Jeffrey Keene [email protected] July 29, 2011
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Transcript of Jeffrey Keene [email protected] July 29, 2011
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Jeffrey [email protected]
July 29, 2011
Concur (CNQR) – Leading provider of on-demand corporate expense management software – uniting
online corporate travel booking with automated expense reporting.
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Stock Chart
Concur’s stock has had a great run over the last five years due to its strong competitive position, solid management team, and steady execution.
However, the stock has stalled over the past year – which provides an attractive entry point for a firm that is positioned to grow revenue at least 20%-plus for the next three to five years.
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Versus PeersOne-year price chart
Blue=Concur down 5%, Red=salesforce up 50%,Orange=SuccessFactors up 30%, Green=NetSuite
up 140%
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Strong Fundamental Picture
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Concur’s solution unites travel bookings and expense reporting – the only one in the market.
The company’s solution remains best in class and faces little to no competition.
Roughly $100 billion annually is spent on corporate travel and entertainment – the 2nd largest controllable cost for organizations.
In my view, the firm is one of the most forward-looking software companies.
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Total Available Market
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Management estimates that the company’s core market is only 10% penetrated (1 million serviceable firms with more than 75 employees) and pegs the company’s total available market at $12 billion.
With a current revenue run rate of only $360 million, Concur has significant room to grow.
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New Growth Areas
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Moving down market Management believes that the majority of revenue
long-term could come from SMBs.
Concur Breeze was released last year.
Overseas expansion Management wants to move from 13% of sales to 25%
- 30%.
Overseas revenue could someday approach 50% or more, as many mature software companies receive at least half of their revenue from international locations.
The firm recently released editions in Japan and India – two potential very large markets. These offerings should begin to materially add to revenue by 2013.
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New Growth Areas
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TripIt functionality
Improves Concur’s mobile functionality.
Fills a gap in the company’s product offering.
Should materially impact ‘13 results if not sooner.
Recent partnerships
American Express
Amadeus
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Corporate Travel Spending Impact
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Corporate travel spending has grown for six consecutive quarters - however, we are still not at the dollar spending level witnessed in 2008.
The company was materially impacted by the recession and reduced travel volumes – Concur had been growing its top-line north of 30%.
As corporate travel continues to bounce back, Concur should begin to see customers increase their transaction volumes, leading to additional revenue.
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Risks
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Has the company penetrated its core U.S. enterprise market?
Will Concur be successful in the SMB space?
Will the firm be able to expand significantly overseas?
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Recent Quarterly Performance
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Actual Guidance Actual GuidanceQ3 2011 19% 18% Beat $0.29 $0.29 In lineQ2 2011 16% 15.5% Beat $0.25 $0.24 BeatQ1 2011 19% 17% Beat $0.30 $0.28 BeatQ4 2010 20% 18% plus Beat $0.30 $0.29 BeatQ3 2010 21% 18% Beat $0.31 $0.28 Beat
Revenue growth Pre-tax non-GAAP EPS
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Financial Overview – Annual
(in millions) FY07A
FY08A
FY09A
FY10A
FY11E
FY12E
FY13E
Total Revenue $129 M
$216 M
$248 M
$293 M
$348 M
$430 M
$538 M
Growth 33% 67% 15% 18% 19% 24% 25%
Gross Profit Margin 66% 68% 70% 71% 72% 72% 72%
Non-GAAP Operating Margin
17% 19% 23% 23% 22% 24% 25%
Pre-tax Non-GAAP EPS $0.54 $0.86 $1.14 $1.21 $1.25 $1.70 $2.21 After-tax Non-GAAP EPS
$0.33 $0.52 $0.72 $0.76 $0.84 $1.14 $1.48
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Assumptions: On the top-line, I am forecasting 24% growth next year (including 1 percentage point from acquisitions) based on better than expected revenue from overseas and from TripIt (where I believe management was conservative) as well a better corporate travel environment, leading to increased transactions and additional revenue for the company. For 2013, my expectation is for 25% growth as the six growth areas all begin to materially push up the revenue figure. On the operating margin line, I am projecting a 2 percentage point improve in fiscal 2012 and a 1 percentage point gain in fiscal 2013 as fewer growth initiatives are spent on and the SMB solution begins to help the margin.
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Valuation – 2011
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Calendar 2011Market
CapEV
EV/Sales
EV/FCF
Sales Growth EPS Growth
Concur (CNQR) $2,629 M $2,295 M 6.6x 40.4x 20% 22%
salesforce.com $21,845 M $21,560 M
9.9x 50.7x 23% 25%
NetSuite $2,596 M $2,484 M 10.8x 122.0x 19% 30% SuccessFactors $2,434 M $2,067 M 7.3x 39.8x 19% 26% Ultimate Software $1,551 M $1,499 M 5.5x 61.3x 20% 28%
SaaS Fast-Growth Median
$1,551 M $1,499 M 6.6x 41.2x 22% 26%
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Valuation – 2012
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Calendar 2012Market
CapEV
EV/Sales
EV/FCF
Sales Growth EPS Growth
Concur (CNQR) $2,629 M $2,295 M 5.4x 29.8x 22% 27%
salesforce.com $21,845 M $21,560 M
8.1x 39.1x 23% 25%
NetSuite $2,596 M $2,484 M 9.1x 70.1x 19% 30% SuccessFactors $2,434 M $2,067 M 6.1x 28.7x 19% 26% Ultimate Software $1,551 M $1,499 M 4.6x 38.6x 20% 28%
SaaS Fast-Growth Median
$1,551 M $1,499 M 5.4x 35.1x 22% 26%