2014

Concur Reports Results for Fiscal 2014 Second Quarter Q2 non-GAAP revenue and non-GAAP EPS exceed guidance

Company reports Q2 non-GAAP revenue growth of 31%

BELLEVUE, Wash., April 29, 2014 /PRNewswire/ -- Concur (Nasdaq: CNQR) today reported financial results for its second quarter ended March 31, 2014.

Concur reported total GAAP revenue for the second quarter of fiscal 2014 of $169.5 million. Excluding revenue from businesses that the company intends to divest, non-GAAP revenue for the second quarter of 2014 was $167.0 million, up 31% from the year-ago quarter and up 4% from the prior quarter. GAAP net loss attributable to Concur for the second quarter of fiscal 2014 was $56.0 million, or $0.99 per share.  Fiscal 2014 second quarter non-GAAP pretax income was $9.0 million, or $0.15 per share.

"We are experiencing strong traction across all of our key drivers, with continued success in our core products and growing momentum around our open platform initiatives," said Steve Singh, Chairman and CEO of Concur. "In the second quarter, on a non-GAAP basis, we exceeded expectations for revenue, earnings, cash flow from operations and free cash flow.  New customer growth was very strong and was particularly notable for our customers' adoption of TripLink™ and the success of our new App Center. We are very excited to welcome more than 2,000 customers and partners to New Orleans next week for Concur's annual Fusion conference, where we have the opportunity to connect with our community and share with them our vision for delivering increasing value through our platform and partnerships."

Financial Highlights

  • Total GAAP revenue was $169.5 million in the second quarter of fiscal 2014, including $2.5 million in revenue from businesses the company intends to divest. Excluding the $2.5 million, non-GAAP revenue was $167.0 million for the second quarter of fiscal 2014, an increase of approximately 31% compared to the year-ago quarter and up 4% sequentially.
  • GAAP pretax loss was $25.2 million for the second quarter of fiscal 2014, compared to a GAAP pretax loss of $8.5 million for the year-ago quarter. GAAP net loss attributable to Concur was $56.0 million, or $0.99 per share, for the second quarter of fiscal 2014, compared to GAAP net loss attributable to Concur of $7.6 million, or $0.14 per share, for the year-ago quarter.
  • Non-GAAP pretax income was $9.0 million, or $0.15 per share, for the second quarter of fiscal 2014, compared to $13.6 million, or $0.24 per share, for the year-ago quarter. Please refer to "About Concur's Non-GAAP Financial Measures" below for an explanation of our non-GAAP financial measures used in this press release.
  • Non-GAAP operating margin was 7.1% for the second quarter of fiscal 2014, compared to 12.4% for the year-ago quarter.
  • GAAP net loss attributable to Concur for the second quarter of fiscal 2014 included a one-time non-cash charge to income tax expense of $31.4 million. U.S. GAAP requires companies to regularly assess their ability to recognize deferred tax assets by evaluating certain criteria.  After performing this analysis in Q2, we determined that the valuation allowance against certain deferred tax assets was required after considering whether these deferred tax assets will be realized in the near future. Our deferred tax assets have expiry dates many years into the future, and so we maintain the ability to utilize these assets at some point to offset future tax liabilities if and when they occur.
  • GAAP cash flows from operations were $22.8 million for the second quarter of fiscal 2014.

Business Highlights

Concur is the leading provider of spend management solutions and services in the world, helping companies of all sizes transform the way they manage spend so they can focus on what matters most. Concur's solutions for corporate travel, expenses and invoicing enable companies to reimagine the way core processes work, deliver an effortless experience to employees in the office and on the road, and provide unprecedented visibility into spending activity. Concur's open platform includes a community of hundreds of developers and third-party service providers, whose services integrate seamlessly to extend the functionality of the platform.

