Concur Exceeds Revenue and Earnings Expectations for 3rd Quarter Fiscal 2007

REDMOND, Wash., August 1, 2007 - 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, 2007.

Concur reported total revenue for the third quarter of fiscal 2007 of $33.3 million, driven by subscription revenue which was up 35% from the year-ago quarter. Total revenue for the quarter was up 24% from the year-ago quarter and up 8% sequentially. Fiscal 2007 third quarter net income, which includes income tax expense of $1.8 million, was $1.8 million, or $0.04 per share, and was above company expectations.

"The third quarter of fiscal 2007 was an exceptional quarter for the company as we exceeded our revenue, earnings and cash flow expectations.Concur is delivering on our vision to align technology, suppliers and service providers with the needs of our clients to drive costs out of their businesses," said Steve Singh, chairman and CEO of Concur. "By delivering innovations like Smart Expense - which shatter the very notion of a traditional expense report - Concur is driving strong adoption by our clients and continued validation by some of the leading suppliers and service providers within the business travel industry."

Singh continued, "Looking ahead we are raising our revenue, earnings and cash flow guidance for fiscal 2007.Upon the completion of the Gelco acquisition, which we expect to occur during the first quarter of fiscal 2008, we expect to add an additional $9 million of subscription revenue per quarter, while maintaining our total revenue growth target of 25% per year."

Financial Highlights

  • Total revenue was $33.3 million for the third quarter of fiscal 2007, up 24% compared to the year-ago quarter and up 8% sequentially.

  • Net income was $1.8 million, or $0.04 per share, for the third quarter of fiscal 2007 and included income tax expense of $1.8 million, compared to $31.6 million, or $0.79 per share, for the year-ago quarter which did not include a similar charge for income taxes.During the third quarter of fiscal 2006, Concur released a portion of its reserves against deferred tax assets, and beginning in the fourth quarter of fiscal 2006, Concur began recording income tax expense.

  • Non-GAAP pretax income was $6.0 million, or $0.15 per share, for the third quarter of fiscal 2007, compared to $4.6 million, or $0.12 per share, for the year-ago quarter.Please refer to "About Concur's Non-GAAP Financial Measures" below.

  • Non-GAAP operating margin was 19% for the third quarter of fiscal 2007, up from 18% for the year-ago quarter and up from 17% sequentially.

  • Cash flows from operations were $8.8 million for the third quarter of fiscal 2007, up 86% from the year-ago quarter.

  • Deferred revenue was $29.7 million for the third quarter of fiscal 2007, up 19% compared to the year-ago quarter and up 7% sequentially.

Recent Business Highlights

  • Concur unveiled Travel and Expense 2.0, which features Smart Expense™ – the game-changing innovation that virtually eliminates traditional expense reports and delivers One Touch Business Travel™.

  • Concur launched Concur® Connect which enables travel suppliers to offer Concur clients direct access to full content, affinity programs and e-receipts.

  • Concur introduced the Concur Travel Management Company (TMC) Partnership Program, which enables participating TMC's to deliver Concur's end-to-end travel and expense management service to their clients.

  • Concur expanded European distribution through partnerships with BCC Corporate and Nordea, which provides thousands of corporate card clients with access to Concur's services.

  • Concur announced enhanced global capabilities for European business travelers, providing direct access to content, affinity programs and electronic receipts from VIA Rail, SNCF, Rail1, Die Bahn and Evolvi.

  • Concur announced key contracts awarded in the third quarter of fiscal 2007 – which helped push the company's customer base over the 5,000 client plateau –  including Agility, Akebono Brake Corporation, Appleton Papers, Chefs Warehouse, Crowley Maritime Corporation, Dollar Tree Stores Inc., Ensemble Chimes Global, Fannie Mae, Garrison Investment Group, Hancock Holding Company, Hawker Beechcraft Corporation, Inalfa Roof Systems, Independent Bank Corporation, Levi Strauss, Mandate Pictures, Psilos Group Managers, The Kor Group, The Linc Group, USA Mobility Wireless, Inc. and Woodforest Financial Group, Inc.

  • Concur was selected by BusinessWeek Magazine to its "100 Hot Growth Companies" list.

  • Concur was selected by Fortune Small Business Magazine to its "America's 100 Fastest Growing Small Companies" list.

  • Concur was selected by Business 2.0 Magazine to its "100 Fastest-Growing Tech Companies" list.

  • Concur was ranked fourth by The Seattle Times on its "Northwest 100" list.

  • Concur was selected by Washington CEO Magazine as one of "Washington's 100 Best Companies To Work For".

