CONCUR TECHNOLOGIES INC - 10-Q Quarterly Report

UNITED STATES SECURITIES
AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarter ended March 31, 2003

Commission file number: 0-25137

CONCUR TECHNOLOGIES, INC.
(Exact name of Registrant as specified in its charter)


Delaware		91-1608052
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

6222 185th Avenue NE
Redmond, Washington 98052
(Address of principal executive offices)

(425) 702-8808
(Registrant’s telephone number, including area code)

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days:

Yes x No o

Indicate by check mark whether the Registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act):

Yes o No x

As of April 30, 2003, there were 31,208,428 shares of the Registrant’s Common Stock outstanding.

CONCUR TECHNOLOGIES, INC.

FORM 10-Q
MARCH 31, 2003

INDEX


			Page

PART I.	FINANCIAL INFORMATION		3

	ITEM 1.	FINANCIAL STATEMENTS	3

		Consolidated Balance Sheets as of March 31, 2003 and September 30, 2002	3

		Consolidated Statements of Operations for the three and six months ended March 31, 2003 and 2002	4

		Consolidated Statements of Cash Flows for the six months ended March 31, 2003 and 2002	5

		Notes to Consolidated Financial Statements	6

	ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	14

	ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	30

	ITEM 4.	CONTROLS AND PROCEDURES	31

PART II.	OTHER INFORMATION		32

	ITEM 4.	SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS	32

	ITEM 6.	EXHIBITS AND REPORTS ON FORM 8-K	32

SIGNATURES			32

CERTIFICATIONS			33

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

Concur Technologies, Inc.

Consolidated Balance Sheets
(In thousands, except share and per share data)
(Unaudited)


		March 31,			September 30,

		2003			2002

Assets
Current assets:
	Cash and cash equivalents	$	17,366		$	13,746
	Marketable securities		1,024			2,024
	Accounts receivable (1), net of allowance for doubtful accounts of $417 and $681 at March 31, 2003 and September 30, 2002, respectively		6,665			8,918
	Prepaid expenses and other current assets		1,959			1,299

Total current assets			27,014			25,987
Property and equipment, net			1,590			3,003
Restricted cash			1,950			1,250
Acquired customer base intangible asset, net of amortization			4,940			5,510
Goodwill relating to acquisition			3,269			2,179
Deposits and other assets			110			339

Total assets		$	38,873		$	38,268

Liabilities and stockholders’ equity
Current liabilities:
	Accounts payable	$	702		$	2,817
	Accrued payroll and benefits		1,638			1,361
	Other accrued liabilities (2)		2,623			4,162
	Current portion of long-term obligations		1,117			1,079
	Current portion of deferred revenues		9,544			7,161

Total current liabilities			15,624			16,580
Long-term obligations, net of current			493			746
Long-term deferred revenues, net of current			1,264			1,245
Stockholders’ equity:
Common stock, par value $0.001 per share:
	Authorized shares – 60,000,000; Issued and outstanding shares – 31,080,427 and 26,155,592 at March 31, 2003 and September 30, 2002, respectively		234,689			223,500
Common stock issuable – 4,160,410 shares at September 30, 2002			—			8,952
Accumulated deficit			(213,197	)		(212,755	)

Total stockholders’ equity			21,492			19,697

Total liabilities and stockholders’ equity		$	38,873		$	38,268

(1) Includes amounts due from related parties of $265,000 and $226,000 at March 31, 2003 and September 30, 2002, respectively.

(2) Includes amounts due to related parties of $0 and $145,000 at March 31, 2003 and September 30, 2002, respectively.

See accompanying notes.

Concur Technologies, Inc.

Consolidated Statements of Operations
(In thousands, except per share data)
(Unaudited)


		Three Months Ended March 31,						Six Months Ended March 31,

		2003			2002			2003			2002

Revenues:
	License	$	1,244		$	2,741		$	4,010		$	4,898
	Subscription		5,486			2,224			10,388			4,226
	Service		7,080			5,872			14,008			12,059

Total revenues (1)			13,810			10,837			28,406			21,183
Cost of revenues:
	License		100			112			274			223
	Subscription		2,848			2,399			5,866			4,799
	Service		2,984			2,836			6,057			5,892

Total cost of revenues (2)			5,932			5,347			12,197			10,914

Gross Profit			7,878			5,490			16,209			10,269
Operating expenses:
	Sales and marketing		3,620			3,981			7,427			8,383
	Research and development		2,674			2,829			5,381			5,364
	General and administrative		1,774			1,624			3,328			3,791
	Amortization of intangible assets		285			—			570			—