Some of the highlights from the second quarter of fiscal 2014 included:

  • Rapidly expanding customer base: Concur continued to extend its leadership position in travel and expense management with the addition of more than one thousand new customers in the second quarter. The Company experienced strong demand across all its markets, including its core enterprise customer segment, the SMB market, and emerging international markets as businesses of all sizes look to capitalize on the benefits of an integrated travel and expense management solution.
  • Continued strong progress on Government deployments: The Company continues to implement its travel and expense management services to U.S. government agencies under the U.S. General Services Administration (GSA) E-Gov Travel Services 2 (ETS2) award.  Each quarter, more government employees are gaining access to Concur's solutions for managing online bookings, travel authorizations and voucher processing.
  • App Center success: In the second quarter, more than 800 clients activated solutions from the Concur App Center, connecting them to innovative products that leverage their Concur investment to build even greater efficiency in their business. Enterprises and travelers are realizing rapid value from a number of solutions that solve specific mission-critical functions, such as:
    • Clients are rapidly adopting value-added tax (VAT) reclaim solutions which can be instantly enabled in Concur to quickly identify and extract eligible transactions. The partners then undergo the reclaim process on behalf of the client. Universal VAT and TaxBack solutions are currently available in the App Center with a number of additional partners currently in development.
    • Identity Management and Single Sign-on is an important feature for increasing enterprise security. Recently added solutions from Microsoft® Azure Active Directory and OneLogin join existing Identify Management providers Ping Identity®, Okta and Centrify® to provide customers with a range of security options.
    • Companies in the Life Sciences and Pharmaceutical industries face rigid regulatory requirements. A number of apps are designed specifically to help them meet the growing administrative and legal requirements. R-Squared, a Life Sciences aggregate spend and compliance solution provider released a new application for SMB's in March. The application offers a simplified means for small and mid-sized pharmaceutical and medical device manufacturers to automate their data validation and create pre-defined reports which meet government guidelines.
  • TripLink momentum: Customers continue to embrace an open ecosystem to deliver a full view of their travel and expenses by adopting TripLink. More than 1,000 customers have purchased TripLink, and this momentum is helping to drive supplier adoption and facilitating an easier travel experience for business travelers. Every quarter, more TMCs are partnering with Concur around the TripLink offering to provide a holistic view of travel and spend and to deliver the best customer experience. World Travel Service and Travel Solutions by Campbell are two of the numerous TMCs who have joined the growing number of TMCs building integrations to ensure full visibility into TripLink itineraries.
  • ExpenseIt user base growing rapidly: ExpenseIt® is changing the way people capture receipts and file expenses, and the impact is illustrated by rapid user adoption. In the second quarter, the number of corporate customers more than doubled while the number of individual users nearly quadrupled. The ExpenseIt development team continues to roll out new features and integrations, such as synchronized notifications for American Express Corporate Cardmembers, that are delighting customers and have helped make ExpenseIt one of the company's most successful new product launches.
  • Largest premier customer event to date: Concur Fusion, the Company's premier annual customer event, will be held in May in New Orleans. The 2014 Fusion conference is already the largest Concur event to date with over 2,000 customers and partners scheduled to attend the four-day event.

Business Outlook

The following statements are based on our current expectations and we do not undertake any duty to update them. These statements are forward-looking and inherently uncertain. Actual results may differ materially as a result of the factors identified below, the factors identified in our public filings made with the Securities and Exchange Commission, or other factors. Please also refer to "About Concur's Non-GAAP Financial Measures" below for an explanation of our non-GAAP financial measures and a reconciliation of those measures to GAAP equivalents.

  • Concur expects non-GAAP revenue for the third quarter of fiscal 2014 to grow approximately 26% year-over-year from the third quarter of fiscal 2013. For the third quarter of fiscal 2014, Concur expects non-GAAP pretax income per share to be $0.24. Non-GAAP revenue and pretax income exclude the effects of businesses the company intends to divest and non-cash related items such as stock-based compensation expenses, amortization of intangible assets, and the accretion of the discount on our convertible senior notes.  It also excludes the non-cash accounting implications and cash fees and expenses of acquisitions and other related strategic activity in which the Company may deploy capital.
  • Concur expects fiscal 2014 non-GAAP revenue to grow approximately 26% year-over-year from fiscal 2013.
  • Concur expects fiscal 2014 non-GAAP pretax income per share to be at least $0.93.
  • Concur expects fiscal 2014 non-GAAP operating margin to be in the range of 10% to 12%.
  • Concur expects cash flows from operations in fiscal 2014 to be at least $72 million, excluding excess tax benefits from share based compensation, acquisition and other related costs, and noncontrolling interest. The Company expects capital expenditures to be 8% to 9% of fiscal 2014 revenue.

