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2012 Annual Report
2012 Annual Report
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Table of Contents 4
CEO Stockholder Letter
6
About Conur
11
Concur’s Commitment
12
Fiscal Year 2011 Financial Highlights
14
Market Information
15
Stock Performance
CEO Stockholder Letter January 28, 2011 Dear Shareholders, Even as immersed as I am in the technology industry, I am continually surprised by the impact that technology has had on our society. Fifty years ago, the technology industry was confined to a small corner of the world – some very large businesses and some governments. Today technology adoption is global. It serves the needs of businesses of all sizes, and is accessible and powerful enough to serve the diverse needs of billions of individuals. Last year, for instance, during the air travel crisis caused by Iceland’s volcanic ashcloud, Jens Stoltenberg, the Norwegian prime minister, was stranded in New York for the weekend. Using an iPad, he continued to run his government remotely. Closer to home, grade school children are using apps developed for their AppleiPhones to track their progress in the annual walk-a-thon. I am not sure what ismore amazing. A custom app profitably developed for a small target market that may use the app once a year, the fact that grade schoolers have iPhones or, that they are civic minded enough to raise funds for the benefit of others. Around the globe, dissident bloggers in places where free speech is a foreign concept go online to speak truth and provide real-time commentaryon events that would otherwise go unreported. Individuals and businesses are using communication and social networking tools like Twitter and Facebook, to challenge the status quo, whether that is in politics,commerce, or social constructs.
Concur 2012 Annual Report
Then there’s someone like me. While I came of age in the pre-digital world, todayI could not do my job without the countless technology tools readily available tome. In fact, I am putting the finishing touches on this letter while flying at 35,000 feet. In a few minutes, somewhere over Iowa, I will email it to my colleagues in Washington for their review and publication. So how are these examples connected? Well, they all highlight a few basic truths about technology. It’s pervasive – it exists in every nook and cranny of our lives. Technology is empowering. Not just for businesses, but for individuals. In conjunction with a great education, technology is the great equalizer. It can and ischanging lives, disrupting industries and altering the course of humanity. And, as individuals and corporations connect to each other, whether to express ideas or to conduct commerce, our world becomes smaller and more integrated. The inexorable march of technology continues on a global scale. While the well-established economies of the U.S. and Western Europe take their first tentative and hopeful steps toward a rebound from the recent economic downturn, the economies in places like India and China continue to grow at astounding rates. Everywhere I go within these vibrant new markets, I see smartphones – which now outsell laptops – and tablets, all bristling with the energy of new ideas. And each device – customized with apps chosen to meet specific needs – is a direct reflection of the individual and the personality that wields it. And, I guarantee, at this very moment, entrepreneurs with nothing more than a broadband connection and a big idea are creating the next generation of innovations that we’ll soon not be able to live without.
About Concur Hyper-connected consumers of technology might yawn at these examples and the lessons we can learn from them. And that’s OK. But technology providers ignore these developments and trends at their own peril. For those that are slow to recognize or deep in denial, it is the beginning of the end of your business. That’s certainly not the case with Concur, and our mission of empowering customers with innovation. The traditional view of our customers is that they are corporations looking to drive costs out of their businesses. And that’s certainly correct. But our customers are also individual business travelers who are looking for more choice, ease of use, assistance and productivity while they travel. And, increasingly, as Concur becomes more pervasive in the travel supply chain, suppliers that are interested in offering the widest range of choice, value and prices to the end customer also become our customers. Our job is to listen to each type of customer – the corporate buyer, individual business travelers and suppliers – and deliver the innovations that drive our industry. Now let’s take a look at Concur’s recent efforts and future areas of focus that will enable us to do just that.
Continued growth combined with targeted investment We were very pleased with our performance in Fiscal 2010. We introduced compelling new products and saw our core products continue to penetrate and evolve our market. We grew revenue 18% and non-GAAP EPS by 6%, even as we increased investments in areas such as innovation and distribution by 21%. Looking ahead, we expect to continue to improve our revenue growth rates and earnings even as we increase investments in pursuit of a large untapped market around corporate travel and expense management.
