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Concur Technologies (NASDAQ:CNQR)

F3Q10 (Qtr End 06/30/2010) Earnings Call

July 28, 2010 5:00 pm ET

Executives

John Torrey - EVP of Corporate

S. Singh - Chairman and Chief Executive Officer

Frank Pelzer - Chief Financial Officer

Analysts

Laura Lederman - William Blair & Company L.L.C.

Sid Parakh - McAdams Wright Ragen, Inc.

Brian Wallins - Broadpoint Capital

Thomas Ernst - Deutsche Bank AG

Michael Clarke

Ross MacMillan - Jefferies & Company, Inc.

AjayKumar Kasargod

Mark Murphy - Piper Jaffray Companies

Operator

Good afternoon, ladies and gentlemen. My name is Gerald, and I will be your conference operator. At this time, I would like to welcome everyone to Concur Technologies Q3 Fiscal 2010 Earnings Conference Call. [Operator Instructions] I would now like to turn the conference over to Mr. John Torrey, Executive Vice President of Corporate Development. Sir, you may begin.

John Torrey

Thank you, operator. Good afternoon, and welcome, everyone, to the Concur earnings conference call for our third quarter of fiscal 2010. My name is John Torrey, Executive Vice President of Corporate Development for Concur. This call includes presentation slides that will accompany our prepared remarks. To access these slides, please log on to our website at www.concur.com. Other information of interest to investors, including our SEC filings, press releases and recent investor presentations can be found on the Investor Relations page of our website.

We are now on Slide 1. Our speakers for the call today are Steve Singh, our Chairman and Chief Executive Officer; and Frank Pelzer, our Chief Financial Officer. After their prepared statements today, Steve and Frank will host a brief question-and-answer session.

Please now advance to Slide 2. Before we get started, we want to remind you that during the course of this conference call, we will discuss our business outlook and make other forward-looking statements regarding our current expectations of future events and the future financial performance of the company.

These forward-looking statements are based on information available to us, as of today's date and are subject to risk and uncertainty. We encourage you to review the details on the Slide 2 and our filings with the Securities and Exchange Commission, which are available at www.sec.gov for additional information on risk factors that could cause actual results to differ materially from our current expectations and the forward-looking statements expressed or implied during this conference call.

We assume no duty or obligation to update these forward-looking statements, even though our situation may change in the future.

Please now advance to Slide 3. At this time, I'd like to turn the call over to Steve Singh. Steve?

S. Singh

Thanks, John. Good afternoon, everyone. Here are the top four themes to take away from the call today. First, fiscal Q3 was an exceptional strong quarter, with performance against key metrics, such as revenue, earnings and free cash flow coming in well ahead of our expectations.

Second, we expect 2010 revenue to grow 18% year-over-year. This, of course, comes on top of the 15% growth we saw in 2009. Looking ahead further, we expect annual revenue growth to move up over the forward few years, as we trend back to our steady-state growth targets. At the same time, we think it's prudent to remain cautious in our outlook, as the economic recovery continues to take shape.

Third, outside of our core growth opportunity which is to grow our customer base in the markets we currently serve, we see three new substantive and long-term growth opportunities. We see an opportunity to significantly expand the geographic markets we serve. We see an opportunity to serve the emerging business sector and an opportunity to provide a highly efficient and open platform within which our customers, our partners and suppliers can work together. We view successful execution in these three growth areas as for both opportunities for growth and as the continued establishment of the competitive platform, which will be extremely difficult for our competitors from any vantage point to replicate or approach.

And fourth, we are in the fortunate position that the leverage inherent in our business model can and is funding the investments we are making in these long-term growth opportunities.

Please turn to the next slide. Turning our attention to Q3 results. We saw exceptional operating performance across the business. The revenue grew 20% year-over-year and reached an all-time high at $75 million. This growth was driven in part by faster-than-expected deployments of new customers and, in part, by stronger-than-expected transactional volume.

Strong revenue growth led to non-GAAP EPS for the quarter of $0.31 per share, which was $0.02 a share ahead of our expectations. And driven by stronger earnings and strong cash collections, the free cash flow in the quarter was $19.7 million, also well ahead of our expectations.

Please turn to Slide #5. We're obviously very pleased with the performance of the business in the first three quarters in the fiscal year. In thinking about our expectations for the remainder of the fiscal year and fiscal 2011 and beyond, it's helpful to understand the growth drivers of our business and our view of the economic climate.

Our growth is driven by three core factors: First and foremost, our growth is driven by new customer additions and new services we can deliver to our existing customers. We continue to see solid momentum on both fronts. The second factor is the employment environment. Unemployment continues to hover around 10% in the economic markets in which we operate. It is a pragmatic view to assume that in the near term, any economic recovery will be a jobless recovery. And that while unemployment may drift down, it will remain relatively high for the next few years. The third variable is the travel environment. Travel transactions in Q3 were ahead of our expectations and are clearly continuing to trend back towards the waterline. However, it's important to note that we are still well below pre-recession levels. It will likely take, at least, until the end of 2011 before travel spend recovers to pre-recession levels. Further, we expect that recovery to be uneven and impacted by GDP growth projections. Finally, all indicators that we see for GDP growth in developed economies point to modest and uneven growth.