All company or product names are trademarks and/or registered trademarks of their respective owners.

This press release contains forward-looking statements that are inherently uncertain. These forward-looking statements, such as the statements made by Mr. Singh, are based on Concur's current expectations and involve many risks and uncertainties that could cause actual results to differ materially from current expectations. Factors that could cause or contribute to actual results differing from current expectations include, but are not limited to: potential difficulties in connection with recent business and asset acquisitions, including achievement of the anticipated benefits of these acquisitions or the broader integration of such businesses with Concur; adverse economic or market conditions, which may cause customers and prospects to delay or reduce purchases of our products and services, cause customers to reduce business travel and correspondingly reduce the use of our products and services, reduce the ability of customers, channel partners, vendors and suppliers to fulfill their obligations to us, increase volatility of our stock price and foreign exchange rates, and otherwise adversely affect our operations and financial performance; potential delays in market adoption and penetration of our subscription service offerings; potential difficulties associated with our deployment and support of our products and services; our ability to manage expected growth of our subscription service offerings; the scalability and security of our computer networks and hosting infrastructure for our subscription service offerings; risks associated with the privacy and protection of information while in our possession; potential increases in the rate of attrition of customers of our subscription service offerings; the level of investment in information technology by our customers; the level of business travel that may reduce the use of our products and services or inhibit new sales of our products and services; potential difficulties associated with strategic relationships and with development of new products and services; risks or difficulties associated with expansion into new geographic markets; uncertain market acceptance of recently-introduced or future products and services; and risks associated with our financing and investment activities.

Please refer to the Company's public filings made with the Securities and Exchange Commission at www.sec.gov for additional and more detailed information on risk factors that could cause actual results to differ materially from current expectations. Concur assumes no obligation to update the forward-looking information contained in this press release.

 

Concur Technologies, Inc.

Consolidated Statements of Operations

(In thousands, except per share amounts)

(Unaudited)
















Three Months Ended
March 31,


Six Months Ended
March 31,










2014


2013


2014


2013

Revenue


$    169,522


$    127,370


$    332,600


$    250,168

Expenses:










Cost of operations


60,981


36,564


119,504


71,560


Sales and marketing


71,194


55,518


144,356


110,460


Systems development and programming


20,369


13,799


41,933


28,026


General and administrative


25,553


20,280


50,457


39,912


Revaluation of contingent consideration


(415)


(677)


(1,643)


2,132


Amortization of intangible assets


5,242


4,539


10,472


9,003

Total expenses


182,924


130,023


365,079


261,093

Operating loss


(13,402)


(2,653)


(32,479)


(10,925)

Other income (expense):










Interest income


615


490


1,474


1,044


Interest expense


(11,003)


(5,128)


(21,883)


(10,096)


Loss from equity investments


(1,136)


(767)


(2,266)


(1,368)


Other, net


(232)


(473)


(814)


(561)

Total other expense


(11,756)


(5,878)


(23,489)


(10,981)

Loss before income tax


(25,158)


(8,531)


(55,968)


(21,906)

Income tax expense (benefit)


31,049


(678)


24,610


(1,735)

Consolidated net loss


(56,207)


(7,853)


(80,578)


(20,171)

Less: Loss attributable to noncontrolling interest


226


208


377


494

Net loss attributable to Concur


$     (55,981)


$       (7,645)


$     (80,201)


$     (19,677)

Net loss per share attributable to Concur common stockholders:









Basic


$         (0.99)


$         (0.14)


$         (1.42)


$         (0.36)


Diluted


$         (0.99)


$         (0.14)


$         (1.42)


$         (0.36)

Weighted average shares used in computing net loss per share:









Basic


56,589


55,597


56,320


55,337


Diluted


56,589


55,597


56,320


55,337

 

Concur Technologies, Inc.

