2.0 Vision
In fiscal 2006, Concur made another game-changing move. Driven by client demand and our vision of a unified corporate travel booking and expense reimbursement process, Concur acquired Outtask and integrated the world’s best online booking tool with the world’s number one expense management service. We believe it was the beginning of an entirely new era in travel and expense management.
Why is it so important to unite the travel booking process with the expense reporting and reimbursement process? Every business traveler will tell you that each business trip begins by booking travel and ends with expense reimbursement. Yet, these business processes are completely disconnected at most companies. Why isn’t the click that books the trip the same click that files the expense report? A simple question, to be sure.
As it turns out the answer is just as simple. Customers are embracing Concur Travel & Expense – the first and only solution that has integrated travel booking and expense reporting – for the simple reasons that it improves the user experience and reduces the cost of doing business. Business travelers have one simple tool that enables them to book their travel and complete their expense reports, with minimal effort. User satisfaction increases, and adoption goes up, leading to increased policy compliance.
Most importantly, through Concur Travel & Expense, companies can now reconcile the three sources of expense information – itinerary data captured at the time of booking, corporate card charges incurred during business travel, and electronic receipts captured directly from the supplier – all within one seamless travel and expense process. Concur Travel & Expense uses these three sources of data to deliver Smart Expenses directly into the expense reporting process - creating trusted, fully reconciled transactions that automatically complete the expense report. With Smart Expenses, expense reports can be automatically completed, audited and paid – all within corporate policy – with very little human intervention. That’s the power of One Touch Business Travel!
Another exciting part of the Travel 2.0 vision is the ability to analyze all of the data around travel. Today, travel data exists in multiple locations – itinerary data, credit card data, supplier contracts, and expense report data. It is not easy to compare booked versus actual. It is not easy to compare corporate travel spend or corporate travel policies to a peer group. Managing supplier contracts against actual spend is a labor intensive task. The ability to look at all of this data in a comprehensive manner is virtually non-existent. We are committed to changing that. With our end-to-end travel and expense service we directly manage the itinerary data, the supplier data and the expense data. Concur can bring all of this data together in a simple, easy to use dashboard and deliver it as an on-demand service.
With each step towards the Travel 2.0 vision, we are dramatically improving the experience for the business traveler and continuing to drive down the cost of doing business for our customers.
Concur’s leadership role in defining and delivering against the Travel 2.0 vision was a key inflection point for the company.
Clearly, calculated risk taking is a key ingredient to building a great company.
Corporate Objectives
Our corporate objectives for the next 5 years are exactly the same as our corporate objectives of the past 5 years. We need to drive scale. We need to increase our investments in distribution and marketing programs to develop the market and increase market penetration. We need to drive innovation at an even faster pace, increasing the value that our customers receive from our services. We need to continue to invest aggressively to exceed the service expectations of our customers and drive even more operating leverage in the business.
Accomplishments of the Past Year
By any measure, fiscal 2007 was an incredible year for Concur.
As compared to the prior year, total revenue was up 33% to $129 million. Non-GAAP EPS was up 52% to $0.54 per share. Free cash flow generated by the business grew to $20 million from $1 million the year before. Non-GAAP operating margin increased to 17% from 15% in the prior year. We added more than 2,000 customers during the course of the year while we grew direct distribution by 60%. We launched Concur Travel & Expense with Smart Expenses. We signed hundreds of Concur® Connect partnerships with leading corporate travel suppliers such as Avis, Hertz, InterContinental Group, and SNCF. And we launched Concur® Vendor Payment to broaden our footprint within organizations already using our travel and expense services to enable them to streamline their processes around managing vendor payments.
We increased our footprint in the expense management market through industry leading organic growth. We further increased our footprint in the expense management market with the acquisition of Gelco on October 1, 2007.
The accomplishments of the past year are the direct result of the commitment and hard work of more than 800 incredible individuals – all of whom are dedicated to the interests of our customers, our shareholders and our partners. Clearly, the largest contributors to our success are our customers. They are dedicated and avid supporters of our company with whom we have a mutually enriching relationship. We are grateful for the opportunity to serve them.
Thank You
I’ve outlined a broad vision for Concur, one that is well under way and promises to revolutionize the travel and expense process for thousands of companies around the globe. Concur is well positioned to capture an increasingly larger share of this market. We have an opportunity to build an enduring and prosperous company for our shareholders, our customers and ourselves. We are committed to that goal.
How should you measure our progress against that goal? Very simple - vision must always be measured through tangible results - revenue and earnings growth. This year, we expect to grow revenue 58% to $204 million and earnings by 37% to $0.74 per share. On behalf of the Board of Directors, our executive staff and every member of the Concur team, thank you for your continued support of our company.
Steve Singh
Chairman of the Board and Chief Executive Officer
Concur
January 30, 2008