Concur 10Q 2010 Q1 Quarterly report

Concur (CNQR) Inactive 10-Q2010 Q1 Quarterly report

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended December 31, 2009

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

For the transition period from to

Commission file number 000-25137

Concur Technologies, Inc.

(Exact name of Registrant as specified in its charter)


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

18400 NE Union Hill Road Redmond, Washington		98052
(Address of principal executive offices)		(Zip Code)

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

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. x Yes ¨ No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). ¨ Yes ¨ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ¨ Yes x No

Number of shares of the registrant’s common stock outstanding as of January 29, 2010: 49,396,634

CONCUR TECHNOLOGIES, INC.

FORM 10-Q

December 31, 2009

INDEX


		Page
PART I. FINANCIAL STATEMENTS

ITEM 1. FINANCIAL STATEMENTS

Income Statements for the Three Months Ended December 31, 2009 and 2008		3
Balance Sheets as of December 31, 2009, and September 30, 2009		4
Cash Flow Statements for the Three Months Ended December 31, 2009 and 2008		5
Notes to 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		24
ITEM 4. CONTROLS AND PROCEDURES		24

PART II. OTHER INFORMATION		25

ITEM 1. LEGAL PROCEEDINGS		25
ITEM 1A. RISK FACTORS		25
ITEM 6. EXHIBITS		34

SIGNATURE		35

PART I. FINANCIAL INFORMATION

ITEM 1.

FINANCIAL STATEMENTS

Concur Technologies, Inc.

Income Statements

(In thousands, except per share amounts)

(Unaudited)


	Three Months Ended December 31,
	2009			2008
Revenue	$	67,653		$	58,564

Expenses:
Cost of operations		20,171			17,874
Sales and marketing		20,772			17,562
Systems development and programming		6,890			6,192
General and administrative		7,714			7,188
Amortization of intangible assets		1,855			1,541

Total expenses		57,402			50,357


Operating income		10,251			8,207

Other income (expense):
Interest income		311			1,146
Interest expense		(103	)		(133	)
Other, net		(160	)		(145	)

Total other income, net		48			868


Income before income tax		10,299			9,075

Income tax expense		3,757			3,266

Net income	$	6,542		$	5,809

Net income per share:
Basic	$	0.13		$	0.12
Diluted		0.12			0.11

Weighted average shares used in computing net income per share:
Basic		49,046			48,814
Diluted		52,519			51,760

See notes to financial statements.

Concur Technologies, Inc.

Balance Sheets

(In thousands, except per share amounts)

(Unaudited)


	December 31, 2009			September 30, 2009
Assets

Current assets:
Cash and cash equivalents	$	118,721		$	119,185
Short-term investments		140,082			143,549
Restricted cash		4,524			3,599
Accounts receivable, net of allowance of $3,351 and $3,680		43,797			45,801
Deferred tax assets		23,275			24,570
Deferred costs and other assets		19,819			18,979

Total current assets		350,218			355,683
Non-current assets:
Property and equipment, net		33,551			33,999
Investments		4,045			4,045
Deferred costs and other assets		19,913			19,964
Intangible assets, net		42,344			44,383
Deferred tax assets		21,517			23,904
Goodwill		188,804			188,907

Total assets	$	660,392		$	670,885

Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	4,127		$	3,638
Customer funding liabilities		42,945			56,424
Accrued compensation		8,576			17,508
Acquisition-related liabilities		—			902
Other accrued expenses and liabilities		10,462			10,539
Short-term debt		1,055			1,129
Deferred revenues		37,133			34,955

Total current liabilities		104,298			125,095
Non-current liabilities:
Long-term debt		—			199
Deferred rent		1,461			1,601
Deferred revenues		13,747			14,083
Tax liabilities		8,513			8,577

Total liabilities		128,019			149,555

Stockholders’ equity:
Convertible preferred stock, par value $0.001 per share		—			—
Authorized shares: 5,000; No shares issued or outstanding
Common stock, $0.001 par value per share		49			49
Authorized shares: 195,000
Shares issued and outstanding: 49,117 and 48,988
Additional paid-in capital		645,856			640,911
Accumulated deficit		(112,609	)		(119,151	)
Accumulated other comprehensive loss		(923	)		(479	)

Total stockholders’ equity		532,373			521,330

Total liabilities and stockholders’ equity	$	660,392		$	670,885

See notes to financial statements.

Concur Technologies, Inc.

Cash Flow Statements

(In thousands)

(Unaudited)


	Three Months Ended December 31,
	2009			2008
Operating activities:
Net income	$	6,542		$	5,809
Adjustments to reconcile net income to net cash provided by operating activities:
Amortization of intangible assets		1,855			1,541
Depreciation		4,132			4,036
Allowance for uncollectible accounts receivable		(329	)		(480	)
Share-based compensation expense		3,499			2,503
Deferred income taxes		3,384			2,669
Changes in operating assets and liabilities, net of effects from acquisition:
Accounts receivable		2,311			(865	)
Deferred costs and other assets		(707	)		(1,206	)
Accounts payable		515			693
Accrued liabilities		(8,911	)		(12,879	)
Deferred revenues		1,858			1,947

Net cash provided by operating activities		14,149			3,768

Investing activities:
Purchases of investments		(37,259	)		—
Maturities of investments		40,639			—
Decrease in customer funding liabilities, net of changes in restricted cash		(14,419	)		(1,107	)
Purchases of property and equipment		(3,645	)		(5,602	)
Payments for acquisition, net of cash acquired		(1,162	)		(14	)

Net cash used in investing activities		(15,846	)		(6,723	)

Financing activities:
Net proceeds from share-based equity award activity		1,114			1,836
Proceeds from employee stock purchase plan activity		285			350
Payments on repurchase of common stock		—			(54,773	)
Repayments on borrowings and capital leases		(272	)		(422	)

Net cash provided by (used in) financing activities		1,127			(53,009	)

Effect of foreign currency exchange rate changes on cash and cash equivalents		106			(2,103	)

Net decrease in cash and cash equivalents		(464	)		(58,067	)
Cash and cash equivalents at beginning of period		119,185			267,725

Cash and cash equivalents at end of period	$	118,721		$	209,658

Supplemental cash flow information:
Cash paid for interest	$	36		$	—
Income tax payments, net		445			49

See notes to financial statements.

CONCUR TECHNOLOGIES, INC.

NOTES TO FINANCIAL STATEMENTS

December 31, 2009

(Unaudited)

Note 1. Description of the Company and Basis of Presentation

Throughout these financial statements Concur Technologies, Inc. is referred to as “Concur,” “we,” “us” and “our”. We report our operating results on the basis of a fiscal year that starts October 1 and ends September 30. We refer to our fiscal years ended September 30, 2008, 2009 and 2010, as “2008,” “2009” and “2010.” All dollar, option and share amounts are reported in thousands, unless otherwise noted.

Description of the Company

We are a leading global provider of on-demand Employee Spend Management solutions. Our integrated travel and expense software solutions enable organizations to control costs by automating the processes used to manage employee spending. Our solutions unite online travel procurement with automated expense reporting, streamline corporate event management, and optimize the process of managing vendor payments, employee check requests and direct reimbursements. Our unified approach to managing these processes provides our customers with visibility into their employee spending, which helps them analyze trends, influence budget decisions, improve forecasting, and monitor and enforce compliance with their corporate policies and external regulations, such as the Sarbanes-Oxley Act of 2002.

Our core mission is to continuously innovate to reduce the costs of employee spend management for our customers. We work closely with our customers to identify opportunities to increase the value of our solutions by streamlining the travel procurement, expense reporting and vendor payment processes, reducing operating costs, improving internal controls, enhancing the overall user experience and user adoption rates, and enabling customers to gain greater insight into their spending patterns through comprehensive analytics.

We sell our solutions primarily as subscription services. We market and sell our solutions worldwide through our direct sales organization and through indirect distribution channels such as strategic resellers.

Concur^®, Concur^® Expense, Concur^® Travel & Expense, Concur^® Cliqbook Travel, Concur^® Invoice, Concur^® Connect, Concur^® ExpenseLink, and Concur^® Advantage are among the registered trademarks and registered service marks of Concur or its subsidiaries, in the United States and other countries. Other parties’ marks are the property of their respective owners and should be treated as such.

Basis of Presentation

The accompanying financial statements present our results of operations, financial position and cash flows on a consolidated basis. These unaudited financial statements include the accounts of Concur and its subsidiaries. We have eliminated all intercompany accounts and transactions in these financial statements.

We have prepared the accompanying unaudited financial statements in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial reporting. In our opinion, we have included all adjustments necessary for a fair presentation. These adjustments consist of normal recurring items. Our unaudited financial statements are not necessarily indicative of results that may be expected for any other interim period or for the full year. These unaudited financial statements should be read in conjunction with the financial statements and related notes included in our Annual Report on Form 10-K for the fiscal year ended September 30, 2009, filed with the Securities and Exchange Commission (“SEC”) on November 18, 2009.

CONCUR TECHNOLOGIES, INC.

NOTES TO FINANCIAL STATEMENTS—(Continued)

December 31, 2009

(Unaudited)

Subsequent Events

We have evaluated subsequent events through February 9, 2010, the date that our financial statements were issued.

Reclassifications

Certain amounts previously presented for prior periods have been reclassified to conform to current presentation. The reclassifications had no effect on net income or total stockholders’ equity.