Consolidated Balance Sheets

(In thousands, except per share amounts)

(Unaudited)












March 31, 2014


September 30, 2013

Assets





Current assets:






Cash and cash equivalents


$             323,264


$                    301,696


Short-term investments


473,890


531,065


Accounts receivable, net of allowance of $5,606 and $3,567


117,484


106,587


Deferred tax assets


20,131


43,987


Deferred costs and other assets


54,390


55,341



Total current assets


989,159


1,038,676

Non-current assets:






Property and equipment, net


94,723


82,414


Investments


121,637


101,756


Deferred costs and other assets


58,798


51,082


Intangible assets, net


113,300


123,297


Deferred tax assets


3,447


3,255


Goodwill


327,070


324,454

Total assets


$          1,708,134


$                 1,724,934

Liabilities and equity





Current liabilities:






Accounts payable


$               15,182


$                      15,036


Customer funding liabilities


51,861


37,039


Accrued compensation


34,678


30,142


Acquisition-related liabilities


2,711


2,231


Acquisition-related contingent consideration


1,594


3,182


Other accrued expenses and liabilities


31,491


34,537


Deferred revenues


97,989


88,550


Convertible senior notes, net


272,327


265,426



Total current liabilities


507,833


476,143

Non-current liabilities:






Convertible senior notes, net


391,966


381,807


Deferred rent and other long-term liabilities


13,045


10,373


Deferred revenues


9,128


15,499


Tax liabilities


23,429


22,832

Total liabilities


945,401


906,654

Temporary equity: convertible senior notes


15,173


22,074

Equity:






Concur stockholders' equity:






Common stock, $0.001 par value per share


57


56


Authorized shares: 195,000






Shares issued and outstanding: 56,855 and 56,044






Additional paid-in capital


968,481


939,423


Accumulated deficit


(221,880)


(141,679)


Accumulated other comprehensive loss


(759)


(1,815)

Total Concur stockholders' equity


745,899


795,985

Noncontrolling interest


1,661


221

Total equity


747,560


796,206

Total liabilities, temporary equity and stockholders' equity


$          1,708,134


$                 1,724,934

 

Concur Technologies, Inc.

Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)
















Three Months Ended March 31,


Six Months Ended March 31,





2014


2013


2014


2013

Operating activities:









Consolidated net loss


$     (56,207)


$       (7,853)


$     (80,578)


$     (20,171)

Adjustments to reconcile consolidated net loss to net cash provided by operating activities:









Amortization of intangible assets


5,242


4,539


10,472


9,003


Depreciation and amortization of property and equipment


9,613


7,082


18,776


13,703


Accretion of discount and issuance costs on notes


8,594


3,227


17,060


6,399


Share-based compensation


19,587


13,718


50,076


31,447


Revaluation of contingent consideration


(415)


(677)


(1,643)


2,132


Deferred income taxes


31,391


(1,586)


24,356


(3,217)


Excess tax benefits from share-based compensation


(275)


(219)


(421)


(365)


Loss from equity investments


1,136


767


2,266


1,368


Payments of contingent consideration



(591)



(591)


Changes in operating assets and liabilities, net of effects from acquisitions:











Accounts receivable, net


(6,625)


(9,650)


(10,578)


(7,389)



Deferred costs and other assets


(7,405)


(5,759)


(4,071)


(4,345)



Accounts payable


1,205


2,898


1,752


1,661



Accrued liabilities


16,399


8,075


4,355


(11,310)



Deferred revenues


549


4,728


3,065


5,423

Net cash provided by operating activities


22,789


18,699


34,887


23,748

Investing activities:










Purchases of investments


(259,609)


(125,677)


(507,994)


(253,185)


Maturities of investments


228,520


136,141


565,043


212,485


Increase (decrease) in customer funding liabilities


(2,790)


5,140


14,677


8,129


Investment in and loans to unconsolidated affiliates


(23,640)



(27,164)


(17,326)


Capital expenditures


(14,473)


(10,455)


(26,779)


(20,989)


Payments for acquisitions, net of cash acquired


(2,560)