Acquisition Highlights

  • Concur agreed to acquire privately-held H-G Holdings, Inc. and its subsidiaries, including Gelco Information Network, Inc., the owner of Gelco Expense Management (Gelco). Gelco provides a wide range of expense management services to its clients, including ExpenseLink.

  • Gelco has over 1,200 clients in a wide range of industries with over 625,000 On-Demand service users.

  • Concur expects the acquisition to close during the first quarter of fiscal 2008.

  • Concur expects the acquisition to add $9M per quarter in revenue after closing.

  • Concur expects the acquisition to be accretive to pro forma earnings in fiscal 2008.

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 ("SEC"), 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 accounting principles generally accepted in the United States ("GAAP").

  • Concur expects total revenue to be $33.6 million for the fourth quarter of fiscal 2007, and to be $127 million for fiscal 2007.

  • Concur expects earnings per share for the fourth quarter of fiscal 2007 to be $0.03 assuming an estimated effective tax rate of 55% and non-GAAP pre-tax earnings per share to be $0.13. 

  • Concur expects earnings per share for fiscal 2007 to be $0.13 assuming an estimated effective tax rate of 55% and non-GAAP pre-tax earnings per share to be $0.51.

Concur expects the fiscal 2007 non-GAAP operating margin to be between 16% and 17% for the year as a whole.

About Concur Technologies, Inc.

Concur Technologies, Inc. is the world's leading provider of on-demand Employee Spend Management services. Concur enables organizations to globally control costs by automating the processes they use to manage employee spending. Concur's end-to-end solutions seamlessly unite online travel booking with automated expense reporting, streamline meeting management and optimize the process of managing vendor payments, employee check requests and direct reimbursements. Organizations of all sizes trust Concur to help them control spend before it occurs while eliminating paper and optimizing supplier relations. Concur's unified approach to managing employee spend delivers a 360° view into all employee expenses, helping companies globally enforce policies and monitor vendor compliance, while delivering unprecedented control and valuable insight. Concur's suite of on-demand services reach millions of employees across thousands of organizations around the world - streamlining business processes, reducing operating costs, improving internal controls and providing enhanced visibility and actionable expense analysis. More information about Concur is available at www.concur.com.

# # #

All company or product names are trademarks and/or registered trademarks of their respective owner.

This press release contains forward-looking statements that are inherently uncertain. These forward-looking statements, such as the statements made by Mr. Singh, including the anticipated benefits of the acquisition of H-G Holdings, Inc. and the anticipated timing of completion of such acquisition, and the statements in the Business Outlook & Acquisition Highlights sections, 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: potential difficulties in completing the acquisition of H-G Holdings, Inc.; 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, including those integrating the Gelco expense management service; 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, including those incorporating Gelco's offerings; risks associated with expansion into new geographic markets; the lengthy sales cycle for our products and services; and uncertain market acceptance of recently-introduced or future products and services.

Please refer to the company's public filings made with the SEC (http://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.

Investor Contact:
John Adair, Concur Technologies, Inc., 425-497-6439, johna@concur.com

Press Contact:
Stefanie Johansen, Weber Shandwick for Concur, 425-452-5468,sjohansen@webershandwick.com

                          Concur Technologies, Inc.
                        Consolidated Income Statements
                    (in thousands, except per share data)
                                 (Unaudited)
                                             Three months      Nine months
                                                ended             ended
                                               June 30,          June 30,
                                            2007     2006     2007     2006

    Revenues:
      Subscription                         $30,233  $22,385  $83,627  $56,790
      Consulting and other                   3,037    4,489    9,733   12,863
    Total revenues                          33,270   26,874   93,360   69,653

    Expenses:
      Cost of operations                    11,037   10,153   32,324   27,779
      Sales and marketing                    9,380    6,067   24,469   16,491
      Systems development and programming    3,766    3,793   11,387    9,057
      General and administrative             4,618    3,546   13,315   10,288
      Amortization of intangible assets        774      706    2,382    1,597
    Total expenses                          29,575   24,265   83,877   65,212

    Operating income                         3,695    2,609    9,483    4,441

    Other income (expense):
      Interest income                          239      130      634      365
      Interest expense                        (386)    (369)  (1,099)    (588)
      Other, net                                (3)      69       91      (79)
    Total other expense, net                  (150)    (170)    (374)    (302)

    Income before income tax                 3,545    2,439    9,109    4,139

    Income tax expense (benefit)             1,784  (29,120)   5,010  (29,000)