Please turn to Slide #6. Given the strong performance of the business in the first three quarters of the year, it may be tempting to get over the optimistic, looking at Q4, and the forward few years. Please note that the benefits from faster-than-expected deployments and higher-than-expected travel transactions are unlikely to repeat themselves in Q4, as we enter a seasonally slow quarter.

It is our view that fiscal 2010 revenue will grow 18% year-over-year, reflecting an improving rate of growth as compared to 2009. At this point, it's clear that we can achieve our revenue and earnings targets for the year as a whole, just as we outlined at the start of the fiscal year. And given the strength of our business model, we expect cash flow from operations and free cash flow to once again be higher than originally expected.

Please turn to the next slide. Over the past several years, we have grown our business substantively. Since fiscal 2006, the year in which we entered the travel booking market; we have grown revenues from $97 million to an estimated $292 million this year; we've grown EPS from $0.36 to an estimated $1.20 this year; we've grown our customer base from more than 4,000 customers to more than 10,000 customers; we've expanded the value and range of services that we deliver to our customers; we have millions of business travelers using our services; and we have strong partnerships with the leading suppliers in the markets we serve.

As we look ahead to the next several years, we see substantive growth opportunities for our business. Those growth opportunities are in the following areas: Expansion of our customer base in the markets we currently serve; geographic expansion into new markets; serving the needs of emerging businesses; and delivering a highly efficient and open platform, within which our customers, our partners and suppliers can work together. The strength of our core business not only affords us the opportunity to continue to deliver compelling revenue, earnings and free cash flow growth, it also affords us the opportunity to invest in the growth initiatives I just outlined that enable incremental revenue and earnings growth in the years ahead.

Let me speak to each of these in a bit more detail. Please turn to Slide #8. In support of the first growth initiative, which is to expand our base of customers in the markets we currently serve, we have continue to expand our internal distribution capacity and our investments in market development. In the most recent quarter, new customer growth was the strongest in our history. As we look ahead, we see a solid demand environment for our services.

Our partnership with American Express continues to perform well, as we drove more new business from the American Express partnership in Q3 than in any prior quarter. Subsequent to the end of the quarter, American Express exercised a 1.28 million share warrant that was a part of the 2008 investment agreement. That exercise added another $50 million to our balance sheet but, more importantly, is a reflection of the ongoing commitment to the partnership by both companies.

Please turn to Slide #9. In support of our second growth initiative, geographic expansion into new markets, we continue to expand our internal distribution capacity, our investment in market development and our local product development capacity across Europe. In fact, the share of new business we are generating from international market is outpacing the total international revenue contribution to our existing revenue base.

Nearly a year ago, we acquired Etap-On-Line, with the objective of expanding our presence and capacity to sell and service clients in France. Over the past year, we have increased our investments in France and are very pleased with the results we've seen to date.

In 2010, France became one of our largest markets in EMEA, in terms of new customer growth. That's a testament to the strong team that we have in place in Paris and their incredible execution over the past year. We will continue to invest aggressively in new markets across Europe, as we look to expand our global presence and expertise.

We also see significant opportunity throughout Asia and South America in markets like India, Japan, Australia, Southeast Asia, China and Brazil. The investments we have made and will continue to make against these new market opportunities are both substantive and very long-term in nature. And they are not expected to appreciably contribute to new customer growth until 2012 or to our revenue until 2013. And just as we did in France, we may augment our organic growth and investments with targeted M&A or strategic partnerships across each of these geographies, if and when those opportunities arise.

Please turn to the next slide. In support of our third growth initiative, we are also investing to deliver our services to emerging businesses on a global basis. We define emerging businesses as companies that employ between one and 250 employees. Nearly a third of the U.S. workforce is employed by emerging businesses, and nearly 40% of the global workforce is employed by emerging businesses. We believe that this market segment is underserved and can generate incremental long-term revenue and earnings growth.

We entered this market in March with Google and through our own direct distribution channel. This past quarter, we added American Express as a distribution partner for Concur Breeze and expect to add a number of other partnerships over the course of the next year. We also expect to materially increase our investments in direct distribution over the course of the next several quarters.

We remain very enthusiastic about the opportunity in this market segment, as early indicators around the strength of the product and new customer growth are very encouraging, and we are just getting started. You should expect us to continue to ramp investments in this market segment around distribution, so that we can reach more customers in more geographies. And it's reasonable to assume that we will deliver multiple products that are complimentary to Concur Breeze, designed to add tremendous value for our customers.

As we stated in the past, while we are incurring costs today for our emerging business investments, we do not expect our initiatives in this market segment, to contribute meaningfully to revenue until 2012.

