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Concur 2008 Annual Report

CEO Stockholder LetterJanuary 30, 2009Dear Shareholders,Concur’s mission has always been to help our clientsdrive costs out of their businesses. That mission remainsunchanged, and in fact, Concur now offers more servicesthan ever to help our clients cut operational costs andcontrol employee spend.Tough economic timesforce companies totake a hard look attheir operations – fromtop to bottom. Manual,inefficient and laborintensiveprocessesthatweredeemed“good enough” duringthe good times arenow being examinedto determine if theycan be managed moreeffectively. Companiesare discovering thatautomating some ofthese processes usingon-demand services requires little up-front costs anddelivers significant ROI quickly – with recurring savingsmonth after month.T&E for most companies represents up to 10% of theiroperating expenses. That’s second only to payroll. Clearly– and especially during tough economic times – it’simperative for companies to take control of this area ofspend. For a significant number of companies around theglobe, the process is still paper-based and managed insilos with almost no visibility or control over that spend.Concur’s on-demand services enable companies toquickly streamline the entire process, and the operationalcost savings alone are usually enough to convince anorganization to automate – a major driver as an increasinglygreater number of companies look to Concur to help themmake their operations more efficient.The accomplishments of the past year are the direct resultof the commitment and hard work of more than 1,000dedicated employees – all of whom focus on the interestsof our customers, our shareholders and our partners eachand every day. But it is our customers who are the largestcontributors to our success. Through their dedicated andavid support, we have a mutually enriching relationship.The opportunity to help them improve their operations isa privilege.ACCOMPLISHMENTS FOR FISCAL 2008Fiscal 2008 was both a record-breaking year for thecompany’s performance and a watershed year forthe industry we continue to lead. Looking back onthe past year, there are some major milestones andaccomplishments that led to our success in fiscal2008 and position us well for continued success in theyears ahead.The Gelco AcquisitionOn the first day of Concur’s fiscal 2008, the companycompleted its acquisition of Gelco, welcoming more than1200 new customers and nearly 300 talented employeesinto the Concur community. The integration of the twoorganizations exceeded our expectations, adding scale toour operations and further enhancing Concur’s leadershipposition in travel and expense management.Concur Travel & ExpenseAt our premier customer event, we announced the generalavailability of Concur Travel & Expense, our flagshipplatform and the industry’s only truly integrated end-toend travel and expense management service. The productof almost two years of development and millions of dollarsof investment, Concur Travel & Expense was a directresult of the company’s 2006 acquisition of Outtask, andprovides the platform from which Concur will continue todrive the innovation curve for our industry.Global ExpansionFiscal 2008 saw Concur meaningfully expand ourpresence around the globe. With successful operationsalready in place in the UK and Australia, Concur openedfield sales offices in Frankfurt, Paris, and Hong Kong,along with establishing a Center of Excellence operationscenter located in Prague to further support our aggressiveexpansion into the EU.Delivering Powerful AnalyticsAt the NBTA Convention in Los Angeles, Concur unveiledthe most powerful set of analytics and reporting toolsavailable for travel and expense. Dubbed “the holy grail” byindustry observers, Concur’s on-demand suite of businessintelligence tools now enables clients – for the first time – toquickly and easily compare booked travel to actual spendusing one simple on-demand service. Now, reconciling allaspects of corporate travel data from the itinerary throughreimbursement – a notion that was once inconceivable –can now be accomplished with a few simple clicks.Concur 2008 Annual Report