    Net income                              $1,761  $31,559   $4,099  $33,139

    Net income per share available to
     common stockholders:
      Basic                                  $0.05    $0.88    $0.11    $0.96
      Diluted                                 0.04     0.79     0.10     0.85

    Weighted average shares used in
     computing net income per share:
      Basic                                 37,912   35,914   37,159   34,695
      Diluted                               41,117   39,912   40,618   38,908



                          Concur Technologies, Inc.
                         Consolidated Balance Sheets
                   (in thousands, except per share amounts)

                                                 June 30,        September 30,
                                                   2007              2006
                                               (Unaudited)
    Assets

    Current assets:
      Cash and cash equivalents                   $25,185             $16,334
      Accounts receivable, net of
       allowance of $2,405 and $1,544              25,300              22,734
      Prepaid expenses                              1,601               1,368
      Deferred income taxes, net                    2,715               2,759
      Other current assets                          7,852               5,883
    Total current assets                           62,653              49,078
    Property and equipment, net                    23,699              20,429
    Intangible assets, net of
     amortization                                  11,188              13,570
    Goodwill                                       65,628              65,628
    Deferred income tax assets, net                19,994              24,839
    Deposits and other long-term assets             9,711               7,775
    Total assets                                 $192,873            $181,319

    Liabilities and stockholders' equity

    Current liabilities:
      Accounts payable                             $4,625              $2,551
      Accrued compensation                          7,307               5,052
      Acquisition-related liabilities                 855               8,826
      Other accrued liabilities                     3,843               3,415
      Current portion of long-term debt             6,000               3,312
      Current portion of deferred rent                401                 240
      Current portion of deferred
       revenues                                    20,880              15,974
    Total current liabilities                      43,911              39,370
    Long-term debt, net of current
     portion                                        5,369              13,520
    Deferred rent, net of current portion           2,530               2,827
    Deferred revenues, net of current
     portion                                        8,847               8,208
    Total liabilities                              60,657              63,925

    Commitments and contingencies

    Stockholders' equity:
      Convertible preferred stock, par
       value $0.001 per share                          --                  --
         Authorized shares: 5,000; No
          shares issued or outstanding
      Common stock, $0.001 par value                   38                  36
         Authorized shares: 60,000
         Shares issued and outstanding:
          38,102 and 36,142
         Issuable shares: 0 and 284
      Additional paid-in capital                  297,701             287,382
      Accumulated deficit                        (166,138)           (170,237)
      Accumulated other comprehensive
       income                                         615                 213
    Total stockholders' equity                    132,216             117,394
    Total liabilities and stockholders'
     equity                                      $192,873            $181,319



                          Concur Technologies, Inc.
                      Consolidated Cash Flow Statements
                                (in thousands)
                                 (Unaudited)
                                         Three months ended  Nine months ended
                                               June 30,          June 30,
                                            2007     2006     2007     2006

    Operating activities:
    Net income                              $1,761  $31,559   $4,099  $33,139
    Adjustments to reconcile net income to
     net cash provided by operating
     activities:
      Amortization of intangible assets        774      706    2,382    1,597
      Depreciation                           2,412    1,358    6,484    3,676
      Provision for doubtful accounts
       receivable                              149      393      935    1,382
      Share-based compensation expense       1,694    1,474    3,991    3,446
      Deferred income taxes                  1,740  (29,085)   4,890  (29,085)
      Changes in operating assets and
       liabilities, net of effects from
       acquisition:
        Accounts receivable                 (3,683)    (171)  (3,452)  (5,376)
        Prepaid expenses, deposits and
         other assets                       (1,619)  (1,323)  (4,047)  (3,927)
        Accounts payable                      (582)  (1,669)    (551)     494
        Accrued liabilities                  4,285      720    4,884     (113)
        Deferred revenues                    1,901      795    5,526    3,671
    Net cash provided by operating
     activities                              8,832    4,757   25,141    8,904
    Investing activities:
      Purchases of property and equipment   (4,133)  (2,773)  (9,673)  (7,684)
      Payments for acquisition, net of
       cash acquired                            --      608   (7,750) (21,900)
    Net cash used in investing activities   (4,133)  (2,165) (17,423) (29,584)
    Financing activities:
      Proceeds from borrowings              11,369       --   11,369   18,000
      Proceeds from issuance of common
       stock from exercise of stock
       options                               1,901    1,469    7,413    4,177
      Proceeds from issuance of common
       stock from employee stock purchase
       plan                                    197      191      616      605
      Payments on repurchase of common
       stock                                    --       --   (1,853)      --
      Repayments on borrowing              (15,620)    (630) (16,832)  (1,260)
    Net cash provided by financing
     activities                             (2,153)   1,030      713   21,522
      Effect of foreign currency exchange
       rate changes on cash and cash
       equivalents                             187      131      420       49
    Net increase (decrease) in cash and
     cash equivalents                        2,733    3,753    8,851      891
    Cash and cash equivalents at beginning
     of period                              22,452   13,340   16,334   16,202
    Cash and cash equivalents at end of
     period                                $25,185  $17,093  $25,185  $17,093