Please turn to Slide #11. Finally, we continue to invest in building out a highly efficient and open platform within which our customers, our partners and suppliers can work together to deliver value for all members of the corporate travel supply chain.

Those investments fall into three major categories: Mobiles Services, Web Services and SaaS 2.0 [Software-as-a-Service 2.0]. Let's speak to mobile services. We've seen a strong adoption of Concur on the BlackBerry, Windows Mobile and iPhone platforms. As a reminder, Concur Mobile delivers the full power of our web-based services on your mobile device. Giving you the capacity to change flights; book taxis, hotels or dining; capture expenses and approve expense reports, all from your handheld device, all within corporate policy and all while on the road.

Smartphones extend the benefits of cloud computing to an ever-expanding range of users that will access a wide range of cloud services on an anytime-anywhere basis. For the purposes of our market, smartphones are, for all practical purposes, becoming purchasing and payment instruments. We see a tremendous opportunity to deliver value to our customers by delivering and integrating a wide range of mobile applications, both from Concur and from our partners, into our technology platform. Over the long term, mobile platforms and applications will provide a new and incremental revenue and earnings growth opportunity.

Let's speak to Web Services. In support of our Concur Travel & Expense service, we have invested to build out the global Concur Connect network, which connects our 10,000-plus customers who spend more than $35 billion annually to content and electronic receipts from hundreds of suppliers that are focused on reducing their own operating cost and providing more value to the business traveler.

Over the past year, we ramped our investments to deliver web services that will expand the Concur Connect network into a platform that allows our customers and partners to deliver content and electronic receipts or build web-based or mobile applications that extend and enhance the value of our services.

Let's speak to SaaS 2.0. As more and more companies outsource business processes that are not mission-critical and not central to the value that they deliver to their customer, they're looking to outsource all elements of the business process. In the area of Travel & Expense management, the majority of both business processes can be automated via technology and deliver in an on-demand model.

As you know, we delivered Concur Advantage services earlier this year, and it's a wide range of offerings that allows our customers to get greater value from our core suite of services. Examples include customized report offering, expense report auditing, VAT recovery and digital mailroom services for both invoice and receipt handling. We've seen strong customer adoption of Concur Advantage services over the first three quarters of fiscal 2010 and expect to continue to expand the range of services we provide.

Please turn to the next slide. With the completion of the convertible debt offering, we received a number of inquiries on how we expect to deploy the capital on our balance sheet. Let me take a moment to speak to this line of questions. First and foremost, we are focused on the corporate travel and expense management market. This is a multi-billion-dollar market that we will be busy focusing on for the next decade. Second, we are highly disciplined acquirers and see no need to change our approach to M&A. Our areas of interest when it comes to deployment of our capital are within the four growth areas that I just spoke to. That's expansion of our customer base in the markets we currently serve, geographic expansion into new markets, serving the needs of emerging businesses, and delivering an efficient and open platform within which our customers and partners and suppliers can work together.

Please turn to the next slide. As you know, we believe there's an incredible opportunity to drive innovation and efficiency into the corporate travel supply chain. Our market leadership position and the challenging economic climate have afforded us a unique opportunity to expand our leadership position. It's an opportunity that we intend to capitalize on. Successful execution against this opportunity will drive compelling and sustainable growth in revenue, earnings and cash flow for years to come, creating compelling value for our long-term shareholders.

Before I hand the call over to Concur's new CFO, I want to state how happy I am with the transition from John to Frank. The three of us have known each other for nearly a decade, and the trust and respect between these two gentlemen has made for a seamless transition.

With that, if you please turn to the next slide, I'd like to turn the call over to Frank, who will provide details on Q3 results as well as our business outlook for 2010. Frank?

Frank Pelzer

Thank you, Steve, and good afternoon, everyone. The results for the third quarter of this year were strong and above our expectations. We continue to see increasing usage of our services and emerging signs of recovery in the markets we serve. We also continue to believe that the recovery in the global economy will be gradual but choppy.

Today, I would like to cover three key messages in my prepared remarks: First, Q3 financial performance was very strong with revenue, earnings and cash flow growth coming in ahead of our expectations; second, we continue to expect the fiscal year to tract according to our expectations, as we've discussed on the last three earnings calls. We expect Q4 to grow year-over-year at a higher rate from the rates achieved in the first half of the year, viewing our investment and long-term growth opportunities to drive top-line growth rates above our steady-state target over an extended period of time. And third, I am pleased to report that the CFO transition process has gone very smoothly and seamlessly between John Adair and me.

If you would please advance to Slide #15, and let's look at Q3 results. Q3 revenue was ahead of our expectations at $75 million, growing 20.5% over the same quarter of last year. Recognized revenues in the quarter benefited from higher-than-expected transaction volume, strong traction and new customer deployments, as well as existing customers adding on new services. We would not expect deployments and transaction volumes to outperform expectations in Q4, a seasonally slower quarter, given vacation schedules. Customer retention rates were again strong for the quarter, returning to our historical averages in the high 90s.

