Concur Exceeds Revenue and Earnings Expectations for Third Quarter of Fiscal 2012

REDMOND, Wash., Aug. 1, 2012 /PRNewswire/ -- Concur (Nasdaq: CNQR) today reported financial results for its third fiscal quarter ended June 30, 2012.

Concur reported total revenue for the third quarter of fiscal 2012 of $113.2 million, up more than 26% from the year-ago quarter and up more than 4% from the prior quarter. Fiscal 2012 third quarter non-GAAP pre-tax income was $19.2 million, or $0.34 per share.

"The third quarter of fiscal 2012 was a very strong quarter, as revenue, non-GAAP operating margin, non-GAAP earnings, and cash flow came in well ahead of our expectations," said Steve Singh, chairman and CEO of Concur. "Our core business continues to perform ahead of our expectations across all geographies and channels. Led specifically by exceptionally strong performance within the SMB market segment, we signed a total of more than 1,000 new customers in the third quarter. We were also selected by the U.S. GSA to power their $1.4 billion ETS2 program."

Singh continued, "With the launch of Concur Open Booking and the enthusiastic embrace of the Concur T&E Cloud from a broad range of leading providers – including Avis, Starwood and TangoCard to name just a few – we continue to drive and enable the innovation curve in our industry. Looking ahead, given our revenue outperformance for the first three quarters of the fiscal year, we are raising our non-GAAP operating margin, earnings, and free cash flow expectations for the full fiscal year.  Given the strength of new customer growth, we expect to exit calendar 2012 with an estimated $500 million annual revenue run-rate. We are pleased with the progress we are making against our investment objectives. We plan to double our distribution capacity as we continue to build upon our leading position within the industry. These investments will help us continue to drive strong revenue growth in the years ahead."

Financial Highlights

• Total revenue was $113.2 million for the third quarter of fiscal 2012, up more than 26% compared to the year-ago quarter, and up more than 4% sequentially.
• Non-GAAP pre-tax income was $19.2 million, or $0.34 per share, for the third quarter of fiscal 2012, compared to $16.0 million, or $0.29 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 18.9% for the third quarter of fiscal 2012, compared to 19.8% for the year-ago quarter.
• GAAP cash flows from operations were ahead of our expectations at $25.1 million for the third quarter of fiscal 2012.
• GAAP net income was $6.9 million, or $0.12 per share, for the third quarter of fiscal 2012, compared to GAAP net income of $2.3 million, or $0.04 per share, for the year-ago quarter.

Recent Business Highlights

• Concur announced that its integrated travel and expense management solution has been selected to power the U.S. General Services Administration (GSA) program for managing online bookings, travel authorizations and voucher processing.
• The Concur® T&E Cloud, Concur® Open Booking and Concur® Big Data are all cornerstones of innovation driving The Perfect Trip™. Recent highlights supporting this traveler-centric vision include:

• The Perfect Trip
  • Marquee hotel and car rental companies – including Avis Budget Car Rental, Best Western International, Choice Hotels International, Inc., The Hertz Corporation, InterContinental Hotels Group, La Quinta Inns & Suites, Marriott International and Starwood Hotels & Resorts Worldwide, Inc. – announced support for Concur Open Booking.
  • Concur announced an agreement that will enable business travelers to purchase Gogo in-flight Internet sessions within the travel booking experience delivered through the Concur T&E Cloud.
  • TripIt Itinerator™ email parsing technology is now included inside Concur's solutions, so that travelers and arrangers using Concur Travel can build a single consolidated itinerary combining traditional GDS and direct connect bookings with travel booked outside of Concur.
  • Travelers now have an easier way to find nearby restaurants or shops, upload photos, make changes to their itineraries from anywhere, and even access past trips on-the-go with the latest updates to TripIt for iPhone and iPad.
  • Employees can see their colleagues' detailed itineraries and sync their own calendar with the office travel calendar now available in TripIt for Business.

• The Concur T&E Cloud
  • Concur Open Booking – the corporate travel option that enables business travelers to book hotels and rental cars outside Concur Travel while still capturing and providing complete visibility into travel transaction and itinerary data – made its debut at the GBTA 2012 Convention in Boston. In conjunction with this initiative, and in support of the Open Travel Alliance hotel specification which is being driven by a broad coalition of Concur clients representing billions of dollars in travel spend, Concur also released an API that will enable suppliers to make their content available directly to Concur clients.
  • Cleartrip, India's leading online travel portal, announced its intention to make its market-leading Indian hotel content available to Concur clients directly through Concur Travel.
  • Travelers in Germany can now compare air and rail pricing side-by-side, while still completing their purchase on the familiar Deutsche Bahn website.

• Concur Big Data
  • Leveraging transaction data from over 18 million travelers, Concur and TripIt provide personalized hotel recommendations based on the traveler's past trips and preferences in accordance with their company's travel policy.

• Concur announced the addition of invoice management to its mid-market suite of solutions.
• Concur announced that the Concur Small Business edition now brings more ease to expense reporting with a new dashboard-like homepage and time-saving tips.
• Gartner, Inc. has ranked Concur as the largest SaaS provider within the ERP market based on total software revenue for 2011. Additionally, Gartner, Inc. has ranked Concur as one of the top ten market share leaders in ERP Software Worldwide based on total software revenue for 2011 (Gartner, Inc., Market Share Analysis: ERP Software, Worldwide 2011, Chris Pang, April 24, 2012).

