Concur Misses by a Penny – Analyst Blog

Concur Technologies Inc.’s (CNQR) revenues for the second quarter of 2010 reached an all-time high at $72.8 million, driven by 8% quarter-over-quarter growth in revenue. This growth was driven in part by faster-than-expected deployments of new customers and in part, by stronger-than-expected transactional volume. There was a 17% year-over-year growth in revenue for the reported quarter, especially in light of the strong growth in the year-ago quarter. Net income was $6.8 million, or 13 cents per share, compared to the Zacks Consensus Estimate of 14 cents.

 

Travel transactions in the quarter were ahead of our expectations and are clearly trending back towards the waterline. However, it’s important to note it is still well below pre-recession levels. Based on recovery periods from prior recessions, it will likely take until late 2011 before travel spend fully recovers to pre-recession levels.

 

In support of the first growth initiative, which is to expand its base of customers in the markets it currently serves, it continues to expand its internal distribution capacity and investments and market development. As a result, it saw strong new customer growth in the quarter and expects the demand environment for its services to remain strong throughout the fiscal year.

 

In support of the second growth initiative, geographic expansion into new markets, it continues to increase its internal distribution capacity, its investments in market development and local product development capacity across Europe. In the reported quarter, it entered a strategic partnership with Amadeus, the leading GDS in Europe. It has completed the integration of Amadeus’ core distribution technology into Concur Travel. It is expected that this partnership will drive new customer growth towards the end of this fiscal year or the early part of fiscal 2011.

 

In the third growth initiative, it is investing to deliver Employee Spend Management services for emerging businesses on a global basis. It defines an emerging business as companies that employ between 1 and 250 employees.

 

Cash flows in the quarter followed its strong earnings performance with cash flow from operations totaling $18.2 million. And after capital investments of $4 million, free cash flow was $14.2 million, up 35% sequentially.

 

Based on strong revenue performance as well as strong contract signings, deferred revenue grew to nearly $55 million by quarter end, reflecting 8% sequential growth and 24% growth over the same period of the prior year. The company issued $250 million in convertible debentures due in April 2015, bearing interest at 2.5%. It also issued an additional $37.5 million in debentures just after quarter end, with the exercise of the green issue. These will be reflected on its balance sheet in the third quarter of fiscal 2010.

 

The company expects revenue growth in the third quarter to increase over that of the reported quarter, reaching 18% over the same period of last year, and then improving even further in the fourth quarter. It believes that as the global economy gradually regains its footing, there will continue to be opportunities for it to strengthen its leadership position, especially in new markets and through new service offerings, such as Concur Breeze.

 

During the second quarter, Concur released Concur® Breeze, the new online expense reporting service designed specifically for small and mid-sized businesses, with a free 30-day trial.

 

We currently have a Neutral recommendation on Concur.