Please advance to Slide #16. Gross margins were in line with our expectations, while operating margins exceeded our expectations, reflecting the underlying strong long-term earnings power of the business. Our gross margin grew to approximately 71%, up sequentially from the prior quarter of this year. Our non-GAAP operating margin of 23.9% was ahead of our expectations for the quarter, due to higher-than-expected revenue.

We continue to track well against our expectation of 23% or more for the year as a whole. With strong revenue and margin performance, Q3 non-GAAP pretax earnings were above our expectations at $0.31 per share compared to our expectations at the beginning of the quarter of $0.29 per share.

Please advance to Slide #17. Cash flows in Q3 followed our strong earnings performance with cash flow from operations totaling $24.8 million. And after capital investments of $5.1 million, free cash flow was $19.7 million, up 38.3% sequentially. After a strong start to cash flows in Q1 and Q2, free cash flow on a year-to-date basis has accumulated to $44.4 million, up 42.2% compared to the same period of last year. As would be expected, with strong revenue and earnings performance, our balance sheet also continued to grow stronger. Cash and investments, net of customer funding liabilities and debt, grew approximately $23.7 million by quarter end. And despite the continued challenges businesses face as the global economy slowly recovers, cash collections were strong, and day sales outstanding ended at 61 days, which is the low end of our 60- to 70-day expected range.

Based on strong revenue performance as well as strong contract signings, deferred revenue grew to over $58.1 million by quarter end, reflecting 6% sequential growth and 27% growth over the same period of the prior year. As Steve mentioned, subsequent to the close of Q3, American Express exercised its warrant for acquiring an additional 1.28 million shares, adding approximately $50 million of additional cash to our balance sheet.

Please advance to Slide #18. Now let's turn the discussion to our outlook for Q4 and fiscal 2010 as a whole. In the latest quarter, the global economy showed mixed signs of recovery with strengths in some areas of Asia, offset by challenges faced by pockets in Europe. In the United States, the recovery has yet to display any significant new job creation, and unemployment in the U.S. registered at 9.5% in the latest June reading. Recent July macroeconomic metrics such as consumer sentiment, housing starts and housing prices have also been mixed. Although the pace and timing of this recovery will vary across the globe, across sectors and across market segments, we see signs in the markets that we serve that are consistent with the general market sentiment of gradual but choppy global improvement.

The pace and slope of this recovery is also consistent with our expectations for this fiscal year. In Q4, we expect revenue to grow 18% year-over-year, which would also result in 18% year-over-year growth for the whole of fiscal 2010. We believe that as the global economy gradually regains its footing, there will continue to be opportunities for us to strengthen our leadership position, especially in new geographical markets and through new service offerings.

Accordingly, we will continue to increase our rate of investment in the opportunities we have highlighted during this call. As a result of all the above, our non-GAAP pretax earnings for Q4 are expected to be $0.29 per share or $0.19 when tax effected at 37.5%. We are maintaining our guidance for non-GAAP pretax earnings for fiscal 2010, which is expected to be $1.20 per share or $0.76 when tax effected at 37.5%. Please note that all of the above include the impact of the recently issued convertible debt.

While working capital fluctuates quarter-over-quarter, cash flows from fiscal 2010 are expected to remain strong and continue to grow as annual earnings grow. Based on strong earnings and working capital performance, we are raising our fiscal 2010 expectations for cash flow from operations to now a total between $76 million to $78 million. And after deducting capital expenditures of approximately $18 million, we now expect free cash flow to total between $58 million to $60 million or an increase of approximately $1 million. This increase comes on top of the $2 million increase we discussed on our last call.

Our expectations for fiscal 2010 reflect year-over-year free cash flow growth of 21%. Our cash tax rate is expected to remain in the single digits for fiscal 2010, as we continue to utilize tax NOLs to reduce cash tax payments. We ended the quarter with an effective tax rate to 42.3%. We now expect our tax rate for the fiscal year to be approximately 37.5%, up 100 basis points from our previous expectations. This revision is due to the pending renewal of the federal research and development tax credit. This credit was originally expected to be renewed at the beginning of the year. If and when the tax credit is approved, we will see accumulative benefit in our effective tax rate.

On a final topic, I'm pleased to report that my first few months as Concur's CFO have gone very smoothly. As planned, John and I have spent a significant amount of time together, so that his decade's worth of knowledge and experience with the business was not lost in this transition. Having worked closely with the company on its strategic direction and almost every major transaction over the last eight years, I knew a great deal about Concur and its executive leadership. Over the past few months, I've had the opportunity to work with all areas and levels in the business and have been very impressed by the high quality and depth of knowledge of all the Concur employees, particularly our world-class financing and accounting team. I'd like to thank everyone for their warm acceptance of me to the organization and their tireless efforts in building a fantastic business.

