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Concur: A Good Model, But Still No Profits

Posted on Friday, Dec 6th 2013

The latest report by Global Business Travel Association (GBTA), estimates worldwide business travel spending to grow 5.4% this year to $1.12 trillion. This growth is expected to increase in the coming years, with the market projected to grow 7.5% annually to $1.50 trillion by 2017.  Travel expense management services provider Concur (Nasdaq:CNQR) is also seeing the business travel market grow.

Concur’s Financials

Concur’s Q4 revenues grew 31% over the year to $154.2 million, ahead of the Street’s projections of $152 million. GAAP net loss of $0.13 per share fell short of the market’s projections of earnings of $0.05 per share.

The company ended the year with revenues up 23.5% to $543 million and EPS of $1.33.

For the current quarter, Concur expects revenues to grow 27% over the year. It projects non-GAAP pretax income of $0.19 per share. Concur expects to end the current year with revenue growth of 26% and non-GAAP pretax income per share of at least $0.93. The company is hopeful of crossing the $1 billion revenue milestone by 2016.

Concur’s Product Portfolio

Concur’s ultimate objective is to be able to successfully populate expense reports of employees automatically and to make business travel a seamless affair in terms of recording of expenses. They believe that they already have 80%-90% of the expense report automated. It is the remaining 10%-20% that is taking more effort. To achieve this goal, they have, over the past year, offered several product upgrades. They launched TripLink, a service that enables transactions booked through travel supplier web sites to automatically appear in Concur. The service helps build in more visibility into the expense and data management for their clients. TripLink is built on Concur’s open platform and uses TripIt’s e-mail-based import tools for capturing all itinerary data.

Concur prides itself on its open platform that enables clients to select from a wider range of travel options while ensuring that they stay within budget and that managers have complete visibility of travel spending. As a result, organizations of all sizes can book their travel on non-conventional vacation stay sites like AirBnB and Home Away, yet have all that travel recorded in Concur’s expense reporting system. At the end of the last fiscal year, more than 300 companies and customers had built applications using the Concur API and connected to the Concur T&E Cloud.

The stock is trading at $95.45 with a market cap of $5.35 billion. It touched a 52-week high of $114.32 in September 2013.

As I have said about, Concur should also look into its platform strategy to get to a more profitable business model.

Like several other SaaS players, Concur’s biggest problem lies in the ability to turn profitable. The company has been operational since 1994 but has yet to turn in a healthy margin. They have a sound business objective and a widely addressable market opportunity. On a non-GAAP level, they keep reporting profits, but it would be nice to see them turn profitable in the pure accounting, GAAP sense as well.

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