Total operating expenses			8,353			8,434			16,706			17,538

Loss from operations			(475	)		(2,944	)		(497	)		(7,269	)
Interest income			54			88			111			230
Interest expense			(34	)		(52	)		(78	)		(122	)
Other income (expense), net			26			(12	)		22			2

	Net loss	$	(429	)	$	(2,920	)	$	(442	)	$	(7,159	)

Basic and diluted net loss per share		$	(0.01	)	$	(0.11	)	$	(0.01	)	$	(0.27	)

Shares used in calculation of basic and diluted net loss per share			30,989			25,856			30,709			25,836

(1) Includes sales to related parties of $133,000 and $383,000 in the three months ended March 31, 2003 and 2002, and $439,000 and $967,000 in the six months ended March 31, 2003 and 2002, respectively.

(2) Includes payments to related parties of $0 and $264,000 in the three months ended March 31, 2003 and 2002, and $386,000 and $499,000 in the six months ended March 31, 2003 and 2002, respectively.

See accompanying notes.

Concur Technologies, Inc.

Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)


			Six Months Ended March 31,

			2003			2002

Operating activities
Net loss			$	(442	)	$	(7,159	)
Adjustments to reconcile net loss to net cash used in operating activities:
	Amortization of intangible assets			570			—
	Depreciation			1,771			3,077
	Provision for bad debts			(145	)		—
	Changes in operating assets and liabilities:
		Accounts receivable		2,653			949
		Prepaid expenses, deposits, and other assets		(552	)		(552	)
		Accounts payable		(1,034	)		(104	)
		Accrued liabilities		(864	)		(2,871	)
		Deferred revenues		2,204			508

Net cash provided by (used in) operating activities				4,161			(6,152	)

Investing activities
Purchases of property and equipment				(457	)		(1,138	)
Purchases of marketable securities				—			(1,947	)
Maturities of marketable securities				1,000			4,000
Increase in restricted cash balances				(700	)		(722	)
Payments of acquisition costs				(510	)		—

Net cash (used in) provided by investing activities				(667	)		193

Financing activities
Proceeds from issuance of common stock from exercise of stock options				338			52
Proceeds from borrowings				915			722
Payments on borrowings and capital leases				(1,127	)		(1,274	)

Net cash provided by (used in) financing activities				126			(500	)

Net increase (decrease) in cash and cash equivalents				3,620			(6,459	)
Cash and cash equivalents at beginning of period				13,746			21,700

Cash and cash equivalents at end of period			$	17,366		$	15,241

Supplemental disclosure of cash flow information:
Cash paid for interest			$	85		$	435

Common stock issued in the acquisition of Captura Software, Inc.			$	1,899		$	—

See accompanying notes.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2003
(Unaudited)

NOTE 1. DESCRIPTION OF THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Description of the Company

Concur Technologies, Inc. (“Concur” or the “Company”) is a leading provider of Web-based Corporate Expense Management software and services that are designed to improve operational efficiency and reduce cost in businesses by automating and streamlining business processes. The Company’s products include Concur Expense™ and Captura Expense™ software for automating travel and entertainment expense management, Concur Payment™ software for automating employee requests for vendor payments, and value-added products and services including Concur Imaging Service™, Concur Voice Access Service™, and Concur Business Intelligence™.

These software products and services are designed to meet the needs of businesses of all sizes worldwide and to accommodate a wide range of customer business needs, technical requirements, and budget objectives through flexible delivery models, including the Company’s license, large-market hosted, and application service provider (“ASP”) models.


	•	License Model. The Company licenses its software products primarily to large-market companies (more than 3,000 employees) that want a highly configurable solution that is managed in-house and delivered over a corporate intranet. The Company generally offers licenses for its products either on an authorized-user basis, under which a customer is licensed to use products based on the number of user-licenses purchased, or on an enterprise basis, under which a customer is licensed to use products throughout its enterprise in exchange for license fees based on the number of employees in the enterprise.

	•	Large-Market Hosted Models. The Company provides access to its software products as an outsourced service, together with related value-added services, primarily to large-market companies that want a highly configurable solution. As part of this service, the Company provides hosting and application management for its software products from its facilities or the facilities of third-party hosting vendors. Some customers of the Company’s hosting services purchase (or have previously purchased) an up-front license for the software, and pay recurring subscription fees for its hosting and application management services. The Company refers to this arrangement as its hosted license model. Other customers of the Company’s hosting and application management services license its software on a monthly subscription basis. The Company refers to this arrangement as its hosted subscription model. Each of these arrangements is offered on an authorized-user or enterprise basis.

	•	Application Service Provider Model. The Company provides Concur Expense as a service o

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