And now in closing, with continued great progression for the fiscal year, as financial performance across the board exceeded our expectations, we have grown increasingly positive on the remainder of the year in the opportunities in which we are investing for long-term growth. Consistent with our expectations throughout this year, this investment will likely include any incremental margin that may be realized in Q4 from overperformance in Q3 against our original expectations.

With an increasingly stronger balance sheet, we also have the capacity to see the organic growth of the business through selective acquisitions and investments. We expect to begin to put this capital to work in the coming years in a disciplined manner that is consistent with our historic guidelines including areas of focus and financial expectations. Operator, we would now like to open the call for questions.

Question-and-Answer Session

Operator

[Operator Instructions] And your first question comes from David Hilal with FBR Capital Markets.

Michael Clarke

This is Michael on behalf of David. First, can you provide some details about your success thus far in emerging market business with Concur Breeze? And I guess specifically, any metrics or commentary in customer ads and how the company is converting customers using the free trial?

S. Singh

Yes, sure. And so first of all, we've been in the emerging business sector now for about a quarter. And so we're obviously very early in this particular market segment. And we obviously entered the market with the Google announcement and also around distribution channel. And then additionally, I think it's important for investors to understand that in April, we added American Express as a channel for the Concur Breeze product on a set. While we haven't yet disclosed any particular numbers, we are very pleased with the adoption that we're seeing, not only in terms of trials, but also in terms of conversion of those trial to paying customers. In fact, we're seeing the conversion rates at or above our expectation. But at this point, it's just too early to draw any real conclusions from it other than the fact to be the positive indication. I would tell you that we don't expect it to really contribute appreciably to revenues until 2012 but certainly starting to already contribute to the number of customers that are using our service. The other thing I would speak to real quickly is we've been immensely pleased with the reception that customers have given to Concur Breeze from a product perspective. It's really a very full-function product that we're seeing a very, very strong adoption in the 25 Employee and Under segment. One of the fact is a bit of a surprise to us. We've been amazed that companies of that scale are looking for that level of functionality, that level of completeness in the product. So we've been very, very pleased there as well.

Michael Clarke

And then just one more question. Regarding your investments you're making in mobile services and web services areas, can you talk about the monetization strategy of these services or investments? And then -- or is this more an offering that will provide features and functionality to your customers that will help build retention and overall customer satisfaction in your products?

S. Singh

Our first and primary objective right now is to make sure that mobile services are fantastic services, full-function services that can be delivered across any smartphone platform to the millions of Concur users that use our web-based applications. We do think that over a long term, our strategy relative to Concur Connect, not specifically Concur Mobile but Concur Connect, with which Concur Mobile is a component of it. But our strategy around Concur Connect that we will be able to monetize that, but today that's not the focus. In fact, we think that -- and certainly, for the next two years, it's not an appreciable contribution of revenues, but we do think it fundamentally changes the way the industry looks at the distribution of content and the consumption of content.

Operator

The next question comes from Laura Lederman with William Blair.

Laura Lederman - William Blair & Company L.L.C.

Just a few. One, if you look at the overage, if you will, in the quarter, revenues being better than expected, can you give us a sense of how much came from better-than-expected transactions versus customers getting up and running versus customers buying these services? I mean, is that a third, a third, a third? Can you just give a sense of the magnitude of each of those contributing to the better-than-expected revenue in the quarter?

S. Singh

Yes, of course. And I apologize, your connection wasn't fantastic, so I'm not sure I heard every part of the question. But I think I understood the basics on -- and so, yes, we did outperform in this quarter relative to our expectation in walking into the quarter. The outperformance is really driven by two factors. First and foremost was taxable and expected deployments. If you recall in the closing quarters of 2009, we saw some very strong sales of our product especially into the financial services sector, and those are very large scale deployments that went live in the June quarter. And so that obviously accelerates the adoption of that revenue into our revenue stream. The second factor, of course, is travel transactions were higher than we had expected. But I think it's also important to bring out that we don't expect those two positive benefits to repeat themselves in Q4 especially since Q4, typically, is seasonally weaker quarter relative to travel transactions. So that should certainly provide what I think you asked as part of the question.

Laura Lederman - William Blair & Company L.L.C.

I was just asking for the magnitude of which one, is one much, much greater than the other. In the other words, with the customers getting up and running more than the bulk of the overage.

S. Singh

No, I think there's a reasonable split between the two. But certainly, the deployments were better than expected.

Laura Lederman - William Blair & Company L.L.C.

Switching gears to -- obviously, you're not giving guidance in 2011. But can you get off us a feel for the balance between increasing revenue growth and investing in the business but also delivering increased profitability overtime? It used to be that you would say okay because you deliver a 100 basis points of margin improvement per year. And obviously last year, you delivered a lot more than that, so can you talk just a little bit about your view on profit improvement overtime?

S. Singh

So right now, Laura, you're actually correct. We haven't given any guidance on 2011. And as a practice, as always been, as we provide that guidance after the Q4 earnings call for a particular fiscal year, so I ask that we wait until then. I think it's important to still bring out, though, that we still have the same long-term operating margin target for the business, which is 30%.