Note 2. Accounting Estimates, Summary of Significant Accounting Policies and Recent Accounting Pronouncements

Use of Estimates

We prepared our financial statements in conformity with GAAP, which requires us to make estimates and assumptions affecting the amounts reported in the financial statements and accompanying notes. Changes in these estimates and assumptions may have a material impact on our financial statements and accompanying notes. Examples of estimates and assumptions include the determination of certain provisions, including allowances for accounts receivable, valuing assets and liabilities acquired through business combinations, valuing and estimating useful lives of intangible assets, deferring certain revenues and costs, estimating expected lives of customer relationships, product warranties, estimating useful lives of property and equipment, and estimating tax valuation allowances.

Recently Adopted Accounting Pronouncements

The Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”) became effective for us during the fourth quarter of 2009. This codification brings all authoritative GAAP that has been issued by a standard setter into one place. The codification retains existing GAAP without changing it.

On October 1, 2009, we adopted authoritative FASB guidance on business combinations. The guidance retains the fundamental requirements that the acquisition method of accounting (previously referred to as the purchase method of accounting) be used for all business combinations, but requires a number of changes, including changes in the way assets and liabilities are recognized and measured as a result of business combinations. It also requires the capitalization of in-process research and development at fair value and requires the expensing of acquisition-related costs as incurred. Adoption of the new guidance did not have a material impact on our financial statements.

On October 1, 2009, we adopted authoritative FASB guidance that changes the accounting and reporting for non-controlling interests. Non-controlling interests are to be reported as a component of equity separate from the parent’s equity, and purchases or sales of equity interests that do not result in a change in control are to be accounted for as equity transactions. In addition, net income attributable to a non-controlling interest is to be included in net income and, upon a loss of control, the interest sold, as well as any interest retained, is to be recorded at fair value with any gain or loss recognized in net income. Adoption of the new guidance did not have a material impact on our financial statements.

On October 1, 2009, we adopted authoritative FASB guidance on fair value measurement for nonfinancial assets and liabilities, except for items that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually). Adoption of the new guidance did not have a material impact on our financial statements.

Recently Issued Accounting Pronouncements

In October 2009, the FASB issued authoritative guidance on revenue arrangements with multiple deliverables that are outside the scope of the software revenue recognition guidance. Under the new guidance, when vendor specific objective evidence or third party evidence for deliverables in an

CONCUR TECHNOLOGIES, INC.

NOTES TO FINANCIAL STATEMENTS—(Continued)

December 31, 2009

(Unaudited)

arrangement cannot be determined, a best estimate of the selling price is required to separate deliverables and allocate arrangement consideration using the relative selling price method. The new guidance includes new disclosure requirements on how the application of the relative selling price method affects the timing and amount of revenue recognition. The new guidance also eliminates the use of the residual method of allocation and instead requires that arrangement consideration be allocated at the inception of the arrangement, to all deliverables based on their relative selling price. We are required to adopt these changes to revenue recognition in the first quarter of 2011. We believe adoption of this new guidance will not have a material impact on our financial statements.

Note 3. Net Income Per Share

We calculate basic net income per share by dividing net income for the period by the weighted-average number of shares of common stock outstanding during the period. We calculate diluted net income per share by dividing net income for the period by the weighted-average number of shares of common stock outstanding during the period, plus any dilutive effect from share-based equity awards and warrants during the period, under the treasury stock method. The computation of basic and diluted net income per share is as follows:


	Three Months Ended December 31,
	2009			2008
Net income	$	6,542		$	5,809

Weighted average number of shares outstanding:
Basic		49,046			48,814
Dilutive effect of share-based equity award plans (1)		3,473			2,946
Warrants (2)		—			—

Diluted		52,519			51,760

Net income per share available to common stockholders:
Basic	$	0.13		$	0.12
Diluted		0.12			0.11
(1) For the three months ended December 31, 2009 and 2008, we did not exclude any options to purchase Concur common stock from the calculations of diluted net income per share. (2) For the three months ended December 31, 2009 and 2008, we excluded warrants to purchase 1,280 shares of Concur common stock from the calculations of diluted net income per share.

Note 4. Property and Equipment

Our property and equipment consisted of the following:

	December 31, 2009			September 30, 2009
Land and building	$	5,601		$	5,596
Leasehold improvements		5,111			5,111
Computer hardware		18,459			17,590
Computer software		44,781			43,577
Furniture and equipment		1,117			1,395

Property and equipment, gross		75,069			73,269
Less: accumulated depreciation		(41,518	)		(39,270	)

Property and equipment, net	$	33,551		$	33,999

CONCUR TECHNOLOGIES, INC.

NOTES TO FINANCIAL STATEMENTS—(Continued)

December 31, 2009

(Unaudited)

Note 5. Investments

Equity Investment in Private Company

In January 2009, we made an investment of $4.0 million, including transaction costs, in RideCharge, Inc. (“RideCharge”), a leading provider of ground travel booking that allows business travelers to book, pay and get reimbursed for ground transportation. Our investment consists of 3.2 million shares of preferred stock and warrants to purchase an additional 1.6 million shares of preferred stock at $1.25 per share.

Because our preferred stock in RideCharge does not meet all the characteristics of in-substance common stock, we have accounted for our investment under the cost method with net accumulated earnings recorded only to the extent of distributed dividends. We have not accounted for the warrants separately because they do not qualify as free standing derivatives. We have reported our investment in RideCharge in “Investments” on our balance sheet.

All Other Investments

We generally invest our excess cash in investment grade short- to intermediate-term fixed income securities and money market funds. The portion in cash and cash equivalents represents highly liquid instruments with insignificant interest rate risk and original maturities of three months or less. Unrealized gains and losses related to available for sale securities are reported in “Other comprehensive gain (loss),” as disclosed in Note 11.

Note 6. Intangible Assets

Our intangible assets arise from our business acquisitions. The following table presents our intangible assets as of December 31, 2009, and September 30, 2009:


Description	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount as of December 31, 2009		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount as of September 30, 2009
Trade name and trademarks	$	717	$	60	$	657	$	1,029	$	324	$	705
Technology		13,704		8,216		5,488		13,721		7,432		6,289
Customer relationships		44,952		8,753		36,199		45,120		7,731		37,389

Total	$	59,373	$	17,029	$	42,344	$	59,870	$	15,487	$	44,383

For the three months ended December 31, 2009 and 2008, we recorded amortization expense of $1.9 million and $1.5 million in our income statements.

Estimated amortization expense for the remaining estimated useful life of the intangible assets is as follows as of December 31, 2009:


Years ending September 30,	Amortization of Intangible Assets
2010 (January 1, 2010, through September 30, 2010)	$	5,453
2011		6,952
2012		4,754
2013		4,243
2014		4,219
Thereafter		16,723

Total	$	42,344

CONCUR TECHNOLOGIES, INC.

NOTES TO FINANCIAL STATEMENTS—(Continued)

December 31, 2009

(Unaudited)

Note 7. Customer Funding Liabilities

We draw funds from and make payments on behalf of our customers for employee expense reimbursements and related corporate credit card payments. We hold these funds in cash and record our obligation to make these expense reimbursement payments on behalf of our customers as Customer Funding Liabilities. Some of our customers require that we maintain restricted bank accounts to hold these funds. Amounts held in these accounts are recorded as restricted cash.

Note 8. Income Taxes

We make estimates and judgments in determining income tax expense for financial statement purposes. These estimates and judgments occur in the calculation of certain tax assets and liabilities, which arise from differences in the timing of recognition of revenue and expense for tax and financial statement purposes.

We measure and recognize uncertain tax positions. To recognize such positions we must first determine if is more likely than not that the position will be sustained on audit. We then must measure the benefit as the largest amount that is more than 50% likely of being realized upon ultimate settlement. Since we are in a net operating loss position for those entities that require a reserve we do not include interest and penalties related to our contingencies in our income tax expense.

Our tax provision for interim periods is derived using an estimate of our annual effective rate, adjusted for any material items. Our effective tax rate of 36.5% varies from the statutory 35% rate due to certain nondeductible expenses and state income taxes moderated by research and development tax credits and lower foreign income tax rates.

Note 9. Share-based Compensation

Our 2007 Equity Incentive Plan (“Equity Plan”) provides for grants of stock options, restricted stock, stock bonuses, stock appreciation rights (“SARs”) and restricted stock units (“RSUs”). As of December 31, 2009, we had 1.8 million shares of common stock reserved for future grants under our Equity Plan, excluding shares of common stock reserved for future issue under our ESPP. We recognize compensation expense for equity awards on a straight line basis over the requisite service period of the award.

We have calculated an additional paid in capital (“APIC”) pool that represents the excess tax benefits related to share-based compensation that are available to absorb future tax deficiencies. We include those excess tax benefits in APIC only when they have been realized. If the amount of future tax deficiencies is greater than the available APIC pool, we will record the excess as income tax expense in our income statements. For the three months ended December 31, 2009 and 2008, we did not record any tax deficiencies against the APIC pool. Excess tax benefits or tax deficiencies are a factor in the calculation of diluted shares used in computing dilutive income per share.

The following table presents our share-based compensation resulting from equity awards that we recorded in our income statements for the three months ended December 31, 2009 and 2008:


	Three Months Ended December 31,
	2009		2008
Cost of operations	$	484	$	384
Sales and marketing		1,707		1,003
Systems development and programming		500		433
General and administrative		808		683

Total share-based compensation	$	3,499	$	2,503

CONCUR TECHNOLOGIES, INC.

NOTES TO FINANCIAL STATEMENTS—(Continued)

December 31, 2009

(Unaudited)

Net cash proceeds from the exercise of stock options were $1.1 million and $0.3 million for the three months ended December 31, 2009 and 2008. For the three months ended December 31, 2009 and 2008, we did not realize any income tax benefit from stock option exercises. We present excess tax benefits from the exercise of stock options, if any, as financing cash flows rather than operating cash flows.

