Concur Technologies (CNQR)

Q3 2011 Earnings Call

July 27, 2011 5:00 pm ET


John Torrey - EVP of Corporate

S. Singh - Chairman and Chief Executive Officer

Frank Pelzer - Chief Financial Officer and Principal Accounting Officer


Laura Lederman - William Blair & Company L.L.C.

David Hilal - FBR Capital Markets & Co.

Michael Huang - Needham & Company, LLC

Brian Schwartz - ThinkEquity LLC

John Kraft - D.A. Davidson & Co.

Ross MacMillan - Jefferies & Company, Inc.

Gregory Dunham - Crédit Suisse AG

Matthew Coss - Piper Jaffray Companies

Unknown Analyst -

Chaitanya Yaramada - Robert W. Baird & Co. Incorporated



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Good evening. My name is Allie, and I will be your conference operator today. At this time, I would like to welcome everyone to the Concur Technologies Fiscal Year 2011 Third Quarter Earnings Release Conference Call. [Operator Instructions] I would now like to turn the conference over to your host, Mr. John Torrey. Sir, you may begin your call.

John Torrey

Thank you, operator. Good afternoon, and welcome, everyone to the Concur Earnings Conference Call for our third quarter of fiscal 2011. My name is John Torrey, Executive Vice President of Corporate Development for Concur. This call includes presentation slides that will accompany our prepared remarks. To access these slides, please log on to our website at Other information of interest to investors, including our SEC filings, press releases and recent investor presentations can be found on the Investor Relations page of our website.

We are now on Slide 1. Our speakers for the call today are Steve Singh, our Chairman and Chief Executive Officer; and Frank Pelzer, our Chief Financial Officer. After their prepared statements today, we will host a brief question-and-answer session.

Please now advance to Slide 2. Before we get started, we want to remind you that during the course of this conference call, we will discuss our business outlook and make other forward-looking statements regarding our current expectations of future events and the future financial performance of the company. These forward-looking statements are based on information available to us as of today's date and are subject to risk and uncertainty. We encourage you to review the details on this Slide 2 and our filings with the Securities and Exchange Commission, which are available at for additional information on risk factors that could cause actual results to differ materially from our current expectations and the forward-looking statements expressed or implied during this conference call. We assume no duty or obligation to update these forward-looking statements even though our situation may change in the future.

Please now advance to Slide 3. At this time, I'd like to turn the call over to Steve Singh. Steve?

S. Singh

Thank you, John. Good afternoon, everyone. Before I get to the details, let me give you the 4 highlights to take away from our call today: First, we had an exceptionally strong quarter. Revenue and revenue growth were ahead of our expectations. And even while we ramp investments at an unprecedented level for us, earnings were exactly as planned as operating margin remains best in class. But perhaps most importantly, new customer growth was significantly ahead of our expectations.

Second, as we look ahead, we expect the new customer momentum we saw in Q3 to continue into Q4, driven by demand from all customer segments and geographies, with notably strong demand across large global organizations.

Third, the accelerating revenue and customer growth that we're seeing in our business in 2011 and what we expect to see in 2012 is being driven by our core business, which is the Concur Travel & Expense offering, serving our core markets, which is the managed travel market in North America and in Europe.

Fourth, we are very pleased with the early progress and results we've seen across the new growth opportunities we're investing in, namely the expansion of our managed travel services into new geographic markets and industries and our entry into the unmanaged travel market. Over the next 3 to 5 years, we expect these additional growth opportunities to both expand our addressable market and be additive to the growth rate being delivered by our core business.

Please turn to the next slide. Drilling down into Q3, there are a number of items to highlight. First, revenue grew 19.3% year-over-year and reached an all-time high at $89.5 million. As is typical, our outperformance was driven in part by faster-than-expected deployments of new customers and in part by stronger-than-expected transactional volume. It's worthwhile to note that the better-than-expected revenue growth rate we saw in Q3 comes on top of a tough comp as revenue in the same quarter of last year grew 20% year-over-year.

Strong revenue growth led to non-GAAP EPS for the quarter of $0.29 per share, which was exactly as planned, as we were successful in investing excess margin against our growth initiatives.

New customer growth, which is the key leading indicator for our business, was exceptionally strong, exceeding our internal expectations, driven by strong demand across all customer segments, geographies and our major channel partners.

Now there are a few things to bring out here. First, this is a lead indicator for revenue growth in the first half of calendar 2012. Second, even as we've continued to grow our internal distribution capacity, a significantly greater percentage of our direct sales organization has already achieved its annual target as compared to the same time last year. I look forward to what we can accomplish as we enter our seasonally strongest quarter for new customer growth. Third, our relationship with our strategic distribution partners continues to flourish. Our partnership with American Express continues to grow and with a quarter left to go, we are confident that this will mark the third straight year of substantive year-over-year growth. Also, as is typical each June quarter, our partnership with ADP drove compelling new customer growth.

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