Concur Again Beats Expectations, Highlights Long-Term Growth Opportunities

Concur beat financial expectations for fiscal third-quarter revenue, earnings, cash flow from operations, free cash flow and new customer growth, according to executives speaking on Monday during an analyst conference call. Regarding new customers, the company claimed to add about 1,500 per quarter during the current fiscal year and within the next few years expects to accelerate that to about 5,000 per quarter, said CEO Steve Singh.

"Driven by continued strength across the business, we are raising our fiscal 2014 revenue growth target to 27 percent," Singh said. "Additionally, new customer bookings continue to grow at a rapid pace which ... gives us confidence in our ability to sustain very strong growth rates into fiscal 2015 and beyond."

The company's long-time growth opportunities notably include Japan and the small- and medium-business sector, as well as U.S federal agency customers via the second-generation E-Gov Travel Service and new customers obtained via a partnership with IBM. IBM is exiting the expense management business and referring users to Concur.

"We continue to see great traction in Japan as that market is in a footrace with leading [Europe, Middle East and Asia] markets to become our second-largest geographic market in terms of new customer bookings," said Concur president and COO Rajeev Singh. "Our SMB business continued to show great progress and is on track to become 50 percent of our new customer bookings in the years ahead." Steve Singh reiterated that enterprise customers, for now, represent "the largest driver of growth of all areas we are investing in."

Meanwhile, of the more than 70 percent of the total transactional business available from the federal government's ETS2 contract that Concur has signed, half of those agencies now are "live and in production," according to Rajeev Singh. Steve Singh emphasized that the company is in the "very early stages of the rollout," hence his expectation that "it's really fiscal '15 you start seeing the benefit of these ETS2 deployments hitting our P&L and fiscal '17 that you see the majority of that economic benefit."

Steve Singh also noted that the huge U.S. Department of Defense account "came out with an RFI and obviously we'll pursue that."

Concur hopes that successful ETS2 deployments will encourage other public sector and academic organizations to automate travel and expense processes via Concur.

Regarding the IBM partnership, Concur claimed to pick up 10 accounts that had been using IBM's Global Expense Reporting Solution. Steve Singh said Concur expects "we'll get the super majority of prior GERS customers to switch."

Concur also reported ongoing progress with the TripLink open booking service, claiming to have signed more users during its fiscal third quarter than in any previous quarter. "You're going to see TripLink become a standard offering that our customers purchase and deploy as the first set of products that they buy from us," said Steve Singh.

Concur recently announced that Starwood Hotels & Reports became the latest supplier to become active in the TripLink program, and that United Airlines and Airbnb signed on as participants.

Overall, Concur's fiscal third-quarter revenue increased 28 percent year over year to $177 million. The company's net result was a $32,000 loss versus a $2.8 million profit in the prior-year period.

Analysts speaking with Concur executives sounded satisfied with the company's performance. In a research note, FBR Capital Markets retained its market perform rating. "To us, ramping up newer growth initiatives (government, SMB, Open Booking) and establishing itself as the platform for corporate travel-related transactions are the keys to Concur sustaining 25 percent or better organic growth for the next few years," wrote analyst Samad Samana.