The following table presents our stock option activity for the three months ended December 31, 2009:


	Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term	Aggregate Intrinsic Value
Outstanding as of September 30, 2009	3,168		$	6.95
Exercised	(121	)		8.71
Forfeited or expired	—			—

Outstanding as of December 31, 2009	3,047			6.88	3.39	$	109,289

Exercisable as of December 31, 2009	3,032			6.84	3.38		108,898

For the three months ended December 31, 2009, the total intrinsic value of options exercised was $3.5 million.

RSUs are stock awards that entitle the holder to shares of our common stock as the award vests. Our RSUs generally vest over four years, but may accelerate in certain circumstances. The compensation expense incurred for RSUs is based on the closing market price of our common stock on the date of grant and is amortized ratably on a straight-line basis over the requisite service period.

The following table presents a summary of RSU award activity for the three months ended December 31, 2009:


	Shares		Weighted Average Share Value
Outstanding as of September 30, 2009	1,327		$	24.86
Granted	—			—
Vested and released	—			—
Cancelled	(1	)		22.50

Outstanding as of December 31, 2009	1,326			24.86

As of December 31, 2009, we expect $11.7 million of total unrecognized compensation costs related to non-vested stock options and RSUs to be recognized over a weighted average period of 1.4 years. For the three months ended December 31, 2009, the total grant date fair value of options vested was $0.3 million, compared to $0.5 million for the three months ended December 31, 2008.

Note 10. Fair Value Measurements

ASC 820 establishes a three-tier fair value hierarchy, categorizing the inputs used to measure fair value. The hierarchy can be described as follows: Level 1- observable inputs such as quoted prices in active markets; Level 2- inputs other than the quoted prices in active markets that are observable either directly or indirectly; and Level 3- unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions. The fair value hierarchy also requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.

CONCUR TECHNOLOGIES, INC.

NOTES TO FINANCIAL STATEMENTS—(Continued)

December 31, 2009

(Unaudited)

We have highly liquid investments classified as cash equivalents and short-term investments included in our balance sheet. Cash equivalents consist of money market instruments and commercial paper that have original maturities of 90 days or less. We also invest in commercial paper with maturities greater than 90 days but generally mature within 270 days. Such instruments are classified within Level 2 of the fair value hierarchy. We had no financial liabilities measured at fair value on a recurring basis at December 31, 2009.

Our financial assets measured at fair value are summarized below:


	Fair Value Measurement Using						Assets at Fair Value
	Level 1		Level 2		Level 3		Assets at Fair Value
Assets:
Money market accounts	$	9,205	$	—	$	—	$	9,205
Commercial paper		—		154,516		—		154,516
Other fixed income securities		—		30,856				30,856

Total	$	9,205	$	185,372	$	—	$	194,577

Equity Investment in Private Company

In January 2009, we made an investment in RideCharge. The valuation of investments in non-public companies requires significant management judgment due to the absence of quoted market prices, inherent lack of liquidity and the long-term nature of such assets. As of December 31, 2009, this investment is recorded at $4.0 million in “Investments” on our balance sheet.

The investment in RideCharge will be subject to fair value adjustments in certain circumstances, such as when there is evidence of impairment. We will record impairment charges when an investment has experienced a decline that we deem to be other-than-temporary. The determination that a decline is other-than-temporary is, in part, subjective and influenced by many factors. Future adverse changes in market conditions or poor operating results of an investee could result in losses or an inability to recover the carrying value of our investment. When assessing our investments for other-than-temporary declines in value, we will consider many factors, including but not limited to the following: the performance of the investee in relation to its own operating targets and its business plan; the investee’s revenue and cost trends; the investee’s liquidity and cash position; and market acceptance of the investee’s products and services. From time to time, we may consider third-party evaluations. In the event an investment experiences other-than-temporary declines in value, we will record an impairment loss in “Other income (expense)” in our income statement.

Note 11. Comprehensive Income

The following table presents the components of our comprehensive income:


	Three Months Ended December 31,
	2009			2008
Net income	$	6,542		$	5,809
Other comprehensive gain (loss):
Foreign currency translation adjustment loss		(477	)		(1,960	)
Net unrealized gain on investments		33			—

Total comprehensive income	$	6,098		$	3,849

CONCUR TECHNOLOGIES, INC.

NOTES TO FINANCIAL STATEMENTS—(Continued)

December 31, 2009

(Unaudited)

Note 12. Segment Reporting

We operate in and report on one segment, which is on-demand Employee Spend Management Solutions.We market our services and products primarily in the United States and operate in a single industry segment. For the three months ended December 31, 2009 and 2008, no single customer accounted for more than 10% of our total revenues. The following table presents our revenues by geographic region:


	Three Months Ended December 31,
	2009		2008
United States	$	58,936	$	52,909
Europe		5,952		3,132
Other		2,765		2,523

Total revenues	$	67,653	$	58,564

Note 13. Contingencies

Litigation

In July 2001, we and several of our current and former officers were named as defendants in two securities class-action lawsuits based on alleged errors and omissions concerning underwriting terms in the prospectus for our initial public offering. In April 2002, these lawsuits were consolidated with more than 300 similar pending cases filed against companies that completed initial public offerings between 1997 and 2000 and the underwriters that took them public. In July 2003, we decided to participate in a proposed settlement negotiated by representatives of a coalition of issuers named as defendants in similar actions and their insurers. Although we believe that the plaintiffs’ claims have no merit, we decided to participate in the proposed settlement to avoid the cost and distraction of continued litigation. The proposed settlement had been preliminarily approved by the district court. However, in December 2006, the court of appeals reversed the district court’s finding that six focus cases could be certified as class actions. In April 2007, the court of appeals acknowledged that the district court might certify a more limited class. At a June 2007 status conference, the district court terminated the proposed settlement as stipulated among the parties. Plaintiffs filed an amended complaint in August 2007 and a motion for class certification in six focus cases in September 2007, which was later withdrawn in October 2008. In November 2007, defendants in the six focus cases filed a motion to dismiss the complaint for failure to state a claim, which the district court denied in March 2008. Plaintiffs, the issuer defendants (including us), the underwriter defendants and the insurance carriers for the defendants have engaged in mediation and settlement negotiations. The parties reached a settlement agreement, which was submitted to the district court for preliminary approval on April 2, 2009. As part of this settlement, our insurance carrier has agreed to assume our entire payment obligation under the terms of the settlement. On June 10, 2009, the district court granted preliminary approval of the proposed settlement. After a September 10, 2009 hearing, the district court gave final approval to the settlement on October 5, 2009.

Product Warranty and Indemnification Obligations

We provide services and software solutions to our customers under sales contracts, which usually include a limited warranty regarding product and service performance and a limited indemnification of customers against losses, expenses and liabilities from damages that may be awarded against them if our services or software are found to infringe upon a patent, copyright, trademark, or other proprietary right of a third party. The contracts generally limit the scope of and remedies for such indemnification obligations in a variety of industry-standard respects, including but not limited to time and geography-based scope limitations and a right for us to replace an infringing product. We also enter into similar limited indemnification terms in agreements with certain strategic business partners and vendors. To date, we have experienced minimal warranty claims and have not had to reimburse any customers for any losses related to the limited indemnification described above.

ITEM 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

OurManagement’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) provides information that we believe is relevant to an assessment and understanding of our results of operations and financial condition. This discussion should be read in conjunction with theFinancial Statements and Notes that are included with this report. Also, the discussion ofCritical Accounting Policies and Estimates in this section is an integral part of the analysis of our results of operations and financial condition.

Throughout this MD&A, we refer to Concur Technologies, Inc. as “Concur,” “we,” “us” and “our.” We report our operating results on a fiscal year basis that starts October 1 and ends September 30. We refer to our fiscal years ended September 30, 2008, 2009 and 2010, as “2008,” “2009” and “2010.” Throughout this MD&A, where we provide discussion of the three months ended December 31, 2009, and we provide data for the same period in the prior year, we will refer to the prior period as “2008.” All dollar, option and share amounts (other than per share dollar amounts) are reported in thousands, unless otherwise noted.

Special Note Regarding Forward-Looking Statements

This document contains forward-looking statements regarding our plans, objectives, expectations, intentions, future financial performance, future financial condition, and other statements that are not historical facts. These statements can be identified by our use of the future tense, or by forward-looking words such as “may,” “will,” “expect,” “anticipate,” “believe,” “intend,” “estimate,” “continue” and other similar words and phrases. These forward-looking statements involve many risks and uncertainties, described in Item 1A,Risk Factors, as well as in our other filings with the Securities and Exchange Commission (“SEC”). The occurrence of any of these risks and uncertainties may cause our actual results to differ materially from those anticipated in our forward-looking statements, which could have a material adverse effect on our business, results of operations, and financial condition. All forward-looking statements included in this report are based on information available to us as of the date of this report. We undertake no obligation to revise or update any such forward-looking statements for any reason.

Overview

We are a leading provider of on-demand Employee Spend Management solutions. Our integrated travel and expense software solutions enable organizations to control costs by automating the processes used to manage employee spending. Our solutions unite online travel procurement with automated expense reporting, streamline corporate event management, and optimize the process of managing vendor payments, employee check requests and direct reimbursements. Our unified approach to managing these processes provides our customers with visibility into their employee spending, which helps them analyze trends, influence budget decisions, improve forecasting, and monitor and enforce compliance with their corporate policies and external regulations, such as the Sarbanes-Oxley Act of 2002.

We generate our revenues predominantly from the delivery of subscription services, and to a much lesser degree from consulting services and other services, which includes the sale of software licenses. Our subscription services revenues are recognized over the time period we provide our services to customers, in contrast to license revenues, which typically are recognized upon software delivery to the customer.