Five Areas of Strategic Focus Let’s take a look at these five core areas of focus: We are focused on significantly expanding our customer base in the markets we currently serve. We will materially expand our global presence.We believe the SMB market can be a material portion of our revenue base.
Concur 2012 Annual Report
We see a significant opportunity to deliver compelling value to the business traveler while they are on their trip.We are creating a high value ecosystem through the Concur Connect Platform that connects our customers, partners and suppliers together in a efficient manner that drives our value for all members of the ecosystem. We view our successful execution in these five growth areas as both opportunities for growth and as a foundation from which Concur and its partners can continue to drive innovation and compelling value for our mutual customers.
1. Expand our customer base We will continue to increase our investments in distribution, market development and innovation in order to continue to expand our base of customers in the markets that we currently serve and the range of services we can deliver to those customers. Over the last several quarters, new customer growth has continued to be exceptionally strong – aided in part by our partnership with American Express. In fact, in fiscal 2010 we exceeded our target for new business coming from the American Express partnership. Additionally, in the fourthquarter of fiscal 2010, American Express exercised a1.28M share warrant that was part of the 2008 investmentagreement. That exercise added another $50M to our balance sheet, but more importantly, is a reflection of the continued and substantive success of the partnership between our companies. In early 2010, we introduced Concur Advantage Services– a collection of SaaS 2.0 services that includes managed reporting and analytics, expense report auditing, VAT recovery, automatic fraud detection, and digital mail room services for invoice and receipt handling. Over the course of the year it became one of our most successful new product introductions. We also continued to expand our internal distribution capacity, our investments in market development and our local product development capacity across Europe. In 2010, France became one of Concur’s largest markets in EMEA in terms of new customer growth. As we head into 2011, we will look to extend that success into central Europe. We will do that by increasing our existing footprint in Germany, through increased investments in local distribution, service and development capacity. Today, EMEA’s contribution to total new sales is outpacing the region’s addition to current recognized revenue. If this trend continues, we would expect EMEA to represent a higher percentage of total reported revenue in the future.
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2. Expanding our global presence We believe we can be truly global only by being truly local. Our objective – over the next five years – is to become the market-leading provider of travel and expense management services in each major economy. To that end, we continue to see compelling success inmarkets such as Australia, Singapore and Hong Kong where our transaction volume and local customer wins continue to grow substantively.In fiscal 2011, we 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. Japanese multinationals comprise more than 15% of the Global 2000 and with high labor costs there is a strong focus on driving efficiency across the organization. Concur India will serve the local needs of a market that is forecast to grow at more than 5% a year for the next 20 years – a market that is likely to become the third largest economy in the world over that time period. More than 20% of the Financial Times 500 are Indian multinationals. While labor costs are not yet a challenge, scalable operations at that rate of growth are only made possible through the use of technology. Concur already processes hundreds of thousands of transactions across India and Japan each year in the local language and in compliance with local tax and regulatory requirements. It is our expectation to be operational in Japan and in India by the middle of fiscal 2011. Over the next two years, we will build out our local distribution, development and service capacity in each country. While Concur Japan and Concur India will be significant investment arenas over the next 24 months, we expect both to comprise significant portions of our global revenue over the next decade.
3. Grow the SMB market In support of our third growth initiative – we are also investing to deliver our services for small and medium sized businesses on a global basis. We believe that this market segment is underserved and can generate incremental long-term revenue and earnings growth. We continue to see compelling growth in the 100 to 500 employee segment of the SMB market. And in the Emerging Business segment [companies with less than 100 employees], we remain very enthusiastic about our opportunity as early indicators around the strength of the product and new customer growth are very encouraging.
Concur 2012 Annual Report
We expect to materially increase our investments in direct and partner distribution over the course of the next few years. And, as we have stated in the past, while we are incurring costs today in the Emerging Business sector of the SMB market, we do not expect our initiatives in this market segment to contribute meaningfully to revenue until 2014.