(9,564)


(2,560)


(9,564)


Payments of contingent consideration related to acquisition of Etap



(1,266)



(1,266)

Net cash provided by (used in) investing activities


(74,552)


(5,681)


15,223


(81,716)

Financing activities:










Investments in consolidated joint venture by noncontrolling interest




1,809



Payments on repurchase of common stock




(441)


(201)


Net proceeds from share-based equity award activity


1,547


857


1,819


1,420


Proceeds from employee stock purchase plan activity


881


928


1,686


1,584


Minimum tax withholding on restricted stock awards


(31,959)


(19,251)


(31,985)


(19,347)


Excess tax benefits from share-based compensation


275


219


421


365


Payments of contingent consideration



(2,497)



(2,497)


Repayments on capital leases


(1,833)



(1,833)


Net cash used in financing activities


(31,089)


(19,744)


(28,524)


(18,676)


Effect of foreign currency exchange rate changes on cash and cash equivalents

(60)


(1,086)


(18)


(1,190)

Net increase (decrease) in cash and cash equivalents


(82,912)


(7,812)


21,568


(77,834)

Cash and cash equivalents at beginning of period

406,176


232,252


301,696


302,274

Cash and cash equivalents at end of period


$     323,264


$     224,440


$     323,264


$     224,440

 

Concur Technologies, Inc.

Reconciliation of GAAP Financial Measures to Non-GAAP Financial Measures

(In thousands, except per share and margin data)

(Unaudited)
















Three Months Ended March 31,


Six Months Ended March 31,





2014


2013


2014


2013












Non-GAAP Revenue:










Revenue


$     169,522


$     127,370


$    332,600


$    250,168


Business operations to be divested


(2,513)



(5,295)



Non-GAAP revenue


$     167,009


$     127,370


$    327,305


$    250,168











Operating income (loss):










Operating loss


$     (13,402)


$       (2,653)


$     (32,479)


$     (10,925)


Loss from operations as a % of total revenue (operating margin)


(7.9)%


(2.1)%


(9.8)%


(4.4)%


Add back:











Share-based compensation


19,587


13,718


50,076


31,447



Amortization of intangibles


5,242


4,539


10,472


9,003



Acquisition and other related costs


307


1,182


943


1,481



Revaluation of contingent consideration


(415)


(677)


(1,643)


2,132



Contingent consideration (included in compensation expense)



(480)



1,075



Noncontrolling interest joint venture


226


208


377


494



Business operations to be divested


322



(454)



Non-GAAP operating income


$       11,867


$       15,837


$      27,292


$      34,707



Non-GAAP operating income as a % of total revenue (Non-GAAP operating margin)


7.1 %


12.4 %


8.3 %


13.9 %











Net income (loss) attributable to Concur:










Net loss attributable to Concur


$     (55,981)


$       (7,645)


$     (80,201)


$     (19,677)


Add back:











Share-based compensation

19,587


13,718


50,076


31,447



Amortization of intangibles

5,242


4,539


10,472


9,003



Acquisition and other related costs

307


1,182


943


1,481



Revaluation of contingent consideration


(415)


(677)


(1,643)


2,132



Contingent consideration (included in compensation expense)


(480)



1,075



Loss from equity investments


1,136


767


2,266


1,368



Accretion of notes discount

7,744


2,897


15,371


5,743



Income tax expense (benefit)


31,049


(678)


24,610


(1,735)



Business operations to be divested


322



(454)



Non-GAAP pretax income attributable to Concur


$         8,991


$       13,623


$      21,440


$      30,837

Diluted net income (loss) per share attributable to Concur:










Diluted net loss per share attributable to Concur


$         (0.99)


$         (0.14)


$         (1.42)


$         (0.36)


Add back:











Share-based compensation


0.34


0.24


0.86


0.55



Amortization of intangibles


0.10


0.08


0.19


0.16



Acquisition and other related costs


0.01


0.02


0.02


0.03



Revaluation of contingent consideration


(0.01)


(0.01)


(0.03)


0.04



Contingent consideration (included in compensation expense)



