We are reaffirming our Neutral recommendation on
Concur Technologies
(
CNQR
). The company witnessed a strong third-quarter fiscal 2012,
outperforming its expectations. Revenue increased 27% year over
year, above its previous expectation of 25%. Based on the overall
performance in the quarter, Concur raised its revenue, operating
margin, earnings and free cash flow expectations for fiscal 2012.
The company benefits from a significant increase in travel
transaction volume and quick returns on investments in new markets,
such as the SMB market and the unmanaged travel market. However,
the uncertain macroeconomic environment remains a matter of
concern. Furthermore, the company is heavily dependent on sales of
a smaller number of solutions.
Concur Tech's services are expected to be very employee
friendly. Its on-demand Employee Spend Management solutions are
easy for employees to use, so adoption is rapid. It has low set up
costs with low monthly subscriptions. There is no cost for
upgrades, which ultimately results in low total cost of ownership.
The company has a well-defined software development methodology,
which allows it to deliver products that satisfy business needs and
meet commercial quality expectations. Its systems development and
programming group teams up with the marketing department to assess
market needs and requirements. It also uses independent development
firms or contractors, when needed, to expand the capacity and
technical expertise of its internal research and development
team.
Valuable long-term drivers for the company include its
investment in the emerging markets, its geographic expansion and
customer retention (in which Concur leads the industry in client
satisfaction). Concur's relationship with American Express
continues to grow and serve the needs of both partners. Further,
the company benefits from significant increase in travel
transaction volume and quick returns on investments in new markets,
such as the SMB market and the unmanaged travel market. Over the
long term, the company expects to benefit from its investment in
content aggregation and delivery, big data and mobile computing.
Through this, the company is expected to build a strong position in
the $1 trillion corporate travel market. The company plans to
double its distribution capacity by the end of fiscal 2013 through
significant increase in investment across its business.
With an increasingly stronger balance sheet, Concur has the
capacity to witness the organic growth of the business through
selective acquisitions and investments. The company's continued
investments in innovation provide greater opportunity to
participate in the travel and expense management process. Concur
Technologies expanded its foundation with the acquisition of TripIt
and the formation of Concur Japan. The company expects TripIt to be
an appreciable stream of revenue in fiscal 2012 and a significant
stream of revenue in fiscal 2013. Concur signed a strategic
partnership and made a $40 million equity investment in Cleartrip,
which is India's second-largest and fastest-growing online travel
agency.
However, Concur Technologies is dependent on the sales of a
smaller number of solutions. A decline in demand for any of those
solutions could substantially harm its results of operations. The
company's revenue is primarily generated from four solutions,
Concur Travel & Expense, Concur Expense, Concur ExpenseLink and
Concur Cliqbook Travel.
Concur depends upon strategic relationships with third parties,
including American Express Travel Related Services Company Inc. Its
revenues will decline if it is unable to sustain and develop these
relationships.
Concur Technologies currently holds a Zacks # 3 Rank implying a
short-term 'Hold' recommendation on the stock.
CONCUR TECH INC (CNQR): Free Stock Analysis
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