Updated CNQR research report from Hambrecht & Quist, released today subsequent to the earnings announcement and conference call. (Links go to the Yahoo! thread, where the report has been reproduced in its entirety.)
Part I
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Part II
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Part III
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A few highlights:
"While encouraged by several positive developments, given the low level of near term visibility as Concur transitions from traditional up-front software license model to a combination of license and recurring subscription fees we are maintaining our Market Perform rating."
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Earnings (in millions; A=actual; E=estimated):
1999 2000 2001
Q1 Revs $ 8.1A $ 9.0A $19.5E
Q2 Revs $ 8.7A $10.8E $21.0E
Q3 Revs $11.2A $14.0E $23.0E
Q4 Revs $ 9.0A $19.1E $27.0E
FY EPS -1.87A -2.53E -1.75E
FY Revs $37.0A $52.9E $90.5E
CY EPS -2.17A -2.26E -1.60E
CY P/E N/A N/A N/A
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"Concur posted December quarter revenues of $9.0 million, exactly in-line with our projection. The reported EPS loss of ($0.76) (excluding acquisition charges) modestly exceeded our estimate and the Street consensus ($0.72). The lower earnings resulted from a combination of higher than expected R&D spending and lower gross margins. While overall revenues were in-line with projections, we note that software license revenues were lower than expected ($4.2 million vs. our $5.2 million projection), while services revenues made up the difference and exceeded projections."
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"We adjusted our estimates to account for a rising contribution of subscription and transaction related revenues following the report of the September quarter results and based on the current tone of business, we are leaving our future FY00 (September) estimates unchanged. Specifically, for FY00, we now project revenues of $52.9 million and an EPS loss of ($2.53). We are initiating FY01 projections of $90.5 million in revenues and an EPS loss of ($1.75)."
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"The market response to these hosted solutions [ASP] has been healthy and the company signed more hosted customers during the quarter than initially expected. In total, the company currently has 60 ASP customers. While no significant revenues to date have been recognized from these transactions, we expect this revenue stream will begin to contribute in the March quarter. The typical ASP contract spans 3 years and the company estimates that the price of hosting solution typically reaches that of a traditional licensing deal after 24 months."
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"While Concur has only been operating the network [Concur Commerce Network] for a month and a half, the company has already begun to capture some early transaction fees. The amount of these transaction fees to date is diminuous and we do not anticipate noticeable revenues from this stream until FY01."
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"Other news during the quarter, included the fact that Concur entered into a partnership relationship with Nortel, whereby Nortel will resell ASP versions of the eWorkplace suite to its ISP customers, who in turn will sell them into
the broad base of small to medium sized customers they serve. While we do not expect this opportunity will begin to contribute to revenues until 2H00 at the earliest, given the extensive reach of the Nortel channel, if successful, this partnership offers potential future upside opportunity."
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"In total, Concur added 47 new customers during the quarter (up from 35 last quarter). The company's customer base now measures 320 accounts, and encompasses 2.4 million employees. Of the 47 new customers, 35 signed multi-
year contracts for hosted ASP solutions and 12 customers purchased traditional licenses. Management commented that both the sales price and the sales cycle for traditional license sales remained unchanged. ASP customers added during the quarter included Citrix, Indiana Teacher's Association, Ontario Power and Mercury Interactive while new license customers included accounts such as Lexmark, Dow Jones and Honeywell."
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"While it has been widely speculated over the past several weeks that Concur has won business at several additional new blue chip accounts, to date, no news has been forthcoming."
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"Outlook: While we were encouraged by several developments during the quarter (the increase in the number of customers signed, early traction from the commerce network and the potential contribution from the Nortel relationship), we are maintaining our Market Perform rating. Although we acknowledge the stock appears inexpensive at current levels, given the limited near term revenue visibility as the company transitions its business model, we prefer to remain on the sidelines at this juncture." |