On August 1, 2009, we completed the acquisition of Etap-On-Line (“Etap Acquisition”). Etap-On-Line is a leading European provider of business travel and expense management solutions, based in Paris, France. The Etap Acquisition is expected to strengthen our operations and client base in the European market.

Our strategic focus in 2010 is to continue to grow our core subscription business and to reduce our cost of deploying and operating our services as a percentage of revenue. We expect our subscription revenues to increase in 2010 compared to 2009 due to anticipated growth in demand. We expect our sales and marketing expenses to increase on both an absolute basis and as a percentage of revenues in 2010 compared to 2009, primarily reflecting our continued emphasis on growing our sales and marketing personnel to support expected demand and create additional awareness in our target market. While we observe trends of declining travel transactions, increased unemployment and business contraction generally, which tend to reduce revenue, we believe they will be outweighed by cross-selling additional services and expansion of our customer base.

We operate in and report on one segment, which are on-demand Employee Spend Management solutions.

RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED DECEMBER 31, 2009 AND 2008

Selected Financial Data

The following table presents financial data derived from our unaudited income statements as a percentage of total revenues for the periods indicated.


	Three Months Ended December 31,
	2009		2008
Revenue	100.0	%	100.0	%

Expenses:
Cost of operations	29.8		30.5
Sales and marketing	30.7		30.0
Systems development and programming	10.2		10.6
General and administrative	11.4		12.3
Amortization of intangible assets	2.7		2.6

Total expenses	84.8		86.0


Operating income	15.2		14.0

Other income (expense):
Interest income	0.5		2.0
Interest expense	(0.2	)	(0.2	)
Other, net	(0.2	)	(0.3	)

Total other income, net	0.1		1.5


Income before income tax	15.3		15.5

Income tax expense	5.6		5.6

Net income	9.7	%	9.9	%

Results of Operations

Revenues


	Three Months Ended December 31,
	2009		2008		Change
Revenue	$	67,653	$	58,564	15.5	%


	Three Months Ended December 31,
	2009		%		2008		%
United States	$	58,936	87.1	%	$	52,909	90.3	%
Europe		5,952	8.8	%		3,132	5.4	%
Other		2,765	4.1	%		2,523	4.3	%

Total revenues	$	67,653	100.0	%	$	58,564	100.0	%

Revenues. Revenues consist of fees paid for subscription services, and to a much lesser degree the amortization of set-up fees paid to us in connection with those services, and the amortization of fees paid for software maintenance services under software license arrangements and in multiple element subscription arrangements where there is no vendor specific objective evidence of fair value for an undelivered subscription element. Revenues are affected by pricing, the number of new customers, customer contract durations and our customer retention rate.

Revenues increased 15.5%, or $9.1 million, for the three months ended December 31, 2009, compared to 2008. The increase was primarily due to the increased number of customers for our subscription services. The growth in customers reflects increased market demand for our subscription services and high rates of retention of existing subscription customers. We believe this demand reflects the market’s growing awareness of our on-demand Employee Spend Management Solutions and the increasing acceptance of outsourced services, driven in part by limited information technology capital budgets.

We expect revenues to continue to grow in 2010 as a result of the growing demand for our subscription service offerings and our planned increase in spending on sales and marketing.

International Revenues. Revenues from customers outside the United States represented 13% of total revenues for the three months ended December 31, 2009, compared to 10% for the three months ended December 31, 2008. We expect our international revenues to grow in the near term, as our products and services continue to gain acceptance in international markets, due to our Etap Acquisition, our investment in global distribution and increased awareness of our products in the international markets.Historically, fluctuations in foreign currency exchange rates have not had a material effect on our operating results.

Expenses


	Three Months Ended December 31,
	2009		2008		Change
Cost of operations	$	20,171	$	17,874	12.9	%
Sales and marketing		20,772		17,562	18.3	%
Systems development and programming		6,890		6,192	11.3	%
General and administrative		7,714		7,188	7.3	%
Amortization of intangible assets		1,855		1,541	20.4	%

Total operating expenses	$	57,402	$	50,357	14.0	%

Cost of Operations. Cost of operations expenses consist primarily of salaries and related expenses (including travel related expenses) and allocated overhead costs (including depreciation, occupancy, insurance, telecommunications and computer equipment expenses) associated with employees and contractors who provide our subscription and consulting services. Cost of operations expenses also include co-location and related telecommunications costs, fees paid to third parties for referrals, resale arrangements, royalties and amortization of deferred set-up costs that we incur in connection with our subscription services.

Cost of operations expenses as a percentage of total revenues decreased to 29.8% for the three months ended December 31, 2009, compared to 30.5% for 2008. Cost of operations expenses increased by 12.9%, or $2.3 million, for the three months ended December 31, 2009, compared to 2008. Total salaries and related expenses increased by 9.3%, or $0.9 million for the three months ended December 31, 2009, compared to 2008. Allocated overhead costs increased by 8.4%, or $0.3 million for the three months ended December 31, 2009, compared to 2008. Initial set-up costs that we incur in connection with our subscription services increased by 18.6%, or $0.8 million, for the three months ended December 31, 2009, compared to 2008. These increases were primarily due to an increase in headcount and growth of the business.

We expect cost of operations expenses to continue to trend down as a percentage of total revenues over the long term as the incremental cost to deploy and support each new customer is expected to decrease due to economies of scale anticipated in our subscription service model infrastructure. We anticipate that cost of operations will increase in absolute dollars as we continue to expand our capacity to deploy and support additional new customers.

Sales and Marketing. Sales and marketing expenses consist of salaries and related expenses (including sales commissions and travel related expenses) and allocated overhead costs associated with our sales and marketing personnel, miscellaneous sales and marketing costs, such as advertising, trade shows and other promotional activities.

Sales and marketing expenses as a percentage of total revenues increased to 30.7% for the three months ended December 31, 2009, compared to 30.0% for 2008. Sales and marketing expenses increased by 18.3%, or $3.2 million, for the three months ended December 31, 2009, compared to 2008. Total salaries and related expenses increased by 14.8%, or $1.8 million, for the three months ended December 31, 2009, compared to 2008. Allocated overhead costs increased by 29.2%, or $0.8 million, for the three months ended December 31, 2009, compared to 2008. Initial costs that we incur in connection with our subscription services increased by 38.5%, or $0.9 million, for the three months ended December 31, 2009, compared to 2008. These increases were primarily attributable to an increase in sales personnel and marketing programs.

We expect total sales and marketing expenses in 2010 to increase as a percentage of revenue and in absolute dollars compared to 2009, driven primarily by an increase in sales personnel and marketing programs globally. These increases reflect a key part of our strategic focus in 2010, which is to ensure that our sales and marketing efforts are expanded to create awareness in our target markets to support expected demand.

Systems Development and Programming Costs. Systems development and programming costs consist of salaries and related expenses and allocated overhead costs associated with employees and contractors engaged in software engineering, program management and quality assurance.

Systems development and programming costs as a percentage of total revenues decreased to 10.2% for the three months ended December 31, 2009, compared to 10.6% in 2008. This decrease reflects our higher revenues compared to relatively stable expenses in this area. Systems development and programming costs increased 11.3%, or $0.7 million, for the three months ended December 31, 2009, compared to 2008. Total salaries and related expenses increased by 6.4%, or $0.2 million, for the three months ended December 31, 2009, compared to 2008. Allocated overhead costs increased by 18.7%, or $0.5 million, for the three months ended December 31, 2009, compared to 2008. These increases were primarily due to the growth of the business.

In response to the demand for our subscription services, the majority of our systems and development resources are focused on developing internal-use software used to provide these services to our customers. We capitalize costs in accordance with accounting principles generally accepted in the United States (“GAAP”) for corporate software developed or obtained for internal use and amortize it over its useful life. Capitalized internal-use software costs, net of amortization, increased $0.2 million, from $16.5 million at September 30, 2009, to $16.7 million at December 31, 2009.

We anticipate that recognized systems development and programming costs in 2010 will increase in absolute dollars and remain relatively consistent as a percentage of revenue compared to 2009 as we continue to focus on product innovation and enhancement.

General and Administrative. General and administrative expenses consist of salaries and related expenses and allocated overhead costs, all associated with employees and contractors in finance, human resources, legal and facilities, as well as miscellaneous costs, such as professional fees and public company regulatory compliance costs.

General and administrative expenses as a percentage of total revenues decreased to 11.4% for the three months ended December 31, 2009, compared to 12.3% for 2008. General and administrative expense increased by 7.3%, or $0.5 million, for the three months ended December 31, 2009, compared to 2008. This increase was primarily due to the growth of the business.

We expect the absolute dollar amount of general and administrative expenses to increase in 2010 compared to 2009 due to increases in personnel costs related to the growth of our business. However, we expect general and administrative costs as a percentage of revenue to remain relatively consistent with 2009 due to economies of scale.

Amortization of Intangible Assets. Amortization of intangible assets represents the amortization of the intangible assets from acquisitions. We are amortizing our intangible assets as non-cash charges to operations over an expected useful life which is consistent with the timing and level of expected cash flows attributed to customer relationships, use of acquired technology, trade name and trademarks, and non-compete agreements.

Interest Income, Interest Expense and Other


	Three Months Ended December 31,
	2009			2008			Change
Interest income	$	311		$	1,146		(72.9	)%
Interest expense		(103	)		(133	)	(22.6	)%
Other, net		(160	)		(145	)	10.3	%

Total other income, net	$	48		$	868		(94.5	)%


Interest income decreased for the three months ended December 31, 2009, compared to 2008, due to lower interest rates during 2009 compared to 2008. We record realized gains and losses on fluctuations in exchange rates in the Other income (expense) section of the income statement.