(0.01)



0.02



Loss from equity investments


0.02


0.02


0.04


0.03



Accretion of notes discount


0.14


0.05


0.27


0.10



Income tax expense (benefit)


0.53


(0.01)


0.43


(0.03)



Business operations to be divested


0.01





Non-GAAP pretax diluted income per share attributable to Concur


$           0.15


$           0.24


$          0.36


$          0.54












Shares used in calculation of GAAP and non-GAAP income (loss) per share:










GAAP basic shares


56,589


55,597


56,320


55,337












GAAP diluted shares


56,589


55,597


56,320


55,337


Adjustment for warrants associated with convertible senior notes


1,928



1,726



Adjustment for share based equity awards


1,565


1,634


1,694


1,827


Non-GAAP diluted shares


60,082


57,231


59,740


57,164

 


Concur Technologies, Inc.

Reconciliation of GAAP Operating Expense to Non-GAAP Operating Expense

(In thousands, except per share and margin data)

(Unaudited)












Three Months Ended
March 31,


Six Months Ended
March 31,






2014


2013


2014


2013

Non-GAAP operating expense:









Cost of operations

$       54,530


$      34,977


$      104,875


$       67,306


Sales and marketing

62,608


49,302


120,951


94,307


Systems development and programming

17,864


12,176


35,375


24,266


General and administrative

20,005


15,011


38,501


29,489


Total

$     155,007


$    111,466


$      299,702


$     215,368

Non-GAAP operating margin *

7.1 %


12.4 %


8.3 %


13.9 %

Non-GAAP pretax diluted income per share attributable to Concur *

$           0.15


$          0.24


$            0.36


$           0.54












Three Months Ended
March 31,


Six Months Ended
March 31,






2014


2013


2014


2013

Cost of operations

$       60,981


$      36,564


$      119,504


$       71,560

Less:









Share-based compensation

3,509


1,492


9,573


4,061


Acquisition and other related costs


1



2


Noncontrolling interest joint venture

107


94


215


191


Business operations to be divested

2,835



4,841


Non-GAAP cost of operations

$       54,530


$      34,977


$      104,875


$       67,306










Sales and marketing

$       71,194


$      55,518


$      144,356


$     110,460

Less:









Share-based compensation

8,443


6,545


23,123


14,985


Contingent consideration (included in compensation expense)


(434)



972


Acquisition and other related costs


19



22


Noncontrolling interest joint venture

143


86


282


174

Non-GAAP sales and marketing

$       62,608


$      49,302


$      120,951


$       94,307










Systems development and programming

$       20,369


$      13,799


$        41,933


$       28,026

Less:









Share-based compensation

2,464


1,643


6,476


3,607


Contingent consideration (included in compensation expense)


(46)



103


Acquisition and other related costs


2



3


Noncontrolling interest joint venture

41


24


82


47

Non-GAAP systems development and programming

$       17,864


$      12,176


$        35,375


$       24,266










General and administrative

$       25,553


$      20,280


$        50,457


$       39,912

Less:









Share-based compensation

5,171


4,038


10,904


8,794


Acquisition and other related costs

307


1,160


943


1,454


Noncontrolling interest joint venture

70


71


109


175

Non-GAAP general and administrative

$       20,005


$      15,011


$        38,501


$       29,489










* Please refer to the reconciliation of GAAP to non-GAAP financial measures on previous page.

 

CONCUR TECHNOLOGIES, INC.

About Concur's Non-GAAP Financial Measures

This release contains non-GAAP financial measures. The tables above reconcile the non-GAAP financial measures to the most directly comparable financial measures prepared in accordance with accounting principles generally accepted in the United States ("GAAP").

Non-GAAP financial measures should not be considered as a substitute for, or as superior to, measures of financial performance prepared in accordance with GAAP. Concur's non-GAAP financial measures do not reflect a comprehensive system of accounting and they differ from GAAP measures with similar names and from non-GAAP financial measures with the same or similar names that are used by other companies. We strongly urge investors and potential investors in our securities to review the reconciliation of our non-GAAP financial measures to the comparable GAAP financial measures that are included in this release and our consolidated financial statements, including the notes thereto, and the other financial information contained in our periodic filings with the Securities and Exchange Commission and not to rely on any single financial measure to evaluate our business.

