Concur Technologies (CNQR)

Q3 2010 Earnings Call

July 28, 2010 5:00 pm ET


John Torrey - EVP of Corporate

S. Singh - Chairman and Chief Executive Officer

Frank Pelzer - Chief Financial Officer


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

Sid Parakh - McAdams Wright Ragen, Inc.

Brian Wallins - Broadpoint Capital

Thomas Ernst - Deutsche Bank AG

Michael Clarke

Ross MacMillan - Jefferies & Company, Inc.

AjayKumar Kasargod

Mark Murphy - Piper Jaffray Companies



Good afternoon, ladies and gentlemen. My name is Gerald, and I will be your conference operator. At this time, I would like to welcome everyone to Concur Technologies Q3 Fiscal 2010 Earnings Conference Call. [Operator Instructions] I would now like to turn the conference over to Mr. John Torrey, Executive Vice President of Corporate Development. Sir, you may begin.

John Torrey

Thank you, operator. Good afternoon, and welcome, everyone, to the Concur earnings conference call for our third quarter of fiscal 2010. 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, Steve and Frank 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 the 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

Thanks, John. Good afternoon, everyone. Here are the top four themes to take away from the call today. First, fiscal Q3 was an exceptional strong quarter, with performance against key metrics, such as revenue, earnings and free cash flow coming in well ahead of our expectations.

Second, we expect 2010 revenue to grow 18% year-over-year. This, of course, comes on top of the 15% growth we saw in 2009. Looking ahead further, we expect annual revenue growth to move up over the forward few years, as we trend back to our steady-state growth targets. At the same time, we think it's prudent to remain cautious in our outlook, as the economic recovery continues to take shape.

Third, outside of our core growth opportunity which is to grow our customer base in the markets we currently serve, we see three new substantive and long-term growth opportunities. We see an opportunity to significantly expand the geographic markets we serve. We see an opportunity to serve the emerging business sector and an opportunity to provide a highly efficient and open platform within which our customers, our partners and suppliers can work together. We view successful execution in these three growth areas as for both opportunities for growth and as the continued establishment of the competitive platform, which will be extremely difficult for our competitors from any vantage point to replicate or approach.

And fourth, we are in the fortunate position that the leverage inherent in our business model can and is funding the investments we are making in these long-term growth opportunities.

Please turn to the next slide. Turning our attention to Q3 results. We saw exceptional operating performance across the business. The revenue grew 20% year-over-year and reached an all-time high at $75 million. This growth was driven in part by faster-than-expected deployments of new customers and, in part, by stronger-than-expected transactional volume.

Strong revenue growth led to non-GAAP EPS for the quarter of $0.31 per share, which was $0.02 a share ahead of our expectations. And driven by stronger earnings and strong cash collections, the free cash flow in the quarter was $19.7 million, also well ahead of our expectations.

Please turn to Slide #5. We're obviously very pleased with the performance of the business in the first three quarters in the fiscal year. In thinking about our expectations for the remainder of the fiscal year and fiscal 2011 and beyond, it's helpful to understand the growth drivers of our business and our view of the economic climate.

Our growth is driven by three core factors: First and foremost, our growth is driven by new customer additions and new services we can deliver to our existing customers. We continue to see solid momentum on both fronts. The second factor is the employment environment. Unemployment continues to hover around 10% in the economic markets in which we operate. It is a pragmatic view to assume that in the near term, any economic recovery will be a jobless recovery. And that while unemployment may drift down, it will remain relatively high for the next few years. The third variable is the travel environment. Travel transactions in Q3 were ahead of our expectations and are clearly continuing to trend back towards the waterline. However, it's important to note that we are still well below pre-recession levels. It will likely take, at least, until the end of 2011 before travel spend recovers to pre-recession levels. Further, we expect that recovery to be uneven and impacted by GDP growth projections. Finally, all indicators that we see for GDP growth in developed economies point to modest and uneven growth.

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