Income Tax Expense

	Three Months Ended December 31,
	2009			2008			Change
Income tax expense	$	3,757		$	3,266		15.0	%

We are subject to income taxes both in the U.S. and numerous foreign jurisdictions. We make estimates and judgments in determining income tax expense for financial statement purposes. We also make estimates and judgments in the calculation of certain tax assets and liabilities, which arise from differences in the timing of recognition of revenue and expense for tax and financial statement purposes.

We measure and recognize uncertain tax positions. To recognize such positions we must first determine if is more likely than not that the position will be sustained on audit. We then must measure the benefit as the largest amount which is more than 50% likely of being realized upon ultimate settlement. Since we are in a net operating loss position for those entities that require a reserve we do not include interest and penalties related to our contingencies in our income tax expense.

Financial Condition

Our total assets decreased by 1.6%, or $10.5 million, to $660.4 million at December 31, 2009, from $670.9 million at September 30, 2009.

Our total current liabilities decreased by 16.6%, or $20.8 million, to $104.3 million at December 31, 2009, from $125.1 million at September 30, 2009. This decrease was primarily due to the timing of receipts and payments of cash in relation to our Customer Funding Liabilities and to the payment of accrued bonus and commissions.

Our additional paid in capital increased by 0.8%, or $4.9 million, to $645.9 million at December 31, 2009, from $640.9 million at September 30, 2009. The increase was primarily due to the exercise of stock options under our stock-based compensation plans, and the purchase of stock under our employee stock purchase plan.

Liquidity and Capital Resources

Our available sources of liquidity as of December 31, 2009, consisted principally of cash and cash equivalents totaling $118.7 million. Our cash and cash equivalents held at financial institutions generally are in excess of the current Federal Deposit Insurance Corporation limits of $250. In addition, we have a revolving credit facility, which is discussed in more detail below.

Our operating cash inflows consist of payments received from our customers related to our subscription and other product offerings. Our operating cash outflows consist of employee salaries, payments to vendors directly related to subscription and license services, payments under arrangements with third parties who provide hosting infrastructure services in connection with our subscription services offerings, related sales and marketing and administrative costs, cost of operations and systems development and programming costs. Net cash provided by operating activities was $14.1 million for the three months ended December 31, 2009, compared to $3.8 million for 2008. The increase in cash provided by operating activities was primarily due to higher net income and an increase in cash flows from operating income.

Our investing activities used $15.8 million for the three months ended December 31, 2009, compared to $6.7 million for 2008. Purchases of property and equipment were $3.6 million for the three months ended December 31, 2009, compared to $5.6 million for 2008. The decrease in customer funding liabilities, net of changes in restricted cash resulted in $14.4 million in cash used for the three months ended December 31, 2009, compared to a decrease in cash provided of $1.1 million for the same period in 2008.

Our financing activities provided $1.1 million for the three months ended December 31, 2009, compared to $53.0 million in cash used for 2008. Financing activities included $54.8 million in cash used for repurchases of our common stock during the three months ended December 31, 2008. The exercise of stock options provided $1.1 million for the three months ended December 31, 2009, compared to $1.8 million for 2008.

We entered into a credit agreement with a financial institution (“Credit Agreement”) that provides for a revolving loan for up to $70 million and expires in September 2012, or earlier as provided in the Credit Agreement. As of December 31, 2009, and September 30, 2009, we were in compliance with all loan covenants under the terms of the Amended Credit Agreement, and we had no outstanding borrowings under this agreement.

Our Board of Directors previously authorized a stock repurchase program (“Repurchase Program”) that allowed us to repurchase up to 7.0 million shares of our common stock through January 2011. In December 2009, our Board of Directors extended the Repurchase Program for an additional two year period expiring in January 2013, and increased the number of shares eligible for repurchase by an additional 2.0 million shares, from 7.0 million shares to 9.0 million shares. We may repurchase our common stock from time to time in the open market based on market conditions. Any repurchases will be made at the then-current market prices, and repurchased shares will be retired. As of December 31, 2009, 4.1 million shares remained eligible for repurchase under the Repurchase Program. We did not have any stock repurchases during the three months ended December 31, 2009.

We believe our cash and cash equivalents, amounts available under existing credit arrangements, as well as expected positive operating cash flows, will be sufficient to meet our anticipated cash needs for normal business operations, working capital needs and capital expenditures for at least the next 12 months. In the longer term, or if we decide to acquire assets or businesses, we may require additional funds and may seek to raise such additional funds through private or public sales of debt or equity securities, or securities convertible or exchangeable into such securities, strategic relationships, bank debt, lease financing arrangements or other available means. There can be no assurances that any such funds will be available or, if they are available, that they will be available on acceptable terms to meet our business needs. If additional funds are raised through the issuance of equity securities, stockholders may experience dilution, or such equity securities may have rights, preferences, or privileges senior to those of the holders of our common stock.

Contractual Obligations and Commercial Commitments

The following table summarizes our outstanding contractual obligations as of December 31, 2009:


Years ending September 30,	Capital Leases		Operating Leases		Purchase Obligations
2010 (January 1, 2010, through September 30, 2010)		856		2,559		661
2011		199		2,651		404
2012		—		2,612		28
2013		—		1,633		—
2014				38

Total	$	1,055	$	9,493	$	1,093

Capital Leases

We lease equipment, some of which is required to be capitalized if it meets certain criteria, with the related asset recorded in property and equipment and an offsetting amount recorded as a liability.

Operating Leases

We lease office space and equipment under non-cancelable operating leases. We lease our current headquarters in Redmond, Washington under an operating lease that expires on May 31, 2013. The lease agreement for our headquarters in Redmond, Washington provides for an eight-year term with an option to renew for an additional five years. Amounts for operating leases do not include certain operating expenses under these leases such as common area maintenance. As of December 31, 2009, we also leased office space in the United States in the states of Arizona, California, Georgia, Illinois, Minnesota, New Jersey, Texas and Virginia, and internationally in the countries of Australia, Belgium, Canada, China (Hong Kong), Czech Republic, France, Germany, Netherlands, Singapore, Sweden and the United Kingdom.

Purchase Obligations

We have future minimum purchase obligations under arrangements with third parties who provide hosting infrastructure services in connection with the provision of our subscription service offerings.

Off-Balance Sheet Arrangements

We do not maintain any off-balance sheet arrangements.

Critical Accounting Policies and Estimates

Our discussion and analysis of financial condition and results of operations is based on our financial statements, which have been prepared in accordance with GAAP. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosures of contingent assets and liabilities. We base our estimates and judgments on historical experience and on various other factors that we believe to be reasonable under the circumstances; such estimates and judgments are periodically re-evaluated. Actual results may differ materially from these estimates under different assumptions, judgments or conditions.

The estimates and judgments noted above are affected by our application of accounting policies. Our critical accounting policies are those we deem most important to the portrayal of our financial condition and results of operations, including those that require the most difficult, subjective or complex judgments. Our critical accounting policies include business combinations, revenue recognition, allowances for accounts receivable, share-based compensation and income taxes.

Business Combinations

We are required to allocate the purchase price of acquired companies to the tangible and intangible assets acquired and liabilities assumed based on their estimated fair values. This valuation requires management to make significant estimates and assumptions, especially with respect to long-lived and intangible assets.

Critical estimates in valuing intangible assets include but are not limited to estimates about: future expected cash flows from customer contracts, customer lists, distribution agreements, proprietary technology and non-compete agreements; the acquired company’s brand awareness and market position, as well as assumptions about the period of time the brand will continue to be used in our product portfolio; and discount rates. Our estimates of fair value are based upon assumptions we believe to be reasonable, but which are inherently uncertain and unpredictable. Assumptions may be incomplete or inaccurate, and unanticipated events and circumstances may occur.

Other estimates associated with the accounting for these acquisitions may change as additional information becomes available regarding the assets acquired and liabilities assumed.

Revenue Recognition

We generate our revenues from the delivery of subscription services (which include software maintenance services), and to a much lesser degree, consulting services and the sale of software licenses. We recognize revenues in accordance with accounting standards for software and service companies.

We recognize revenue when:

•

evidence of an arrangement exists;

•

delivery has occurred;

•

the fees are fixed or determinable; and

•

collection is considered probable.

If collection is not considered probable, we recognize revenues when the fees are collected. If the fees are not fixed or determinable, we recognize revenues as payments become due from the customer. Accordingly, our judgment as to the probability of collection and determinability of fees may materially affect the timing of our revenue recognition and results of operations. If non-standard acceptance periods or non-standard performance criteria are required, we recognize revenue upon the expiration of the acceptance period or satisfaction of the acceptance/performance criteria, as applicable.

In contractual arrangements that include the provision of multiple elements, we apply the accounting guidance most applicable to the specific arrangement to determine how contract consideration should be measured and allocated to the separate elements in the arrangement. Multiple element arrangements require the delivery or performance of multiple products, services and/or rights to use assets. Generally, separate contracts with the same customer that are entered into at or near the same time are presumed to have been negotiated together and, therefore, are accounted for as a single contractual arrangement in determining how contract consideration should be measured and allocated to the separate elements in the arrangement. Typically, we measure and allocate the total arrangement fee among each of the elements based on their fair value or, if necessary, vendor-specific objective evidence of their fair value (“VSOE”). VSOE is determined by the price charged when an element is sold separately or, in the case of an element not yet sold separately, the price set by authorized management, if it is probable that the price, once established, will not materially change prior to separate market introduction.

Revenues

Our revenues are typically recognized monthly as the service is provided to the customer and consist of:

•

monthly fees paid for subscription services;

•

amortization of related set-up fees; and

•

amortization of fees paid for software maintenance services under software license arrangements.