Operator

And your next question comes from Tom Ernst with Deutsche Bank.

Thomas Ernst - Deutsche Bank AG

So you mentioned -- I think we appreciate the cautiousness on what you're assuming for macro improvement and that the recovery might be uneven in travel spend. But are you actually seeing signs of that in your pipeline and what you see coming in the business?

S. Singh

Yes. I think what we're seeing is, if you look at this at a very high level, going back into about halfway through 2009, we've seen -- in fact, when you go back to March and June quarters of 2009, you started to see some stabilization. In fact, I think it was April of 2009. Between April and June, we started to see stabilization in the travel spend. So it didn't go down any further on a year-over-year basis. In the September quarter, you actually saw it to start to move back up. Since then, we certainly seen a general trend in the positive direction back towards the water line. However, I think it's important to bring out a couple of factors related to that. Number one is that September is typically a seasonally weaker quarter relative to travel transaction, simply because there's a lot of vacation travel that occurs in July and August. In addition to that, that I think that the -- if you look at the economic kind of indicators more broadly, I think there's going to be some level of lumpiness, if I may, in growth in various economies. And typically, what we see is when you see lumpiness in growth projections on a broad GDP basis, that lumpiness typically translates to lumpiness in travel spend as well. Now I will tell you that from a customer perspective, which is the most important element of this, right, which is the core growth driver of our business, we still see continued strength in that customer pipeline. In fact, in the June quarter, we saw the strongest new customer signings in our history. And in fact, the American Express relationship yielded the most as far as new customer growth that we've had in history that partnership.

Thomas Ernst - Deutsche Bank AG

So it's safe to assume that what we're not seeing is a contraction in your pipeline at this point. You're just being more conservative on how that may close on a lumpy basis here in the next quarter or two.

S. Singh

I think that it's important to kind of maybe modify that just a bit that it's important to tie this to the shape of the recovery in the economy. And that shape is a multi-year, I guess, perspective.

Operator

Your next question comes from Ross MacMillan with Jefferies.

Ross MacMillan - Jefferies & Company, Inc.

Steve, can you just talk about where we stand with the Amadeus relationship? I missed the prepared remarks. You may have already touched upon that. And just what your strategy is to address the 3,500 or so customers that they have that use their front-end booking tool?

S. Singh

Sure. So first of all, we have a fantastic partnership with Amadeus. It's a partnership that we launched back in the February time period of this calendar year. We actually completed the integration of the Amadeus core booking technologies into Concur Travel in the last quarter. So we're very pleased with the initial progress we've seen there. We are, of course, working with Amadeus to deliver that integrated set of services into customers across Europe. The thing that I did point out in the last call that I think is still important to remember is that we didn't expect to see any revenue contribution from that relationship this year, but did expect to start to see some pipeline and customer contribution in this fiscal year, which we still are very comfortable with. In addition to that, it's also important to understand, if you look at what we've actually done across Europe in the last few quarters, in particular, we've seen -- if you look at the bookings that we're seeing out of Europe, they're actually greater as a percentage than the percentage of revenues that come out of Europe against our total revenue base. And on top of that, if you look at the success we've seen, frankly, in France in particular, this is a marketplace that we really entered in full just about a year ago with the acquisition of Etap. That deal has gone exceptionally well and that, of course, impacts our relationship with Amadeus.

Ross MacMillan - Jefferies & Company, Inc.

And then maybe just one for Frank just on -- even if the relationship between this and revenues is not great, we do look at the billings number. And obviously that's once again here in the June quarter growing at 23%. So a bit ahead of revenue and certainly ahead of the growth rate that you're seeing for 4Q. Is it misleading for us to continue to look at that billings number as any indicator of forward growth? Or how would you caveat us looking at that number?

Frank Pelzer

It's really unfortunately not a great metric to use because of monthly billings versus the way we actually bill is on a monthly basis.

Ross MacMillan - Jefferies & Company, Inc.

And then just last one. I don't know if you mentioned to beat ADP, their contribution and really, I guess I'm curious as to with your focus with Breeze on the smaller customer. How are you working both with American Express, who are clearly taking that product to market but also with ADP?

S. Singh

Sure. So the ADP relationship continues to be very positive and continues to progress very well. We're very happy with it. Of course, ADP has a very significant customer base in the middle market and also the SMB marketplace. And so we think this is really a fantastic opportunity in which we can continue to expand our relationship with ADP. But as we've always stated, our priority has always been to drive about 75% to 80% of our bookings directly to our own channel because we want to be in control of our own distribution capacity. But having said that, we're very happy with ADP just as we are with the American Express relationship.

Operator

And your next question comes from Brad Whitt with Gleacher Company.

Brian Wallins - Broadpoint Capital

Brian Wallins for Brad. Just based on the planned execution of your distribution strategies and how you think the macro will play out. I was wondering, what kind of time frame should we be thinking of in terms of getting back to your 25% target growth rate?