American Express PartnershipConcur’s vision for travel and expense managementreceived further validation when the company enteredinto a global partnership with American Express TravelRelated Services Company, Inc. Through a seven yearexclusive marketing partnership, American Express’sGlobal Commercial Card business will promote Concur Expense to its corporate clients. Concur will now partnerwith one of the world’s leading brands, and the globalleader in corporate credit cards, to promote our servicesto their clients around the globe. In addition, AmericanExpress invested more than 250 million and acquired a13% share of Concur.Four consecutive quarters of record growthFiscal 2008 was ground-breaking on multiple fronts. Butstrategy and vision are only interesting when matchedwith execution. Fiscal 2008 marks the 8th straight yearof meeting or exceeding our financial expectations. Weoutperformed our objectives in each quarter and raisedour full year outlook for all key metrics every quarter. Ona year-over-year basis, we grew revenue 67% while alsoimproving our non-GAAP operating margin from 17% to19% and improving free cash flow from 20M to 51M.We continued to strengthen our management teamand added significant talent to our Board of Directorswith the appointment of Rajeev Singh, our President &COO as well as Ed Gilligan, Vice Chairman of AmericanExpress Company.UNPRECEDENTED GLOBAL ECONOMIC DOWNTURNThe current economic environment is the most difficult wehave seen in decades. Most economic data points to thecurrent downturn having started at the end of 2007. At thattime, the financial crisis that would eventually send shockwaves around the globe hadn’t yet fully materialized, butother factors were beginning to drag on the economy andimpact our clients.Specifically for the business travel industry, the risingcost of fuel during the first half of fiscal 2008 impactedcustomers and suppliers, forcing companies to dealwith the rising costs of business travel amidst a slowingeconomy. Meanwhile, airlines cut back on capacity and awave of consolidation and bankruptcies rippled throughan already fragile industry. When the credit crisis hit,most organizations found themselves in a tough demandenvironment with little to no access to credit. Thatcombination has proven to be exceptionally difficult.It is our responsibility to manage through the difficulttimes ahead with an eye on long-term value creation. So,even as we see continued demand for our services, wemust plan for the impacts of growing unemployment,increased business failures, decreasing travel budgets, astrengthening U.S Dollar, and declining interest rates.With prudent investments across the business, Concur cancontinue to set the pace of innovation, service excellenceand customer value in the corporate travel and expensemanagement market.OUR TOP PRIORITIESFor those who have watched our business grow overthe past five years, our objectives remain unchanged.For those new to our story, I’d like to take a moment tohighlight our top priorities.Every employee at Concur is focused on the followingobjectives. We need to increase our investments indistribution and marketing programs to develop themarket and increase market penetration. We need tocontinue to drive the innovation curve in our market,increasing the value that our customers receive from ourservices. We need to continue to invest aggressively toexceed the service expectations of our customers anddrive even more operating leverage in the business.OUR PROMISE TO YOUThe success that Concur enjoyed in fiscal 2008 is simplyone more step along a path that began 15 years ago. Andwith each success, Concur takes one more step towardbuilding an enduring and prosperous company for ourshareholders, our customers and ourselves. That’s the goalto which we have always remained committed.I ask that you measure our progress toward that goalthrough the tangible results by which you would measureany successful enterprise - revenue and earnings growth.On behalf of the Board of Directors, our executive staffand every member of the Concur team, thank you for yourcontinued support of our company.Steve SinghChairman of the Board and Chief Executive OfficerConcurJanuary 30, 2009Concur 2008 Annual Report

Fiscal Year 2008 Financial HighlightsQUARTERLY SUBSCRIPTION REVENUE (IN MILLIONS)TOTAL REVENUE (IN MILLIONS) 55.7 53.2 50.8 215.5 46.5 32.4 30.2 129.1 27.9 22.4 97.1 23.7 25.5 19.2 71.8 15.2 56.62004200520062007Q1 20062008EARNINGS PER SHARE*Q2 2006Q3 2006Q4 2006Q1 2007Q2 2007Q3 2007Q4 2007Q1 2008Q2 2008Q3 2008Q4 2008OPERATING MARGIN*19% 0.8617% 0.5415% 0.36200620072008200620072008FINANCIAL SUMMARYYear ended September 3020082007200620052004 215,491 129,107 97,145 71,831 56,550 17,184 8,225 34,156 5,366 2,035 0.35 0.20 0.87 0.15 0.0648,45941,03339,15036,34836,815(In Thousands, Except for Per Share Data)RevenuesNet incomeNet income per share, dilutedShares used in calculation of diluted net incomeper shareCash and cash equivalents 267,725 168,835 16,334 16,202 23,735Total assets 641,019 345,482 181,319 60,651 52,899Long-term debt, net of current portionStockholders’ equity- 5,369 13,520-- 534,538 284,360 117,394 30,692 30,145* Excludes the effect of share based compensation, amortization of intangibles and income tax expense (benefit).Concur 2008 Annual Report

Fiscal 2008 Business HighlightsFISCAL 2008 Q1 BUSINESS HIGHLIGHTSConcur announces first quarter revenue up 69 percent year-over-year.69%Concur completes its acquisition of privately-held H-G Holdings, Inc. and itssubsidiaries, including Gelco InformationNetwork,Inc., the owner[ PhotoPlaceholder] of GelcoExpense Management.Concur announces the general availability of Concur Travel & Expense, theindustry-first innovation featuring Smart Expenses that completely shatters thenotion of the traditional expense report by enabling One Touch Business Travel .Concur announces that IHG Properties is now delivering e-receipts directly intoConcur Travel & Expense through Concur Connect - a global program connectingConcur clients, representing over 35 billion of spend, to suppliers from aroundthe world.FISCAL 2008 Q2 BUSINESS HIGHLIGHTSConcur announces second quarter revenue up 74 percent year-over-year.Concur launches Concur Travel & Expense in EMEA, pioneering a new era of OneTouch Business Travel for clients throughout Europe.Concur launches Concur Pay, the on-demand service that enables clients toautomatically transfer payments to corporate card providers and to employeesrequiring reimbursement, virtually eliminating human intervention.Concur selected as the winner of the prestigious ‘Expense Management Service’award at the 14th annual Business Travel World Awards 2008 event in LondonConcur CEO and company chairman Steve Singh named among the 25 mostinfluential executives in the business travel industry by Business Travel News.Concur becomes the first technology company named as an NBTA FoundationPremier Partner.Concur opens German, French and Belgian offices to further expand itsEuropean presence.Concur appoints Randall H. Talbot to its Board of Directors.Concur announces that Choice Hotels is now delivering e-receipts directly intoConcur Travel & Expense through Concur Connect.Concur 2008 Annual Report74%