Set-up fees paid by customers in connection with subscription services, as well as the associated direct and incremental costs, such as labor and commissions, are deferred and recognized ratably over the expected lives of the customer relationships, which generally range from two to five years. In addition to set-up fees, our deferred revenue balances include subscription fees paid in advance of their recognition and software maintenance fees related to our legacy license offerings. For those subscription service offerings that have been commercially available for only a short period of time, the contractual lives are used as the best estimate of the expected lives of the customer relationships. We continue to evaluate and adjust the length of these amortization periods as we gain more experience with customer contract renewals and contract cancellations. It is possible that, in the future, the estimates of expected customer lives may change and, if so, the periods over which such subscription set-up fees and costs are amortized will be adjusted. Any such change in estimated expected customer lives will affect our future results of operations.

Software maintenance services include technical support and the right to receive unspecified upgrades and enhancements on a when-and-if available basis. Fees for software maintenance services are typically billed annually in advance of performance of the services with provisions for subsequent automatic annual renewals. We defer the related revenues and recognize them ratably over the respective maintenance terms, which typically are one year.

Revenues are adjusted for estimated sales allowances, which are based on our historical experience, including a review of our experience related to price adjustments and sales credits issued.

Portions of our revenues are generated from sales made through our reseller partners. When we assume a majority of the business risks associated with performance of the contractual obligations, we record the revenues on a gross basis and amounts paid to our reseller partners are recognized as cost of operations. Our assumption of such business risks is evidenced when, among other things, we take responsibility for delivery of the product or service, establish pricing of the arrangement and are the primary obligor in the arrangement. When our reseller partner assumes the majority of the business risks associated with the performance of the contractual obligations, we record the associated revenues net of the amounts paid to our reseller partner. Our judgment as to whether we have assumed the majority of the business risks associated with performance of the contractual obligations materially affects how we report revenues and cost of operations.

Accounts Receivable Allowances

We record provisions for estimated sales allowances against subscription and consulting revenues in the period in which the related revenues are recorded. We record our sales allowances based on historical experience, including a review of our experience related to price adjustments and sales credits issued.

We make judgments as to our ability to collect outstanding receivables, and we provide an allowance for doubtful accounts, included in general and administrative expenses. In estimating allowances for doubtful accounts, we consider specific receivables when collection is doubtful, as well as an analysis of our historical bad debt experience and the current economic environment. If the data used to estimate the allowance provided for doubtful accounts does not adequately reflect our future ability to collect outstanding receivables, additional provisions for doubtful accounts may be needed and future results of operations could be materially affected.

Income Taxes

We measure and recognize uncertain tax positions. To recognize such positions we must first determine if is more likely than not that the position will be sustained on audit. We must then measure the benefit as the largest amount that is more than 50% likely of being realized upon ultimate settlement. Since we are in a net operating loss position for those entities that require a reserve we do not include interest and penalties related to our contingencies in our income tax expense.

ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are exposed to market risks in the ordinary course of our business. These risks include primarily interest rate and foreign exchange risks.

Interest Rate Risk.We have borrowing arrangements with variable rates of interest. We also maintain cash in highly liquid investment vehicles including money market accounts that bear interest at variable overnight or short term rates. Variable interest rate investment and debt exposes us to differences in future cash flows resulting from changes in market interest rates. Variable interest rate risk can be quantified by estimating the change in cash flows resulting from a hypothetical 100 basis point increase in interest rates.

Our revolving credit facility bears interest at floating rates we select under the terms of our credit agreement with a financial institution. As of December 31, 2009, we had no outstanding indebtedness under this credit facility. The revolving credit facility is not hedged with an interest rate swap.

Foreign Currency Risk. We have foreign currency risks related to our revenue and operating expenses denominated in currencies other than the U.S. dollar. We do not believe movements in the foreign currencies in which we transact will significantly affect future net earnings. Foreign currency risk can be quantified by estimating the change in cash flows resulting from a hypothetical 10% adverse change in foreign exchange rates. We believe such a change would not have a material impact on our cash flows or financial instruments that are sensitive to foreign currency exchange risk.

Derivatives. We do not use derivative financial instruments.

ITEM 4.

CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Based on our management’s evaluation (with the participation of our Chief Executive Officer and Chief Financial Officer), our Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of the period covered by this report, our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934) were effective in providing reasonable assurance that the information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified by the SEC and is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting

There was no change in our internal control over financial reporting during the three months ended December 31, 2009, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Limitation on Effectiveness of Controls

It should be noted that any system of controls, including disclosure controls and procedures and internal controls over financial reporting, however well designed and operated, can provide only reasonable, and not absolute, assurance that the objectives of the system are met. The design of any control system is based, in part, upon the benefits of the control system relative to its costs. Our disclosure controls and procedures were designed to provide reasonable assurance of achieving their objectives and the actual effectiveness of our disclosure controls and procedures is described above.

Control systems can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. In addition, over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of these and other inherent limitations of control systems, there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions, regardless of how remote.

PART II. OTHER INFORMATION

ITEM 1.

LEGAL PROCEEDINGS

From time to time we are involved in legal proceedings that arise in the ordinary course of our business. Any such proceedings, whether meritorious or not, could be time consuming, costly, and result in the diversion of significant operational resources or management time. Although the outcomes of legal proceedings are inherently difficult to predict, we are not currently involved in any legal proceeding in which the outcome, in our judgment based on information currently available, is likely to have a material adverse effect on our business or financial position.

ITEM 1A.

RISK FACTORS

We operate in a dynamic and rapidly changing business environment that involves multiple risks and substantial uncertainty. The following discussion addresses the risks and uncertainties that could cause, or contribute to causing, actual results to differ from expectations in material ways. In evaluating our business, investors should pay particular attention to the risks and uncertainties described below and in other sections of this report and in our subsequent filings with the SEC.

We depend on sales of a relatively small number of our solutions for a substantial majority of our revenues, and decreased demand for any of those solutions could substantially harm our revenues and results of operations.

We generated 94% of our total revenues for the three months ended December 31, 2009, from four solutions — Concur Travel & Expense, Concur Expense, Concur ExpenseLink and Concur Cliqbook Travel. We expect these solutions to continue to constitute a large but decreasing percentage of our total

revenues as we continue to expand our service offerings. Our financial performance and business outlook depends on continued market acceptance of these solutions. If customers reduce or cancel their subscriptions for our solutions due to economic conditions or because our competitors (some of which have substantially greater resources than we do) develop new offerings, or if we do not keep up with technological advancements in services and software platforms, delivery models or product features, our revenues could decline significantly. There can be no assurance that our solutions will continue to maintain current levels of market penetration or that we will maintain current levels of revenues from sales of these solutions in the future.

If the market for integrated travel and expense services does not grow as we expect it to, our business will be harmed.

The market for integrated travel and expense services is developing, and it is not certain whether these services will achieve market acceptance and sustain high demand. Our future profits depend on increasing customer subscriptions for integrated travel and expense services. The market for integrated travel and expense services may not grow, or may shrink. Our future financial performance and revenue growth depend on the willingness of enterprise customers to use integrated travel and expense services. Many enterprises have internal resources and processes to manage corporate travel and expenses, so they may not perceive the benefit of our external integrated travel and expense management services. Privacy concerns and transition costs are also factors that may affect an enterprise’s decision to subscribe to an external solution. If enterprises do not value the benefit of integrated travel and expense services, then the market for these services will not develop at the rate that we anticipate.

Unfavorable economic conditions may continue or worsen, affecting our business and financial performance.

Our financial performance depends on the state of the economy, which deteriorated in the recent broad recession, and which may which may deteriorate more in the future. Lower levels of economic activity result in declines in corporate spending on travel, fewer travel and expense transactions, lower information technology spending, and deceased revenue for us. The core factors that affect customer usage and therefore our subscription revenue are unemployment, recession-driven attrition through business failure or acquisition, and travel budget cutbacks. The 2008 – 2009 contraction in the global economy appears to be lingering, and continuing or worsening economic conditions may result in increased expenses for labor, energy, equipment and facilities, as well as increased volatility of our stock price and foreign exchange rates, and impairment of goodwill and other assets. If unfavorable economic conditions continue or worsen, our business, operating results and financial condition could be materially and adversely affected.

We face significant competition from companies with longer operating histories and greater resources than we have, and our business will suffer if we fail to compete effectively.

Our principal direct competition comes from independent vendors of corporate travel and expense management software and services, as well as financial institutions and enterprise resource planning software vendors that sell products similar to ours along with their suites of other products and services. Many of our competitors have longer operating histories; more financial, technical, marketing and other resources; greater name recognition and more customers for their products and services than we do. Some of our competitors, particularly major financial institutions and enterprise resource planning software vendors, have well-established relationships with our current and potential customers, as well as with systems integrators and other vendors and service providers. These competitors may also be able to respond more quickly to new or emerging technologies and changes in customer requirements, devote greater resources to the development, promotion and sale of their products, or better withstand economic downturns. We also face indirect competition from potential customers’ internal development efforts and, at times, have to overcome their reluctance to move away from existing paper-based systems. In addition, we anticipate the entrance of new competitors in the future. This competitive landscape makes it difficult for us to achieve our objective of increasing the number of our customers and expanding our role in the travel supply chain. Increased competition may also result in price reductions, reduced gross margins and change in market share and could have a material adverse effect on our business, financial condition and results of operations.

Because we depend upon strategic relationships with third parties, our revenues could decline if we do not sustain and develop these relationships.

We depend on strategic reseller and referral relationships to offer products and services to a larger customer base than we can reach through our current direct sales, telesales and internal marketing efforts. Some of our strategic relationships are in early stages of operation and, accordingly, it is uncertain whether these third parties will be able to market our products and services successfully or provide the volume and quality of orders and lead referrals that we currently expect.