                          Concur Technologies, Inc.
            Reconciliation of GAAP to Non-GAAP Financial Measures
               (in thousands, except per share and margin data)
                                 (Unaudited)

                               Three months ended        Nine months ended
                                    June 30,                  June 30,
                               2007         2006         2007         2006
    Operating income:
      Operating income        $3,695       $2,609       $9,483       $4,441
      Income from operations
       as a % of total
       revenue (Operating
       Margin)                   11%          10%          10%           6%
      Add back:
        Effect of share-based
         compensation on
         operating income      1,694        1,474        3,991        3,446
        Effect of amortization
         of intangibles on
         operating income        774          706        2,382        1,597
      Non-GAAP operating
       income                 $6,163       $4,789      $15,856       $9,484
        Non-GAAP operating
         income as a % of
         total revenue
         (Non-GAAP Operating
         Margin)                 19%          18%          17%          14%

    Net income to pretax
     income:
      Net income              $1,761      $31,559       $4,099      $33,139
      Add back:
       Share-based
        compensation           1,694        1,474        3,991        3,446
       Amortization of
        intangibles              774          706        2,382        1,597
       Income tax expense
        (benefit)              1,784      (29,120)       5,010      (29,000)
      Non-GAAP pretax income  $6,013       $4,619      $15,482       $9,182

    Diluted income per share:
      Diluted income per
       share                   $0.04        $0.79        $0.10        $0.85
      Add back:
       Effect of share-based
        compensation on
        income per share        0.04         0.04         0.10         0.09
       Effect of amortization
        of intangibles on
        income per share        0.02         0.02         0.06         0.05
       Provision for income
        taxes
                                0.05        (0.73)        0.12        (0.75)
      Non-GAAP pretax diluted
       income per share        $0.15        $0.12        $0.38        $0.24

    Shares used in calculation
     of basic and diluted
     non-GAAP income per
     share:
      Basic                   37,912       35,914       37,159       34,695
      Diluted                 41,117       39,912       40,618       38,908
 

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 SEC and not to rely on any single financial measure to evaluate our business.

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. Concur believes that its non-GAAP financial measures also facilitate the comparison of results for current periods and business outlook for future periods with results of past periods. Concur presents the following non-GAAP financial measures in this release: non-GAAP operating income; non-GAAP operating margin; non-GAAP net income; and non-GAAP pre-tax earnings per share. Concur excludes the following items as noted from these non-GAAP financial measures:

  • Share-based compensation expenses. Concur's non-GAAP financial measures exclude share-based compensation expenses, which consist of expenses for stock options and restricted stock units ("RSU") that it records under the provisions of Statement of Financial Accounting Standard No. 123(R). 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, which did not include share-based compensation expenses.

  • Amortization of acquired 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.

  • Income tax expense (benefit).In accordance with GAAP, Concur began recording income tax expense in the fourth quarter of fiscal 2006.Concur excludes this expense from its non-GAAP financial measures primarily because it is largely a non-cash expense that Concur does not consider part of ongoing operating results when assessing the performance of its business, and the exclusion of this expense facilitates the comparison of 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 net income, non-GAAP earnings per share and non-GAAP pre-tax earnings 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 earnings per share and non-GAAP pre-tax earnings per share as measures that determines executive cash incentive compensation, along with GAAP measures, such as revenue.

  • Because share-based compensation, amortization of acquired intangible assets are non-cash in nature and income tax expense is largely non-cash in nature, Concur believes that non-GAAP operating income, non-GAAP net income, non-GAAP earnings per share and non-GAAP pre-tax earnings 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. In addition, the income tax expense can vary significantly because losses in its foreign operations are not included in the calculation of the consolidated income tax expense as we have not yet released the reserves against the deferred tax assets for our foreign operations.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 options is reflected in fully-diluted shares outstanding used in calculating both GAAP earnings per share and our non-GAAP earnings per share.

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, facilitates comparison of its results across historical and future periods, and because its non-GAAP financial measures provide a special focus on the underlying operating performance of the business relative to expectations.

All company or product names are trademarks and/or registered trademarks of their respective owners.

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