Concur Technologies Inc.‘s (CNQR) revenues for the fourth quarter of 2010 reached an all-time high at $77.5 million, up 20% year over year. Net income in the quarter was $3.5 million, or 6 cents per share, compared with the Zacks Consensus Estimate of 12 cents. The company’s revenue surpassed the Zacks Consensus Estimate of $77 million. The growth in revenues was driven in part by faster-than-expected deployments of new customers and, in part, by stronger-than-expected transactional volume. The company believes that it can generate substantial revenues over the next three to five years.
Travel transactions in the quarter were ahead of expectations and are clearly trending upward. However, it is 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 spends fully recover 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. In the most recent quarter, new customer growth was the strongest in the company’s history, aided in part by its partnership with American Express (AXP).
In support of the second growth initiative, geographic expansion into new markets, Concur continues to increase its internal distribution capacity, its investments in market development and local product development capacity across Europe. In 2010, France became one of the largest markets in EMEA in terms of new customer growth. In fiscal 2011, the company will establish Concur Japan and Concur India. Concur Japan will focus on the local needs of the third-largest economy in the world, a market that has embraced cloud computing services from companies such as Salesforce.com (CRM). Concur India will serve the local needs of a market that’s forecasted to grow more than 5% a year for the next 20 years, a market that’s likely to become the third-largest economy in the world over that time period.
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 flow from operations were $23.1 million for the fourth quarter and $80.3 million for the fiscal. After capital investments of $18.6 million, free cash flow was $61.7 million for the fiscal, up 27% year over year. This growth rate benefited from operational improvements such as a 3-day reduction in days sales operations (DSOs), comparing the reported quarter to the prior-year quarter.
Looking ahead to fiscal 2011, Concur expects annual revenue growth rate to improve over 2010. Total revenue for the first quarter of 2011 is expected to grow 17% year over year. This growth rate represents a 150 basis point increase from the same time last year. It expects the overall growth rate for fiscal 2011 to increase year over year. Cash flows for fiscal 2011 are expected to remain strong and grow further. For fiscal 2011 as a whole, It expects cash flow from operations to total between $88 million and $92 million.
In the fourth quarter, American Express exercised a 1.28 million share warrant that was part of the 2008 investment agreement. This added another $50 million to Concur’s balance sheet.
In the first half of fiscal 2011, the company is expected to launch the Concur Connect platform, version 2.0, of its cloud computing offering to support the ecosystem of travel partners, customers, and end users. The Concur Connect platform is a set of open, cloud-based APIs and tools that allow customers, partners, and for the first time, third-party developers, to connect to and extend the Concur technology platform with a whole set of applications and services, the individual employees can rely upon every day.
We currently have a Neutral recommendation on Concur Technologies for the long term.
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