Concur's management believes that its non-GAAP financial measures provide useful information to investors because it allows investors to view the business through the eyes of management. Further, Concur believes that its non-GAAP financial measures provide meaningful supplemental information regarding Concur's operating results because they exclude amounts that Concur excludes as part of its monitoring of operating results and assessing the performance of the business. In addition, Concur believes that its non-GAAP financial measures facilitate the comparison of results for current periods and the business outlook for future periods with results of past periods because the measures provide a special focus on the underlying operating performance of the business relative to expectations.

Concur presents the following non-GAAP financial measures in this release: non-GAAP revenues, non-GAAP operating income, non-GAAP operating margin, non-GAAP operating expense, non-GAAP pretax income, non-GAAP cost of operations, non-GAAP sales and marketing expenses, non-GAAP systems development and programming expenses, non-GAAP general and administrative expenses, non-GAAP diluted shares, and non-GAAP diluted pretax income per share. Concur excludes the following items as noted from these non-GAAP financial measures:

  • Share-based compensation. Concur's non-GAAP financial measures exclude share-based compensation, which consists of expenses for restricted stock units ("RSU"). Concur excludes these expenses from its non-GAAP financial measures primarily because they are non-cash expenses that are not considered part of ongoing operating results when assessing the performance of our business. Excluding these amounts improves comparability of the performance of the business across periods.
  • Amortization of intangible assets. In accordance with GAAP, operating expenses include amortization of acquired intangible assets such as customer relationships and technology. Concur excludes these items from its non-GAAP financial measures because they are typically static expenses that Concur does not consider part of ongoing operating results when assessing the performance of our business, and Concur believes that doing so facilitates comparisons to its historical operating results and to the results of other companies in our industry, which have their own unique acquisition histories.
  • Acquisition and other related costs. Concur excludes the effects of acquisition and other related costs from its non-GAAP financial measures. Acquisition and other related costs include transaction fees, due diligence costs, travel expenses, and other one-time direct costs associated with strategic activity in which we may deploy capital. Such expenses are incurred in connection with our acquisitions and other strategic investments, which generally would not have otherwise been incurred in the periods presented as a part of our continuing operations. Concur also believes it is useful for investors to understand the effects of these items on our operations.
  • Revaluation of contingent consideration. The authoritative guidance on business combinations requires contingent consideration to be recorded at fair value on the acquisition date. The authoritative guidance also requires that changes in the fair value of the contingent consideration subsequent to the acquisition date be recorded in the consolidated statements of operations.  Concur excludes from its non-GAAP financial measures the gains or losses from the fair value re-measurement of the contingent consideration in order to facilitate the comparison of post-acquisition operating results. Concur believes that it is useful for investors to understand the effects of these items on our operations.
  • Contingent consideration (included in compensation expense). Concur's non-GAAP financial measures exclude contingent consideration included in compensation expense which relates to the cash payment to certain TripIt employees whose right to receive such payment is forfeited if they terminate their employment prior to the required service period. The contingent cash payment that these employees are entitled to receive is part of the consideration that all TripIt shareholders received from Concur in exchange for their TripIt shares.  As the contingent payment is subject to continued employment, GAAP requires that it be accounted for as compensation expense and such expense is subject to revaluation similar to the above mentioned "revaluation of contingent consideration." Concur excludes this item from its non-GAAP financial measures primarily because it is a component of the deal consideration and it is not considered part of ongoing operating results when assessing the performance of our business. The exclusion of these expenses facilitates the comparison of post-acquisition operating results.
  • Noncontrolling interest joint venture. Noncontrolling interest joint venture includes income or loss from operations attributable to our joint venture partner and is excluded from the calculation of non-GAAP operating income because it is unrelated to our ownership in the venture.
  • Loss from equity investments. For investments under the equity method, Concur records its proportionate share of investee income or loss, including adjustments to recognize certain differences between carrying value and Concur's equity in net assets of the investee at the date of investment, impairments, and other adjustments required by the equity method. Concur's non-GAAP financial measures exclude the equity method adjustments from GAAP income because they are unrelated to our ongoing operations and are significantly impacted by factors outside our direct control.
  • Accretion of note discount. In accordance with GAAP, interest expense on the convertible senior notes includes the accretion of the note discount, which is a non-cash expense that Concur does not consider part of ongoing operating results when assessing the performance of our business.
  • Income tax expense (benefit). Concur excludes this expense (benefit) from certain non-GAAP financial measures primarily because it is largely a non-cash expense (benefit) that Concur does not consider a meaningful component of our operating results when assessing the performance of our business. The exclusion of this expense (benefit) facilitates the comparison of our business outlooks for future periods with the results from prior periods.
  • Business operations to be divested. Business operations to be divested include the revenues and operating expenses from the recently acquired call center and BPO businesses, both of which were acquired during the year ended September 30, 2013 and which Concur intends to divest. As Concur does not expect these business operations to contribute to Concur's ongoing operating results in the future, Concur believes it is useful for investors to understand the effects of these items on our current operating results.

