Updated Research Report on Concur - Analyst Blog

On Apr 16, 2014, we issued an updated research report on Concur Technologies Inc. CNQR. The company had earlier reported better-than-expected quarterly results. The company's first quarter saw new customer growth across all its segments, thereby strengthening its travel management business. Concur's performance in SMB, enterprise and in its federal business remained strong in the quarter. This apart, we remain positive about the mounting opportunities for the company driven by the increased demand for the managed travel expenses by the corporate industry across the globe.

Concur has delivered positive earnings surprises in three of the last four quarters, with an average positive beat of 46.8%. However, in the first quarter non-GAAP earnings (excluding one-time items) of $0.21 per share compared favorably with the Zacks Consensus Estimate of net loss of $0.9 per share. Nevertheless, earnings surged 31% year over year.

Additionally, management provided an encouraging outlook for fiscal 2014. Concur expects non-GAAP revenue for second-quarter 2014 to grow about 30% year-over-year and expects non-GAAP pre-tax income per share to be at 14 cents a share.

For fiscal 2014, non-GAAP revenue is expected to grow approximately 26% year-over-year and non-GAAP pre-tax income per share is projected to be at least $0.93 a share. For fiscal year 2014, the company expects non-GAAP operating margin to be in the range of 10% to 14%. Cash flow from operations in in the year is predicted to be at least $72 million, while capital expenditures are expected to be 8% to 9% of fiscal 2014 revenue.

The company has a well-defined software development methodology, which allows it to deliver products that satisfy business needs of customers and meets commercial quality expectations. Its systems development and programming group teams up with the marketing department to assess market needs and requirements. It also uses independent development firms or contractors, when needed, to expand the capacity and technical expertise of its internal research and development team. Concur has also added ‘system integrators' to its business. Recently, Concur unveiled a new travel and expense (T&E) trend analysis solution that was developed in partnership with Oversight Systems. The application based on T&E Cloud Platform will aid the travel management companies to obtain critical insights about corporate spending patterns. The company aims to add more partners going forward to meet the growing customer demand while developing its solution delivery capabilities.

Additionally, the company's Perfect Trip initiative, that was started a couple of years back, has been benefiting the company by increasing its distribution capacity. Concur's distribution capacity has already increased by more than 100% to date. Also, as this initiative is being increasingly accepted by the company's customers, partners, developers, and suppliers across the globe, the growth trend is expected to continue going ahead. This initiative is driven by the presence of an open platform that makes travel ecosystem more efficient and competitive. The company is also likely to benefit from increasing investments in these open platforms and its open booking service, TripLink, launched in the first half of fiscal 2013. Concur also intends to add a number of new solutions to its portfolio like Tripit Pro, an innovative mobile tool designed to simplify and enhance corporate traveling experience. In a research by Concur's TripIt application, it was found that the number of leisure travels is likely to increase. This uptrend will bode well for company's profits and interests.

However, though the macroeconomic environment has improved, the rate of improvement in mature markets is still in a nascent stage. The company has a significant portion of revenues coming from its European businesses, which continue to be impacted by the after effects of the European financial crisis, thereby providing limited visibility into the company's future.

Concur currently carries a Zacks Rank #3 (Hold).

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