4. Serve the needs of the business traveler Our fourth growth initiative is focused on bringing value to the business traveler while they are on their business trip. To that end, in early January of this year, we announced the acquisition of TripIt. The acquisition of Tripit positions Concur to participate in every element of the travel process– from trip planning and booking, through in-trip activities and sharing trip information, to post-trip expense reconciliation and reimbursement. This enables Concur to meet the requirements of individual business travelers within the context of corporate policies – while fundamentally enabling the direct relationship between travel suppliers and their tens of millions of end customers. Just as the integration of travel booking and expense reporting changed the trajectory of our market five years ago, embracing the direct relationship between travel suppliers, individual travelers and the businesses for which they work, will redefine our industry once again. Business travelers can use TripIt to organize and share their travel plans – regardless of where they booked their travel. In fact, TripIt supports travel itineraries from more than a thousand travel sites – including of course, Concur’s own industry leading travel-booking service. TripIt can automatically capture itineraries or travelers can simply forward their travel confirmation emails to plans@tripit.com. TripIt’s technology creates a master itinerary – or super PNR – that you can access on the web or your mobile phone with all your travel plans plus maps, directions, weather and other helpful items – all driven from the only single source of complete travel information – the individual traveler. And of course, TripIt users can automatically share their travel plans via integration with social networks such as LinkedIn and Facebook or via the tens of thousands of user-generated company groups that Tripit supports. If you do not use TripIt, I invite you to sign up for it today.
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5. The Concur Connect Platform Since we introduced integrated travel and expense to our industry nearly five years ago, we have invested in Concur Connect in order to provide our customers with seamless access to the broadest selection of travel content available anywhere through any provider. With Concur Connect, we have enriched the vast, traditional carrier content provided by the leading global distribution systems, with direct connections to thousands of major hoteliers, ground transportation providers, rail providers, car rental agencies, dining and other travel services. The multi-GDS, multi-direct connect strategy encapsulated in Concur Connect has improved customer choice and has helped to bring about transparency and efficiency to a supply chain that was and is sorely in need of both. In doing so, we have created value for more than 10,000 customers, more than 15 million business travelers, and an entire industry of travel suppliers who have become disintermediated from the $700 billion of products and services they produce each year. In the first half of fiscal 2011, we will launch the Concur Connect Platform, version 2.0 of our cloud computing offering to support our ecosystem of travel partners, customers, and end users. The Concur Connect Platform is a set of open, cloud-based APIs and tools that allow our customers, our partners, and, for the first time, third-party developers to connect to and extend the Concur technology platform. We’ll offer a whole set of applications and services that individual employees can rely upon every day from applications designed for small and medium businesses, to vertical applications of our travel and expense services, to innovative new mobile applications to location-based services, to specialized travel content and services – all integrated into your Concur experience and all available through both traditional desktop and mobile interfaces. The Concur Connect Platform creates new sources of value for our ecosystem partners, and, as a result, we believe it can create new revenue streams for Concur beyond our traditional subscription revenue model.
Concur’s commitment We deeply value our relationship with our customers, our partners and you, our investors. We strive to build upon those relationship each year by building great products that our customers love and by executing against a long-term strategy of growth that is driven by being the innovation leader in our industry. We continue to be pleased with our consistent and strong record of execution – quarter after quarter, year after year. It’s a testament to the hard work and dedication of over 1300 incredible individuals around the globe that I get to work with. As with all great relationships, sustainability is essential. As we look ahead, we see a number of compelling growth opportunities that can help us improve the value we deliver to our customers, increase our market leadership position, and improve our competitive advantage in the market. Successful execution against our market opportunity has driven and will continue to drive compelling and sustainable value for our long-term shareholders. On behalf of our Board of Directors and the Concur management team, thank you for your continued support of our company.