Our success depends in part on the ultimate success of our strategic reseller and referral partners and their ability to market our products and services successfully. Some of these third parties have entered, and may continue to enter, into strategic relationships with our competitors. Further, many of our strategic partners have multiple strategic relationships and they may not regard us as significant for their businesses. Our strategic partners may terminate their respective relationships with us, pursue other partnerships or relationships, or attempt to develop or acquire products or services that compete with our products or services. Our strategic partners also may interfere with our ability to enter into other desirable strategic relationships. Further, unfavorable global economic conditions may hurt our strategic partners, making them less effective or causing them to modify or cancel their relationships with us.

If we are unable to maintain our existing strategic relationships or enter into new ones, we would have to devote substantially more resources to the distribution, sales and marketing of our products and services, which would increase our costs and decrease our earnings.

Our future growth and financial performance depends on our ability to grow our subscription services.

We believe that our future growth and financial performance depend upon growth of our subscription services, and we have invested in infrastructure, operations and strategic relationships to support on-demand subscription services, which represent a significant departure from traditional software delivery strategies. Our costs of providing subscription services are relatively fixed in the short term, so we may not be able to adjust expenses quickly enough to offset slowdowns in subscription sales. In addition, any delays in deployment may prevent us from recognizing subscription revenue for indeterminate periods of time, even when we have already incurred costs relating to the deployment of our subscription services. Further, we may experience unanticipated increases in costs associated with providing our subscription services and software maintenance services to customers over the term of our customer contracts as a result of inaccurate internal cost projections or other factors, which may harm our operating results. If our customers cannot make payments or gain access to credit to make payments, they may be forced to cancel existing subscriptions for our products and services. Some of our sales contracts contain cancellation provisions and, if cancelled, could result in us recognizing substantially less revenue than the aggregate value of those contracts over their terms. If a customer cancels or otherwise seeks to terminate a subscription or maintenance agreement prior to the end of its term, or if we are unable to renew such an agreement at the end of its term, our operating results in future periods could be substantially harmed.

We depend on our relationships with travel suppliers, so any adverse changes in these relationships could adversely affect our business, financial condition and results of operations.

An important component of our business success is our ability to maintain and develop relationships with travel suppliers. Adverse changes in existing relationships, including any impact of the economic recession on the businesses of those suppliers, could reduce the amount, quality and breadth of attractively priced travel products and services that we are able to offer, which could adversely affect our business, financial condition and results of operations.

If our customers have concerns over the scalability or security of our products, they might discontinue buying them and our revenues will decline.

If customers believe that our subscription services offerings are not sufficiently scalable, do not provide adequate security for the dissemination of information over the Internet or corporate extranets, or are otherwise inadequate for Internet or extranet use or if, for any other reason, our customers decide not to accept our subscription services for use, our business will be harmed. As part of our subscription services, we receive credit card, travel booking, employee, purchasing, supplier and other financial and accounting data, through the Internet or extranets and there can be no assurance that this information will not be subject to computer break-ins, theft and other improper activity that could jeopardize the security of information handled by our products. Any such lapse in security could expose us to litigation, loss of customers, damage to our reputation, or otherwise harm our business.

In addition, any person who circumvents our security measures could steal proprietary or confidential customer information or cause interruptions in our operations. We incur significant costs to protect against security breaches, and may incur significant additional costs to alleviate problems caused by any breaches. Customers’ concerns about security could deter them from using the Internet to conduct transactions that involve confidential information, so our failure to prevent security breaches, or well-publicized security breaches affecting the Internet in general, could significantly harm our business and financial results.

Privacy concerns could result in regulatory changes that may harm our business.

Personal privacy has become a significant issue in the United States and many other countries where we operate. The United States and many other countries have imposed restrictions and requirements on the use of personal information by those collecting such information. Changes to law or regulations affecting privacy, if applicable to our business, could impose additional costs and liability on us and could limit our use and disclosure of such information. If we were required to change our business activities or revise or eliminate services, our business could be harmed.

Interruption of our operations could prevent us from delivering our products and services to our customers, which could significantly harm our business.

Because our business is primarily conducted over the Internet, it depends on our ability to protect our computer equipment and the information stored in our computer equipment, offices and hosting facilities against damage from earthquake, floods, fires, power loss, telecommunications failures, unauthorized intrusion and other events. There can be no assurance that our disaster preparedness will prevent significant interruption of our operations.

In addition, we engage third party facility providers for our Web hosting facilities and related infrastructure that is essential for our subscription services. Our service to customers could be interrupted in the event of a natural disaster, or by a hosting provider decision to close a facility or terminate operations, or by other unanticipated problems. Similarly, we use third-party telecommunications providers for Internet and other telecommunication services. Any of these third-party providers may fail to perform their obligations adequately, causing business interruption or system damage that could reduce our revenue, cause us to issue credits or pay penalties, cause customers to terminate their subscriptions, or decrease our renewal rates.

Our quarterly revenues and operating results may fluctuate in future periods, we may fail to meet expectations of investors and public market analysts or we may be affected by other adverse factors, which could cause the market price of our common stock to be volatile or to decline.

Our revenues and operating results may fluctuate significantly from quarter to quarter, and if they fall below the expectations of investors or public market analysts, the price of our common stock could decline substantially. Factors that might cause quarterly fluctuations in our operating results include:

•

general economic and market conditions;

•

the evolving demand for our solutions;

•

spending decisions by our customers and prospective customers;

•

our ability to manage expenses;

•

the timing of new product releases;

•

changes in our pricing policies or those of our competitors;

•

the timing of large contracts;

•

changes in mix of our offerings;

•

the mix of sales channels through which our solutions are sold;

•

costs of developing new products and enhancements;

•

our ability to adequately provide software solutions on-demand; and

•

global political conditions.

Our acquisitions of, and investments in, other companies, products, or technologies may not yield expected benefits.

We have acquired and invested in other companies from time to time, and we may acquire or invest in other companies, products or technologies in the future. In August 2009 we acquired Etap-On-Line, a provider of business and travel expense management solutions based in Paris, France. This acquisition expands our presence in the European market and reflects a greater commitment to foreign sales and operations.

We may not realize the anticipated benefits of our acquisitions or investments to the extent that we anticipate, or at all. We may incur additional debt or issue additional equity securities to pay for future acquisitions or investments, the issuance of which could be dilutive to our existing stockholders. If any acquisition or investment is not perceived as ultimately improving our financial condition and results of operations, our stock price may decline. In addition, we may incur non-cash amortization charges from our acquisition of Etap-On-Line which could harm our future operating results. The value of acquired businesses or investments may decline due to market conditions or adverse developments in the acquired business, as a result of factors such as the performance of the business relative to its business plan, revenue and cost trends its liquidity and cash position, and market acceptance of its products.

Our integration of a recent acquisition may affect our business, operating results and financial condition.

For us to realize the benefits of our recent acquisition of Etap-On-Line, we must successfully integrate the acquired business with ours. Some of the challenges to successful integration include:

•

unanticipated costs or liabilities associated with the acquisition;

•

difficulties integrating acquired operations, personnel, technologies or products;

•

diversion of management attention from business operations and strategy;

•

commitment of resources that are needed in other parts of our business;

•

potential loss of key employees; and

•

potential litigation by third parties, such as claims related to intellectual property or other assets acquired or liabilities assumed.

The growth of the international component of our business subjects us to risks associated with foreign operations.

Our international operations are an increasingly important part of our business. Revenues from customers outside the United States represented 13% of total revenues for the three months ended December 31, 2009, and we expect international revenues to increase due to our acquisition of Etap-On-Line. Our international operations are subject to many difficulties and incremental costs, including:

•

costs to customize our products for foreign markets;

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foreign currency exchange rate risk;

•

compliance with multiple, conflicting and changing governmental laws and regulations;

•

different pricing environments;

•

longer sales cycles;

•

greater difficulty in collecting accounts receivable;

•

import and export restrictions and tariffs;

•

adverse tax consequences;

•

potentially weaker protection for our intellectual property than in the United States and practical difficulties in enforcing our rights abroad; and

•

difficulties staffing and managing foreign operations.

Our ability to expand into international markets will depend on our ability to develop and support solutions that incorporate the tax laws, accounting practices and currencies of applicable countries. Our international operations also involve foreign currency risks for us. Most of our revenues are denominated in United States dollars, but we believe that an increasing portion of our revenues will be denominated in foreign currencies. Unfavorable economic conditions have been accompanied by increased foreign currency exchange rate volatility. We currently do not engage in foreign exchange hedging activities and, therefore, our international revenues and expenses are currently subject to the risks of foreign currency fluctuations.

Our international operations also increase our exposure to international laws and regulations. If we are unable to comply with foreign laws and regulations, which are often complex and subject to variation and unexpected changes, we could incur unexpected costs and potential litigation. For example, the governments of foreign countries might attempt to regulate our services and products or levy sales or other taxes relating to our activities. In addition, foreign countries might impose tariffs, duties, price controls or other restrictions on foreign currencies or trade barriers, any of which could make it more difficult for us to conduct our business in international markets.

We intend to continue to expand our global sales and marketing activities and enter into relationships with additional international distribution partners. We are in the early stages of developing our distribution channels in markets outside the United States. We may not be able to attract and retain distribution partners that will be able to market our products effectively.

Changes in financial accounting standards or practices may cause adverse, unexpected financial reporting fluctuations and affect our reported results of operations.