S. Singh

We really haven't given any guidance yet on 2011 and beyond. The one statement I did make in the prepared remarks, which we certainly feel comfortable with is that if you look at the guidance we've given for 2010, it's for 18% growth on a year-over-year basis. That's, of course, nicely up from the 15% growth we saw in 2009, and that we expect our growth rate to continue to trend up overtime.

Operator

Your next question comes from Mark Murphy with Piper Jaffray.

Mark Murphy - Piper Jaffray Companies

Steve, I'm wondering if you saw any quarter-to-quarter change in the occurrence of overage charges. Or in other words, are you more frequently seeing customers maybe that are crossing over their contractual limits? Or are we not quite there yet?

S. Singh

No, we really didn't see that. In fact, I think by and large, that's a very rare occurrence. And I think what we've really came down to is very simple, which is nothing more than faster-than-expected deployments plus more transactions really driven by travel than expected. So I would absolutely not get excited about expense transactions being higher than expected in any material fashion.

Mark Murphy - Piper Jaffray Companies

And then next, when you said that the new customer growth in the quarter was the strongest in your history, I just wanted to clarify, is that the number of customers? Or is that the dollar value of bookings from those customers? Or perhaps, is it both?

S. Singh

Well, typically, we speak to dollar value. Obviously, there tends to be some correlation to that, but what we speak to when we say that is dollar value.

Mark Murphy - Piper Jaffray Companies

And then just one last one, Steve, you've talked more about the development of a platform. I'm wondering, is it possible now or at some point in the future to maybe disaggregate the business into an applications bucket versus a platform bucket kind of similar to what salesforce.com provides? Or are you not really thinking about it that way? Is it more that the platform technology is really embedded in the application subscription streams?

S. Singh

Sure. So there's quite a bit of differences in the way we look at platform versus the way that a salesforce might look at it. Now having said that, I'm not an expert in how salesforce looks at platforms. Our view is very much it's a technology platform and a distribution platform. The technology platform, not only for the delivery of electronic receipts and of content, it's a technology platform that we're expanding to allow our partners and our customers that deliver application, whether they're web-based applications or mobile application, to deliver those applications and integrate directly to Concur Travel & Expense for the benefit of end users. The second part of this is really distribution platform, so that those partners and customers can deliver those offerings to the Concur customer base, which obviously always has a choice of looking at these individual applications and deciding whether or not they like them or whether or not they want to use them. And then, obviously, the other component is content distribution. We are fundamentally in a corporate travel and expense management space, where content is absolutely critical and that content comes from many, many different sources, including GDSs and including direct connection. And we want to make sure that our platform enables the efficient distribution of that content to the end user.

Operator

And your next question comes from Ajay Kasargod with Morgan Keegan.

AjayKumar Kasargod

My first question, Steve, comes to you, and you touched on it a couple of questions ago about third-party contribution to bookings. And I think you had mentioned, I think, historically, it's been 20% were from third parties, it's a round number. And then my understanding was with AMEX, there was an opportunity for acceleration of third-party contribution to bookings. So how much did AMEX contribute on a round basis, too, into bookings? And how much are third parties contributing?

S. Singh

So first of all, we never break out the specifics of any one partner. And when we say third parties, it's all of our third-party partners. And so as the AMEX, as ADP, it's every other relationship that we have. And it's also important to understand that these are leads that we're getting from these strategic partners that we then engage with the customer. And obviously at some point, the customer chooses to buy our services. And we have a direct relationship with that customer upon them signing up for our service. So the fact that we speak to about 20% or so of our customer base or our business that we're adding in any given quarter originates from our strategic partners. It's really nothing more than a reflection of where we're getting the leads. And it underscores our core objective, which is to always be in a position where we can go drive a lot of that demand generation and customer success of predominantly our own channels.

AjayKumar Kasargod

And I guess, Steve, the reason I was asking that question was, as you talk about the longer-term opportunities in getting back to a longer-term growth rate north of where you are, my belief would be that those channels and having strong ones like obviously like AMEX and investor and a partner of yours could help drive that.

S. Singh

Yes, absolutely, Ajay. I think that's the right way of looking at it. I think we want to be careful not to confuse two different topics. We may get a significant number of leads from American Express, especially on a dollar-weighted basis. But keep in mind that these are relationships that fundamentally we end up signing directly with the end customer. And so I don't think it's a negative thing to see a 20% average or 25% average for the next 10 years. That's completely independent of the fact that American Express or ADP or a number of our other travel management company partners could, in fact, help drive the growth rate that we see as a business back towards our steady state targets.

AjayKumar Kasargod

You were talking about, Steve, your platform, and you mentioned content distribution being one of the pillars of the platform. So with that being the case, what does the Google acquisition of ETA (sic) [ITA] mean to Concur? I mean, that's one thing I was trying to put into perspective.

