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Concur And NetSuite Continue To Expand

Posted on Friday, Sep 9th 2011

Concur (NASDAQ:CNQR), a leading SaaS expense management vendor, after its TripIt acquisition earlier in the year, continued expanding with its recent acquisition of GlobalExpense for about £14 million (US$22.2 million). NetSuite (NYSE:N), a SaaS ERP vendor, on the other hand, expanded its services to the enterprise class and landed leading companies like Groupon and Qualcomm as customers. Let’s take a closer look.

Concur is a SaaS provider in the niche area of expense management and has annual revenue of $292.9 million. In its third quarter results, the company reported revenue of $89.5 million, up 19% y-o-y and 6% q-o-q. Net income was $2.3 million, or $0.04 per share compared to net income of $3.6 million, or $0.07 per share last year. The year-over-year decrease in net income was primarily driven by the accounting impacts of the TripIt acquisition. Non-GAAP pretax income was $16.0 million, or $0.29 per share compared to $16.1 million, or $0.31 per share, for the year-ago quarter. Cash and investments, net of customer funding liabilities and debt, decreased approximately $11.8 million due to its acquisition activities.

During the earnings call, Concur CEO Steve Singh said

“Our objective over the next 5 years is to become the market-leading provider of travel & expense management services in each major economy. To that end, we are investing in and continue to see compelling success in markets such as Australia, Singapore, Hong Kong, France, Germany and the U.K. as our transaction volume and local customer wins continues to grow substantively in each market.”

Earlier this year, Concur established Concur Japan and Concur India and over the next three years, the company will continue to build local distribution, development, and service capacity in each of these major markets.

In July, Concur acquired GlobalExpense, an expense management company with expertise in receipt validation, VAT and income tax compliance, and U.K. tax legislation. The company says the acquisition reflects its strategic commitment to being a great local provider in each major economic market. With the acquisition, Concur added approximately 100 people to the Concur team, and it expects to add nearly $500,000 in revenue in Q4, as well as nearly $5 million in revenue in fiscal 2012. The company also expects, with time, to extend its services to other local markets in Europe.

Concur also announced a $5 million strategic investment in Yapta, a leading provider of airfare tracking and hotel rate tracking services. Yapta’s airfare tracking engine will power TripIt Pro’s airfare price tracking and price assurance capabilities. Concur had acquired TripIt early this year when it had roughly 2 million users. Since then, it has added 1 million users and expects to double the TripIt user base by the end of the year.

Concur’s growth story is not limited to the private sector but also extends to the government. It is the leading provider of expense management services to the French government, and in the U.S., it serves the U.S. Postal Service and various state and local government organizations. Concur is also hopeful of landing a $1.5 billion contract spread over 15 years for the ETS2 program. The award is scheduled for the spring of 2012. The company believes it is in a strong position to receive either a single award or a joint award and is investing to win as much of the award as possible over the 15-year term of the award.

Concur expects fourth quarter revenue to increase approximately 22% y-o-y resulting in fiscal 2011 growth of approximately 19% year-over-year from fiscal 2010. This includes approximately $500,000 of revenue contribution from GlobalExpense. Concur expects non-GAAP pre-tax income per share to be $0.37, which includes approximately $0.03 of dilution in Q4 of fiscal 2011 from acquisition-related activities. The stock is trading around $39.54 with a market cap of about $2.1 billion. It hit a 52-week high of $58.19 on May 2.

Chart forConcur Technologies, Inc. (CNQR)

NetSuite, a SaaS ERP vendor with annual revenue of $193.1 million, recently reported second quarter revenue of $57.8 million, up 23% y-o-y. Net loss was $9.8 million or $0.15 per share compared to a net loss of $7.2 million or $0.11 per share last year. Non-GAAP net income was $1.6 million, or $0.02 per share, as compared to non-GAAP net income of $1.9 million, or $0.03 per share last year.

Subscription and support revenue for the second quarter was $48.2 million, representing 21% growth over the same period in the prior year. In May, NetSuite had launched its enterprise-class products and won two new enterprise companies as customers, Groupon and Qualcomm. Groupon, one of the fastest growing companies, went live with NetSuite OneWorld in five international markets and plans to go live in 26 international markets, replacing hundreds of spreadsheets with a single cloud ERP system to achieve real-time global financial consolidation and management, as well as support for multi-currency management, local taxation compliance, reporting, and analytics.

Sarah Lacy on Seeking Alpha says
“Groupon’s aggressive and immediate push to go international has been unprecedented among US Web startups, and if others follow suit, NetSuite may have identified a lucrative new niche of large customers who don’t have time for traditional ERP implementations– or the old-economy hangups about doing business in the cloud.”

Groupon is indeed a good catch for NetSuite and it is trading around $30 with market cap of about $2 billion. It hit a 52-week high of $31.03 on February 11.

Chart forNetSuite Inc. (N)
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