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Jeffrey Keene jkeene2@gsb.uchicago July 29, 2011

Concur (CNQR) – Leading provider of on-demand corporate expense management software – uniting online corporate travel booking with automated expense reporting. Jeffrey Keene jkeene2@gsb.uchicago.edu July 29, 2011. Stock Chart.

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Jeffrey Keene jkeene2@gsb.uchicago July 29, 2011

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  1. Concur (CNQR) – Leading provider of on-demand corporate expense management software – uniting online corporate travel booking with automated expense reporting. Jeffrey Keene jkeene2@gsb.uchicago.edu July 29, 2011

  2. Stock Chart Concur’s stock has had a great run over the last five years due to its strong competitive position, solid management team, and steady execution. However, the stock has stalled over the past year – which provides an attractive entry point for a firm that is positioned to grow revenue at least 20%-plus for the next three to five years.

  3. Versus Peers One-year price chart Blue=Concur down 5%,Red=salesforce up 50%, Orange=SuccessFactors up 30%,Green=NetSuite up 140%

  4. Strong Fundamental Picture • Concur’s solution unites travel bookings and expense reporting – the only one in the market. • The company’s solution remains best in class and faces little to no competition. • Roughly $100 billion annually is spent on corporate travel and entertainment – the 2nd largest controllable cost for organizations. • In my view, the firm is one of the most forward-looking software companies.

  5. Total Available Market • Management estimates that the company’s core market is only 10% penetrated (1 million serviceable firms with more than 75 employees) and pegs the company’s total available market at $12 billion. • With a current revenue run rate of only $360 million, Concur has significant room to grow.

  6. New Growth Areas Moving down market • Management believes that the majority of revenue long-term could come from SMBs. • Concur Breeze was released last year. Overseas expansion • Management wants to move from 13% of sales to 25% - 30%. • Overseas revenue could someday approach 50% or more, as many mature software companies receive at least half of their revenue from international locations. • The firm recently released editions in Japan and India – two potential very large markets. These offerings should begin to materially add to revenue by 2013.

  7. New Growth Areas • TripIt functionality • Improves Concur’s mobile functionality. • Fills a gap in the company’s product offering. • Should materially impact ‘13 results if not sooner. • Recent partnerships • American Express • Amadeus

  8. Corporate Travel Spending Impact • Corporate travel spending has grown for six consecutive quarters - however, we are still not at the dollar spending level witnessed in 2008. • The company was materially impacted by the recession and reduced travel volumes – Concur had been growing its top-line north of 30%. • As corporate travel continues to bounce back, Concur should begin to see customers increase their transaction volumes, leading to additional revenue.

  9. Risks • Has the company penetrated its core U.S. enterprise market? • Will Concur be successful in the SMB space? • Will the firm be able to expand significantly overseas?

  10. Recent Quarterly Performance .

  11. Financial Overview – Annual Assumptions: On the top-line, I am forecasting 24% growth next year (including 1 percentage point from acquisitions) based on better than expected revenue from overseas and from TripIt (where I believe management was conservative) as well a better corporate travel environment, leading to increased transactions and additional revenue for the company. For 2013, my expectation is for 25% growth as the six growth areas all begin to materially push up the revenue figure. On the operating margin line, I am projecting a 2 percentage point improve in fiscal 2012 and a 1 percentage point gain in fiscal 2013 as fewer growth initiatives are spent on and the SMB solution begins to help the margin.

  12. Valuation – 2011

  13. Valuation – 2012

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