Further, in the calculation of non-GAAP pretax income per share:

  • Non-GAAP pretax income is calculated by excluding the impacts of the non-GAAP adjustments described above.
  • Non-GAAP diluted shares are calculated by including the anti-dilutive impact of options to purchase shares of our own stock, which reduces the potential economic dilution upon conversion of our convertible senior notes. Under GAAP, the anti-dilutive impact of such call options ("Convertible Senior Notes Hedge") is not reflected in diluted shares. Concur includes the anti-dilutive impact of the Convertible Senior Notes Hedge, if any, in non-GAAP diluted shares because it is useful for investors to understand their economic effects.
  • The dilutive effect of all unvested share-based awards, if any, are included in the calculation of non-GAAP pretax income per share.

Except as noted below, Concur believes that all of the following considerations apply equally to each of the non-GAAP financial measures that we present:

  • Concur's management uses non-GAAP operating income (including the derived non-GAAP operating margin), non-GAAP operating expense, non-GAAP pretax income and non-GAAP diluted pretax income per share in internal reports used by management in monitoring and making decisions regarding Concur's business. For example, these measures are used in monthly financial reports prepared for management, and in quarterly reports to Concur's Board of Directors. Concur also uses non-GAAP pretax diluted income per share as a measure to determine executive cash incentive compensation.
  • Because share-based compensation, amortization of intangible assets, accretion of discount on convertible senior notes and income tax expense (benefit) are largely non-cash in nature, Concur believes that non-GAAP operating income, non-GAAP operating expense, non-GAAP diluted shares, non-GAAP pretax income and non-GAAP diluted pretax income per share provide a more focused view of the operations of its business. In particular, share-based compensation amounts are difficult to forecast because the magnitude of the charges depends upon the volume and timing of RSU grants. Excluding these amounts improves comparability of the performance of the business across periods.
  • The principal limitation of Concur's non-GAAP financial measures is that they exclude significant expenses that are required by GAAP to be recorded. In addition, non-GAAP financial measures are subject to inherent limitations because they reflect the exercise of judgments by management about which charges are excluded from the non-GAAP financial measures.
  • To mitigate this limitation, Concur presents its non-GAAP financial measures in connection with its GAAP results, and recommends that investors do not give undue weight to its non-GAAP financial measures.

About Concur

Concur® is a leading provider of integrated travel and expense management solutions. Concur's easy-to-use Web-based and mobile solutions help companies, federal agencies and their employees control costs and save time. Concur's open platform enables the entire travel and expense ecosystem of customers, suppliers, and developers to access and extend Concur's T&E cloud. Concur's systems adapt to individual employee preferences and scale to meet the needs of companies from small to large. Learn more at http://www.concur.com or the Concur blog.

CONTACT: Press, Danielle Adams, Concur, 425-590-5085, Danielle.Adams@concur.com, or Investors, Todd Friedman, Concur, 415-401-1205, Todd.Friedman@concur.com


SOURCE Concur



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