Steve Singh Chief Executive Officer and Chairman of the Board of Directors Concur January 28, 2011
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Fiscal Year 2011 Financial Highlights 2007
2008
2009
2010
2011
Revenues
$97,145
$129,107
$215,491
$247,596
$292,936
Net Income
$34,156
$8,225
$17,184
$25,677
$20,581
Net Income per share, diluted
$0.87
$0.20
$0.35
$0.50
$0.39
Shares used in calcuation of diluted next income per share
39,150
41,033
48,459
51,740
53,090
Cash, cash equivalents, and short-term investments
$16,344
$168,835 $267,725
$262,734
$630,695
Total Assets
$181,319
$345,482 $641,019
$670,885
$1,043,754
Year ended September 30th (In Thousands, Except for Per Share Data)
$228,128
Senior convertible notes, net
Concur 2012 Annual Report
Deferred rent and other long-term liabilities
$16,348
Stockholder’s equity
$117,394
$7,797
$3,454
$1,149
$284,360 $534,538 $638,783
$1,149 $638,783
Total Revenue (in Millions) 2007
2008
2009
2010
2011
$97.1
$129.1
$215.5
$247.6
$292.9
Earnings Per Share* 2008
2009
2010
$0.86
$1.14
$1.21
Quarterly Subscriptions Revenue (In Millions) Q108
Q208
Q308
Q408
Q109
Q209
Q309
Q409
Q110
Q210
Q310
Q410
$49.4
$53.7
$54.9
$57.5
$58.6
$62.0
$62.2
$64.8
$67.7
$72.8
$75.0
$77.5
Operating Margin* 2008
2009
2010
19%
23%
23%
* Excludes the effect of share based compensation, amortization of intangibles and income tax expense (benefit).
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Market Information Our common stock is traded on the NASDAQ Global Select Market under the symbol “CNQR�. The following tables set forth the range of the high and low sales prices by quarter as reported on the NASDAQ Global Select Market for the years ended September 30, 2010, and September 30, 2009.
Year ended 9/30/11
High
Low
Year ended 9/30/10
Fourth Quarter
$52.17
$41.17
Third Quarter
$45.88
Second Quarter
First Quarter
High
Low
Fourth Quarter
$40.56
$28.21
$37.52
Third Quarter
$34.37
$18.55
$44.57
$37.41
Second Quarter
$34.45
$17.82
$44.01
$34.99
First Quarter
$38.38
$19.52
On September 30, 2010, there were approximately 200 stockholders of record for our common stock. We have never paid cash dividends on our common stock. We currently intend to retain earnings for use in our business and, therefore, do not anticipate paying any cash dividends on our common stock in fiscal 2011.
Concur 2012 Annual Report
Stock Performance The following graph compares (i) the cumulative total stockholder return on the common stock from September 30, 2005,to September 30, 2010 (measured by the difference between closing prices on each such date) with (ii) the cumulative total return of the NASDAQ Global Market Index and the NASDAQ Computer Data Processing Index over the same period, assuming the investment of $100 in the common stock and in both of the other indices on September 30, 2005, and reinvestment of all dividends.
400 350 300 250 200 150 100 50
Concur Technologies NASDAQ Global Market Index NASDAQ Computer & Data Processing Index 2006
2007
September 30
2008
2009
2010
2011
2006
2007
2008
2009
2010
2011
Concur Technologies
$100.00
$117.62
$254.81
$309.30
$321.42
$399.68
NASDAQ Global Market Index
$100.00
$105.44
$124.80
$98.40
$78.96
$89.25
$100.00
$109.73
$131.26
$109.40
$116.61
$135.02
NASDAQ Computer & Data Processing Index
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Visit us at concur.com World Headquarters 18400 NE Union Hill Road Redmond, WA 98052 USA tel +1 (425) 702-8808 fax +1 (425) 702-8828 (877) 4-CONCUR www.concur.com
European Headquarters 7 Bath Road Slough Berkshire SL1 3UAUK tel +44 (0) 1753 574 400 fax +44 (0) 1753 501 700 www.concur.co.uk
Asia Pacific/Australian Headquarters 123 Epping Road North Ryde NSW 2113 AUSTRALIA tel +61 (2) 9113 7315 fax +61 (2) 9113 7330 www.concur.com.au
Š2012 Concur, Redmond, WA U.S.A. all rights reserved. All other company and product names are the property of their respective manufacturers.Specifications and other details listed are accurate as of printing, but may change without notice. 2010/AR 2011/01