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 the fourth quarter of fiscal 2012 to grow approximately 24% year-over-year from the fourth quarter of fiscal 2011.
• Concur is maintaining expectations for fiscal 2012 revenue growth of approximately 26% year-over-year from fiscal 2011.
• Concur now expects fiscal 2012 non-GAAP operating margin to be 19%, up from 18.5%, for the year as a whole.
• For the fourth quarter of fiscal 2012, Concur expects non-GAAP pre-tax income per share to be $0.38.  Non-GAAP pre-tax income excludes the effects of non-cash related items such as stock-based compensation expenses, amortization of intangible assets, and the accretion of the discount on our senior convertible notes.  It also excludes the non-cash accounting implications and cash fees and expenses of acquisitions and other related strategic activity in which the Company may deploy capital. 
• Concur raises expectations for fiscal 2012 non-GAAP pre-tax income per share to $1.37.
• Concur raises expectations for cash flows from operations in fiscal 2012 to be at least $88 million, excluding one-time acquisition and other related costs. The company expects capital expenditures to be between $36 million and $38 million.

All company or product names are trademarks and/or registered 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: potential difficulties in connection with recent business and asset acquisitions, including achievement of the anticipated benefits of these acquisitions or the broader integration of such businesses with Concur; adverse economic or market conditions, 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 and security of the hosting infrastructure for our subscription service offerings; risks associated with the privacy and protection of information while in our possession; 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 or difficulties associated with expansion into new geographic markets; uncertain market acceptance of recently-introduced or future products and services; and risks associated with our financing activities.

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 operating expense, non-GAAP pre-tax income, non-GAAP cost of operations, non-GAAP sales and marketing expenses, non-GAAP systems development and programming expenses, non-GAAP general and administrative expenses, non-GAAP diluted shares, and non-GAAP diluted pre-tax 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 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 acquired intangible assets such as customer relationships and technology. Concur excludes these items from its non-GAAP financial measures because they are typically static 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.
• Acquisition and other related costs.   We have excluded the effect of acquisition and other related costs from our non-GAAP financial measures. We incurred such expenses in connection with our acquisitions which we generally would not have otherwise incurred in the periods presented as a part of our continuing operations. We also believe it is useful for investors to understand the effects of these items on our operations.   Acquisition and other related costs include transaction fees, due diligence costs, travel expenses, and other one-time direct costs associated with strategic activity in which we may deploy capital.
• Revaluation of contingent consideration. The authoritative guidance on business combinations requires contingent consideration to be recorded at fair value on the acquisition date.  The authoritative guidance also requires that changes in the fair value of the contingent consideration subsequent to the acquisition date be recorded in our statements of income.  Under the prior authoritative guidance, contingent consideration would have been included as a component of deal consideration based on the actual amount paid, if any, when the contingency was resolved.  Concur's non-GAAP financial measures exclude the revaluation of contingent consideration, which is the change in fair value of the liability-classified acquisition-related contingent consideration. Concur excludes the unrealized gains or losses from the re-measurement of the contingent consideration from its non-GAAP financial measures in order to facilitate the comparison of post-acquisition operating results.  We believe it is useful for investors to understand the effects of these items on our operations.
• Contingent consideration (included in compensation expense).  Concur's non-GAAP financial measures exclude contingent consideration included in compensation expense which relates to the potential cash payment to certain TripIt employees whose right to receive such payment is forfeited if they terminate their employment.  The contingent cash payment that these employees are entitled to receive is part of the consideration that all TripIt shareholders received from Concur in exchange for their TripIt shares.  As receipt of the contingent payment is subject to continued employment, GAAP requires that it be accounted for as compensation expense and such expense is also subject to revaluation similar to the item above "revaluation of contingent consideration".  Concur excludes this item from its non-GAAP financial measures primarily because it is a component of the deal consideration 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 post-acquisition operating results.
• Noncontrolling interest joint venture. Noncontrolling interest joint venture includes income or loss from operations due to our joint venture partner and is excluded from the calculation of non-GAAP operating income because it is unrelated to our ownership in the venture.
• Loss from equity investments. For investments under the equity method, Concur recognizes its share of the earnings or losses of an investee and adjusts the carrying amount of an investment for its share of the earnings or losses of the investee, including adjustments to recognize certain differences between our carrying value and our equity in net assets, after the date of investments. Concur's non-GAAP financial measures excluded the earnings or losses from GAAP income because it is unrelated to our ongoing operations and is significantly impacted by factors outside our direct control.
• Accretion of note discount.  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 (benefit).  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 (benefit) facilitates the comparison of our business outlook for future periods with results for prior periods.

Further, for calculating non-GAAP pre-tax income per share:

• Pre-tax income is adjusted for the impact of the non-GAAP adjustments described above.
• Non-GAAP diluted shares are adjusted to include the anti-dilutive impact of options to purchase shares of our own stock that reduce the potential economic dilution upon conversion of our senior convertible notes.  Under GAAP, the anti-dilutive impact of such call options ("Senior Convertible Notes Hedge") is not reflected in diluted shares. Concur has included the anti-dilutive impact of the Senior Convertible Notes Hedge  in non-GAAP diluted shares because we believe it is useful for investors to understand their economic effects.
• The dilutive effect of all unvested share-based awards are included in the calculation of non-GAAP pre-tax income per share.

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 operating expense, non-GAAP pre-tax income and non-GAAP diluted pre-tax 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 (benefit) are largely non-cash in nature, Concur believes that non-GAAP operating income, non-GAAP operating expense, non-GAAP diluted shares, non-GAAP pre-tax income and non-GAAP diluted pre-tax 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 RSU grants. 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.

About Concur

Concur® is a leading provider of integrated travel and expense management solutions for companies of all sizes. Concur's easy-to-use web-based and mobile solutions help companies and their employees control costs and save time. Learn more at www.concur.com.

SOURCE Concur

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