Concur Below Estimates

Zacks

Concur Technologies (CNQR) reported second-quarter fiscal 2012 earnings per share from continuing operations of 4 cents, below the Zacks Consensus Estimate of 5 cents.  The prior-year earnings from continuing operations was 10 cents.

On a GAAP basis, the company incurred a loss per share of 9 cents compared with loss of 5 cents in the prior-year period. GAAP loss per share increased by 80% year over year.

Revenue

Total revenue was $108.4 million, an increase of 28.1% year over year. Revenue in the quarter was driven by investments made by the company in the last couple of years in its core business. The SMB and unmanaged travel markets were strong contributors. The company also performed well in India and Japan.

Income and Expenses

Non-GAAP operating margin was 18.5% in the reported quarter compared with 17.9% in the prior-year quarter. Operating income was $6.1 million compared with a loss of $2.3 million. Sales and marketing expense was $41.9 million, up 10% compared with $38.1 million and general and administration expense was $16.6 million, up 17.7% compared with $14.1 million in prior-year quarter.

Balance Sheet and Cash Flow

Cash and cash equivalents were $217.4 million at the end of the quarter with total equity of $708 million. Net cash from operating activities was $25.1 million for the second quarter of fiscal 2012.

Outlook

The company’s total revenue is expected to increase by 25.5% year over year in the third quarter of fiscal 2012. Non-GAAP pre-tax income per share is expected to be 31 cents.

For fiscal 2012, total revenue growth is expected to be 26% year over year compared to fiscal 2011, up from its prior growth expectation of 25.5%.  Non-GAAP operating margin for the year is expected to be 18.5%, up from its prior expectation of 18%.

Concur expects non-GAAP pre-tax income per share to be $1.31 in fiscal 2012. Cash flow from operations, excluding one-time acquisition and other related cost, is expected to be in the range of $84-$88 million in fiscal 2012, up from its prior expectation of $81-$85 million.

The company continues to invest in expanding its distribution capacity to drive customer growth while boosting its business performance. Concur’s Triplt acquisition and newly launched products support the company’s future growth prospects.

However, Concur is dependent on the sales of a smaller number of solutions. A decline in demand for any of those solutions could substantially affect its results of operations. An important component of its business success depends on its ability to maintain and develop relationships with travel suppliers.

Adverse changes in the existing relationships, or an inability to enter into new arrangements with these parties on favorable terms, could reduce the amount, quality and breadth of attractively-priced travel products and services. Further, though the macroeconomic environment improved, the rate of improvement in mature market was very nominal. However, developing economies continued to slide.

Concur Technologies is a provider of business services that automate the processes involved in the management of corporate expense. Concur focuses on reducing costly and inefficient expense processes in businesses of all sizes, by streamlining the reimbursement processes, reducing operating costs, improving internal controls while enabling customers to apply greater insight into their spending patterns through analytics. Major competitors of Concur are Compuware Corporation (CPWR), Oracle Corp. (ORCL) and SAP AG (SAP).

We currently maintain our Neutral rating on Concur Technologies, with a Zacks #3 Rank (Hold recommendation) over the next one-to-three months.

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