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Concur Continues To Expand

Posted on Monday, May 30th 2011

Concur (NASDAQ:CNQR), a leading SaaS expense management vendor, is in the expansion mode. It recently acquired mobile trip manager TripIt for $120 million and followed this up with a strategic investment of $40 million in Indian travel portal Cleartrip. It has also announced the launch of Concur Japan and Concur India. Further, it joined the NetSuite (NYSE:N) SuiteCloud developer network. Let’s take a closer look.

Concur’s Financials
Concur is a SaaS provider in the niche area of expense management and has annual revenue of $292.9 million. In its second quarter results, the company reported revenue of $84.6 million, up 16% y-o-y and 5% q-o-q. Net loss was $2.6 million, or $0.05 per share compared to net income of $6.7 million, or $0.13 per share last year. Cash and investments, net of customer funding liabilities and debt, decreased approximately $64.7 million due to its investment in TripIt and Cleartrip.

In January, Concur signed a definitive agreement to establish Concur Japan in partnership with SunBridge, and last month, it announced the formation of Concur India. It has already signed its first two clients in India but says it expects Concur India to operate at a loss for the next three years as it builds scale in distribution, development, and customer service for the Indian market.

Regarding its investment in Cleartrip, India’s second-largest and fastest-growing online travel agency, Concur CEO Steve Singh said during the earnings call:

“Our partnership with Cleartrip affords us the ability to integrate the best online booking tool for the Indian market directly into our suite of services and affords us to access to unique content, catering to the needs of the Indian business travelers.”

John Cook on GeekWire says:

“What’s interesting about the investment and the recent purchase of TripIt is that Concur — historically known for its online service for helping corporations manage travel and entertainment expense planning — appears to be inching closer to a consumer business offering. That could eventually mean closer competition with the likes of Expedia or other online travel giants.”

Concur is clearly expanding and not just geographically, but to other adjacent markets. This is a healthy sign, but there is always the danger of losing focus and the company should tread carefully.

Meanwhile, like Salesforce.com, the pioneer in SaaS, Concur has seen its sales and marketing expenses increase. During the quarter, Concur reported that sales and marketing expense increased 38% y-o-y, reflecting its investment in distribution. R&D expenses increased 15% y-o-y, driven by the acquisition of TripIt. General & Administrative expenses increased 16% year-over-year, reflecting investment to support its global growth. I observed in a recent post that low margins haunt Salesforce.com, but its investment has paved the way for later SaaS companies.

Owing to the record bookings it had in the fourth quarter of fiscal 2010, Concur expects third quarter revenue to increase approximately 18% y-o-y and improve further in the fourth quarter. The company also reaffirmed its expectations for the full year and said it still expects the overall revenue growth rate to increase compared to fiscal year 2010. The stock is trading around $49.48 with market cap of about $2.67 billion. It hit a 52-week high of $58.19 on May 2.

Chart forConcur Technologies, Inc. (CNQR)

Concur has also joined the NetSuite SuiteCloud developer network. NetSuite, a SaaS ERP vendor with annual revenue of $193.1 million, has partnered with Accenture to push its enterprise financial service built on its SuiteCloud platform. Early this month, NetSuite announced new “enterprise-class” products. In the past, NetSuite had focused on small and mid-sized companies, and with this new class of products aims at large companies, the target market for business software maker Oracle. Larry Ellison, CEO of Oracle, and his family hold 55% of NetSuite’s stock. Don Clark on WSJ notes that

“CEO Zack Nelson still sees little real competition with Oracle even if some of the two companies’ offerings could theoretically end up at the same company. Generally, he says, Oracle software is used for running major operations of entire global corporations. NetSuite’s services, by contrast, might be selected by a single department or subsidiary for less complicated applications.”

NetSuite also launched SuiteSocial, which includes social networking programs for businesses. SaaS customer relationship management (CRM) companies like Salesforce.com and RightNow have already incorporated social networking in their online CRM software. Salesforce.com recently said it would pay $340 million for Radian6, a leader in social media management.

NetSuite recently reported first quarter revenue of $53.4 million, up 21% and net loss of $7.7 million or $0.12 per share compared to a net loss of $6.8 million or $0.11 per share last year. Non-GAAP EPS was $0.03, in line with analyst estimates. The stock is trading around $37.40 after hitting a 52-week high of $37.88 on May 26. Market cap is about $2.47 billion.

Chart forNetSuite Inc. (N)



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