A change in accounting standards or practices can have a significant effect on our reported results and may even affect our reporting of transactions completed before the change is effective. New accounting pronouncements and varying interpretations of accounting pronouncements have occurred and will occur in the future. Changes to existing rules or the questioning of current practices may adversely affect our reported financial results or the way in which we conduct our business.

If we fail to maintain proper and effective internal controls, our ability to produce accurate and timely financial statements could be impaired, which could harm our operating results, our ability to operate our business and investor views of us.

Ensuring that we have adequate internal financial and accounting controls and procedures in place so that we can produce accurate financial statements on a timely basis is a costly and time-consuming effort that needs to be re-evaluated frequently. Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with generally accepted accounting principles. We have in the past experienced a material weakness in our internal controls, and we may discover material weaknesses in our internal controls in the future. Any failure to maintain or implement required controls could cause us to fail to meet our periodic reporting obligations, or result in material misstatements in our financial information. Any such delays or restatements could cause investors to lose confidence in our reported financial information and lead to a decline in the trading price of our stock.

Our lengthy sales cycle could adversely affect our financial results.

Our sales cycle, which is the time between initial contact with a potential customer and the ultimate sale, is often lengthy and unpredictable. Our potential customers typically commit significant resources to an evaluation of available alternatives and require us to expend substantial time, effort and money educating them about the value of our offerings. As a result, we have limited ability to forecast the timing and size of specific sales. In addition, customers may delay their purchases from one quarter to another as they wait for new product enhancements. Customers may delay their purchases for even longer periods due to their inability to assess and forecast future business activity, impaired purchasing ability or other economic factors. Any delay in completing, or failure to complete, sales in a particular quarter or year could harm our business and could cause our operating results to vary significantly.

We may not successfully develop or introduce new products or enhancements to existing products, or successfully integrate acquired products and services with our offerings, and as a result we may lose existing customers or fail to attract new customers and our revenues may suffer.

Our future financial performance and revenue growth depends upon the successful development, introduction and customer acceptance of new and enhanced versions of our software solutions and on our ability to integrate products and services that we acquire into our existing and future solutions. Our business could be harmed if we fail to deliver enhancements to our solutions that meet customer needs. We experience delays in the planned release dates of enhancements to our solutions and we have discovered errors in new releases after their introduction. Either situation could result in adverse publicity, loss of sales, delay in market acceptance of our products and services, or customer claims, including, among other things, warranty claims against us, any of which could harm our business. If we do not deliver new product versions, upgrades or other enhancements to existing products and services on a

timely and cost-effective basis, our business will be harmed. We are also continually seeking to develop new offerings. However, we remain subject to all of the risks inherent in product development, including unanticipated technical or other development problems, which could result in material delays in product introduction and acceptance or significantly increased costs. There can be no assurance that we will be able to develop new solutions successfully, or to introduce and gain market acceptance of new solutions in a timely manner.

If our products and services do not keep pace with technological change, our sales could decline and our business could be harmed.

We must continually modify and enhance our software solutions to keep pace with changes in hardware and software platforms, database technology, electronic commerce technical standards and other items. As a result, uncertainties related to the timing and nature of new product announcements or introductions, or modifications by vendors of operating systems, back-office applications and browsers and other Internet-related applications, could harm our business.

We rely on third-party software and services that may be difficult to replace.

We license or purchase software and services provided by third parties in order to offer some of our services and software offerings. Such third-party software and services may not continue to be available on commercially reasonable terms, if at all. The loss or inability to maintain our rights to use any of these software or services could result in delays in the sale of our services or software offerings until equivalent technology is either developed by us, or, if available, is identified, licensed and integrated, which could harm our business.

Our stock price has experienced high volatility, may continue to be volatile and may decline.

The trading price of our common stock has fluctuated widely in the past and may do so in the future, as a result of many factors. In particular, the stock market as a whole recently experienced extreme price and volume fluctuations that affected the market price of many technology companies in ways that may have been unrelated to those companies’ operating performance. Factors that could cause our stock price to fluctuate include:

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general and industry-specific business, economic and market conditions;

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the announcement of a merger or acquisition;

•

fluctuations in our actual and anticipated operating results;

•

changes in our earnings estimates by analysts;

•

failing to achieve revenue or earnings expectations;

•

volatility inherent in prices of technology company stocks;

•

adverse publicity; and

•

the volume of trading in our common stock, including sales upon exercise of outstanding options.

Securities class action litigation has often been brought against companies that experience periods of volatility in the market prices of their securities. Securities class action litigation could result in substantial costs and a diversion of our management’s attention and resources.

If we fail to attract and retain qualified personnel, our business could be harmed.

Our success depends in large part on our ability to attract, motivate and retain highly qualified personnel, including personnel added through our acquisition of Etap-On-Line. Competition for such personnel is intense and there can be no assurance that we will be successful in attracting, motivating

and retaining key personnel. Many of our competitors have greater financial and other resources than us for attracting experienced personnel. We also compete for personnel with other software vendors and consulting and professional services companies. Further, changes in applicable stock exchange listing standards relating to obtaining stockholder approval of equity compensation plans could make it more difficult or expensive for us to grant options to employees in the future. We rely on our direct sales force to sell our services and software in the marketplace. We anticipate increasing our direct sales force. There is significant competition for direct sales personnel with the advanced sales skills and technical knowledge we need. If we were unable to hire or retain competent sales personnel our business would suffer. In addition, by relying primarily on a direct sales model, we may miss sales opportunities that might be available through other sales channels, such as domestic and international resellers and strategic referral arrangements. Any inability to hire and retain salespeople or any other qualified personnel, or any loss of the services of key personnel, would harm our business.

Our ability to protect our intellectual property is limited and our products may be subject to infringement claims by third parties.

Our success depends, in part, upon our proprietary technology, processes, trade secrets and other proprietary information and our ability to protect this information from unauthorized disclosure and use. We rely on a combination of patent, copyright, trade secret and trademark laws, confidentiality procedures, contractual provisions and other similar measures to protect our proprietary information. Although we have six patent applications pending in various countries, we do not own any issued patents. Despite our efforts to protect our proprietary rights, unauthorized parties may attempt to copy aspects of our products or to obtain and use information that we regard as proprietary and third parties may attempt to develop similar technology independently. We provide our licensed customers with access to object code versions of our software and to other proprietary information underlying our software. Policing unauthorized use of our products is difficult, particularly because the global nature of the Internet makes it difficult to control the ultimate destination or security of software or other data transmitted. While we are unable to determine the extent to which piracy of our software products exists, software piracy can be expected to be a persistent problem. In addition, the laws of some foreign countries do not protect our proprietary rights to as great an extent as do the laws of the United States and we expect that it will become more difficult to monitor use of our products as we increase our international presence. There can be no assurance that our means of protecting our proprietary rights will be adequate, or that our competitors will not independently develop similar technology. In addition, there can be no assurance that third parties will not claim infringement by us with respect to current or future products or other intellectual property rights. Any such claims could have a material adverse effect on our business, results of operations and financial condition. In addition, over the past several years, we have made numerous changes in our product names. Although we own registered trademarks in the United States and have filed trademark applications in the United States and in certain other countries, we do not have assurance that our strategy with respect to our trademark portfolio will be adequate to secure or protect all necessary intellectual property.

Anti-takeover effects of our charter documents and Delaware law could discourage or prevent a change in control of Concur.

Provisions of our certificate of incorporation and bylaws, and of Delaware General Corporation Law, may discourage, delay or prevent a change of control. For example:

•

our Board of Directors may, without stockholder approval, issue shares of preferred stock with special voting or economic rights;

•

our stockholders do not have cumulative voting rights and, therefore, each of our directors can only be elected by holders of a majority of our outstanding common stock;

•

a special meeting of stockholders may only be called by a majority of our Board of Directors, the Chairman of our Board of Directors, or our Chief Executive Officer;

•

our stockholders may not take action by written consent;

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our Board of Directors is divided into three classes, only one of which is elected each year; and

•

we require advance notice for nominations for election to the Board of Directors or for proposing matters that can be acted upon by stockholders at stockholder meetings.

ITEM 6.

EXHIBITS

(a) The following exhibits are filed as a part of this report:


		Incorporated by Reference
Exhibit Number	Exhibit Description	Form	File No.	Date of First Filing	Exhibit Number	Provided Herewith

31.01	Certification of Chief Executive Officer Pursuant to Securities Exchange Act Rule 13a-14(a).	—	—	—	—	X

31.02	Certification of Chief Financial Officer Pursuant to Securities Exchange Act Rule 13a-14(a).	—	—	—	—	X

32.01	Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350 and Securities Exchange Act Rule 13a-14(b).*	—	—	—	—	X

32.02	Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350 and Securities Exchange Act Rule 13a-14(b).*	—	—	—	—	X

This certification is not deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, or otherwise subject to the liability of that section. Such certification will not be deemed to be incorporated by reference into any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, except to the extent that Concur specifically incorporates it by reference.

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Dated: February 9, 2010


CONCUR TECHNOLOGIES, INC.

By		/s/ JOHN F. ADAIR
		John F. Adair Chief Financial Officer principal financial officer and duly authorized signatory

EXHIBIT INDEX


31.01		Certification of Chief Executive Officer Pursuant to Securities Exchange Act Rule 13a-14(a).

31.02		Certification of Chief Financial Officer Pursuant to Securities Exchange Act Rule 13a-14(a).

32.01		Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350 and Securities Exchange Act Rule 13a-14(b).*

32.02		Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350 and Securities Exchange Act Rule 13a-14(b).*

Positive
Negative
Uncertain
Constraining
Legalese
Litigous
Readability	8th grade Good

Large accelerated filer

Accelerated filer

Non-accelerated filer

¨ [Do not check if a smaller reporting company]

Smaller reporting company