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
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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.
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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.
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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.
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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.
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Cash flows from operations were $8.8 million for the third quarter of fiscal 2007, up 86% from the year-ago quarter.
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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
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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™.
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Concur launched Concur® Connect which enables travel suppliers to offer Concur clients direct access to full content, affinity programs and e-receipts.
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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.
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Concur expanded European distribution through partnerships with BCC Corporate and Nordea, which provides thousands of corporate card clients with access to Concur's services.
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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.
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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.
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Concur was selected by BusinessWeek Magazine to its "100 Hot Growth Companies" list.
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Concur was selected by Fortune Small Business Magazine to its "America's 100 Fastest Growing Small Companies" list.
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Concur was selected by Business 2.0 Magazine to its "100 Fastest-Growing Tech Companies" list.
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Concur was ranked fourth by The Seattle Times on its "Northwest 100" list.
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Concur was selected by Washington CEO Magazine as one of "Washington's 100 Best Companies To Work For".
Acquisition Highlights
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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.
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Gelco has over 1,200 clients in a wide range of industries with over 625,000 On-Demand service users.
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Concur expects the acquisition to close during the first quarter of fiscal 2008.
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Concur expects the acquisition to add $9M per quarter in revenue after closing.
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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").
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Concur expects total revenue to be $33.6 million for the fourth quarter of fiscal 2007, and to be $127 million for fiscal 2007.
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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.
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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.
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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:
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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.
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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.
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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:
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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.
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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.
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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.
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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.