S. Singh

Yes, sure. So Google and the ITA deal. Look, our view is that anything that drives greater efficiency into the travel supply chain is good for the customer and is good for the industry. It's as simple as that, right? And so if you think about what we're doing as a company, we'll focus on driving efficiency into the corporate travel supply chain. And so we view the combination of Google and ITA as very positive for the industry, very positive for the end consumer. And one thing just to keep in mind, we obviously are great partners with Google and they're also a fantastic customer. It gives us an opportunity, frankly, to extend that relationship and add more and more value for our end customers.

AjayKumar Kasargod

So there is a possibility of being able to take what they do well in terms of what you offer to your customer in your end in a longer-term basis?

S. Singh

Yes, I'm sorry. That was a little bit -- I didn't quite hear the comment.

AjayKumar Kasargod

So if that's the case and if they're kind of advancing the technology on that end, there is an opportunity for you to be able to leverage what Google is doing with ITA in this space in terms of what you deliver to your customer, in terms of their capability on travel booking.

S. Singh

Certainly. Let's make sure that you also understand that ITA is not a part of our stack, or it's not a part of our technology stack. We don't rely on ITA for pricing. We don't rely on ITA for any content, certainly. So it's very important to draw that distinction, right? So whereas you might see a number of other companies rely on ITA from a pricing perspective as a part of their technology stack, that's not the case with Concur.

Operator

Your next question comes from Sid Parakh with McAdams Wright Ragen.

Sid Parakh - McAdams Wright Ragen, Inc.

A question around Advantage services. Can you give us some color or maybe some more metrics around uptick or attached rates with your end-to-end system sales?

S. Singh

Yes. Sid, I'm not sure that I would break out any more detail other than it's obviously been a very successful introduction of a new products service for us. And so that what we've seen is that it's certainly a service that our customers are embracing because they're looking to outsource the entire process, the entire T&E process from within their corporate wallet. So we're very pleased with that adoption rate. But at the end of the day, it's not something we break out in a lot of detail.

Sid Parakh - McAdams Wright Ragen, Inc.

I mean, is that -- could you maybe even provide some more color on maybe what the incremental revenue uplift is? Like, you've talked about some of the other product components and what they might mean from a financial standpoint.

S. Singh

Sure. Yes, of course. And as you all know, each of the new services we deliver provides an incremental revenue opportunity on a transactional basis. And our Advantage services are no different. In fact, each of the core Advantages services provides an opportunity to see a 10% to 15% of lift in transactional fees. And of course, it just depends on the range of services that the customer chooses to deploy. And so it's very, very comparable to what you saw with Travel, what you saw with Pay, Concur Pay, or what you saw with Concur Analytics or Invoice.

Sid Parakh - McAdams Wright Ragen, Inc.

And can you provide us maybe some attached metrics around Concur Pay, Invoice and some of those newer products?

S. Singh

Yes, sure. So Concur Pay, at this point, we're seeing -- in virtually all of our new customers, seeing adoption of Concur Pay as a part of the initial purchase. Analytics continues to move up. In fact, the majority of our customers, the new customers are choosing Analytics as well. The other piece, I think, that is important is Concur Travel continues to be at the 65% or higher numbers relative to adoption on the initial sale. Invoice, honestly, is still a relatively young product set that's building out. But it's a very young marketplace, and we think that's a multi-year development of that particular marketplace.

Sid Parakh - McAdams Wright Ragen, Inc.

And last question for me, just from an American Express standpoint, how far along are you in that relationship? In the sense that from a ramp up standpoint, do you think the relationship is fully ramped in your outer market with full force? Or do you think there are still some prep work in the background, which should maybe translate to higher benefits down the line?

S. Singh

So, Sid, I tell you that we are in a multi-year process of ramping that relationship. Obviously, American Express is a very large organization that has multiple key markets that they serve. In fact, as you recall, there's eight lead markets that we are trying to address through the American Express relationship. We certainly now gotten to those eight lead markets. But then keep in mind that within each of those markets, there was a different market segment, everything from the biggest companies within their particular market segment to middle market accounts to accounts that frankly are great targets for Breeze. And so we're still ramping this relationship on a global basis. We are still ramping, frankly, the American Express Business Travel relationship. And my view is that, look over the next year, you're going to see us continue to expand that relationship in new geographies. So this is a multi-year effort that, frankly, it just reflects the scale of the opportunity. And it reflects the scale of the organization in American Express. I think, perhaps, most important in all of this is if you look at the fact that they want American Express had as a part of the 2008 investment agreement that it just got exercised, I think that's a great indicator as to the commitment that both companies have to the partnership. And that we view it as a multi-year relationship.

I want to thank all of our investors for joining. And myself and Frank look forward to updating you on Q4 results at the end of the fiscal year. Thanks so much. Goodbye.

Operator

Ladies and gentlemen, this does conclude Concur Technologies' Q3 Fiscal 2010 Earnings Call. You may now all disconnect.

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