Cost Cutting Boosts Demand For Concur's Travel Software

Jun.20.12 | About: Concur Technologies, (CNQR)

If there's one thing European austerity and sluggish economic expansion in the U.S. will bring, it's continued cost cutting. As companies search for savings, travel and expense software provider Concur Technologies (NASDAQ:CNQR) will benefit.

The company is in the middle of doubling its sales force to meet demand tied to its push beyond the Fortune 500 into small business, Government and international markets. The move aims to better penetrate its addressable business travel market, where Concur estimates its share to be below 10%.

To that end, it won a marquee $1.4 billion 15 year deal with the GSA to handle its cloud based travel management, which is used by 70 Federal agencies.

Concur expects the deal will reach its peak annual revenue run rate beginning in 2014. Until then, the company will likely use the GSA win to make in roads for additional contracts, such as with the Department of Defense and international public agencies.

U.S. travel trends are bullish.

Travel stocks have been a good place to be so far this year. Priceline (NASDAQ:PCLN) has gained 44%. Expedia (NASDAQ:EXPE) is up 73% and Trip Advisor (NASDAQ:TRIP) is up 78%.

In the most recently reported month of February, revenue passenger miles for U.S. airlines came in 5.1% above last year. Domestic passengers were up 6.4%. And, U.S. hotel occupancy increased 1.4% in April from a year ago.

Overall, U.S. businesses spent $250 billion on travel in 2011 - making the market ripe for cost and expense management.

Concur is staying ahead of peers with technology investments.

The company believes mobile devices will increasingly be used for travel and expense management. So, it's making investments to ensure it's the leader.

Last year, they bought Tripit, which allows travelers to automatically create road warrior friendly and shareable master itinerary's.

And, in the past two years it has done a handful of additional deals too.

It made an equity investment in Room 77, a provider of granular hotel pricing and room data to travelers. It put $5 million into Yapta, a company providing flight tracking software. It invested $40 million in Cleartrip - an Indian travel portal. And for good measure, it bought London based GlobalExpense too.

Despite all the spending, the company still has $8.70 per share in cash. Given it's generating $81.5 million in operating cash flow, it's likely other deals will come.

Sales growth remains strong

Last quarter, revenue increased 28% from last year, thanks to above plan software deployments and travel transaction volume. Bookings were similarly strong, outpacing last years 35% run rate.

As a result, Concur expects FYQ3 will increase 25.5% from last year. Full fiscal year growth should clock in around 26%. And, next fiscal year the company expects to reach a $500 million annualized run rate exiting FYQ1.

Regardless, sellers remain unconvinced, holding 10.2 days of average volume short. Any positive news is likely to force their hand and help drive prices to new highs.

Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in CNQR, PCLN over the next 72 hours.