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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, 2008

OR



| ̈ | 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 is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definition of accelerated filer, large accelerated filer and smaller reporting
company in Rule 12b-2 of the Exchange Act.



|                           |  |                      |  |                                               |  |                             
|-------------------------- |  | -------------------- |  | --------------------------------------------- |  | ----------------------------
|Large accelerated filer  x |  | Accelerated filer   ̈ |  | Non-accelerated filer   ̈                      |  | Smaller reporting company   ̈
|                           |  |                      |  | [Do not check if a smaller reporting company] |  |                             

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 30, 2009: 48,455,700









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CONCUR TECHNOLOGIES, INC.

FORM 10-Q

December 31, 2008

INDEX



|                             |  |          |  |                                                                                       |  |     
|---------------------------- |  | -------- |  | ------------------------------------------------------------------------------------- |  | ----
|                             |  |          |  |                                                                                       |  | Page
|PART I. FINANCIAL STATEMENTS |  |         
|                             |  |          | 
|                             |  | ITEM 1.  |  | FINANCIAL STATEMENTS                                                                  |  |     
|                             |  |          | 
|                             |  |          |  | Income Statements for the Three Months Ended December 31, 2008 and 2007               |  | 3   
|                             |  |          |  | Balance Sheets as of December 31, 2008, and September 30, 2008                        |  | 4   
|                             |  |          |  | Cash Flow Statements for the Three Months Ended December 31, 2008 and 2007            |  | 5   
|                             |  |          |  | Notes to Financial Statements                                                         |  | 6   
|                             |  |          | 
|                             |  | ITEM 2.  |  | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |  | 13  
|                             |  | ITEM 3.  |  | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                            |  | 24  
|                             |  | ITEM 4.  |  | CONTROLS AND PROCEDURES                                                               |  | 25  
|                             | 
|PART II. OTHER INFORMATION   |  | 25      
|                             |  |          | 
|                             |  | ITEM 1.  |  | LEGAL PROCEEDINGS                                                                     |  | 25  
|                             |  | ITEM 1A. |  | RISK FACTORS                                                                          |  | 26  
|                             |  | ITEM 2.  |  | UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS                           |  | 35  
|                             |  | ITEM 6.  |  | EXHIBITS                                                                              |  | 36  
|                             | 
|SIGNATURE                    |  | 37      



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PART I. FINANCIAL INFORMATION



|ITEM 1. | FINANCIAL STATEMENTS
|------- | --------------------

Concur Technologies, Inc.

Income Statements

(In thousands, except per share amounts)

(Unaudited)



|                                                                |  |                                |        |   |      |   |        |  
|--------------------------------------------------------------- |  | ------------------------------ | ------ | - | ---- | - | ------ | -
|                                                                |  | Three Months EndedDecember 31, |       
|                                                                |  | 2008                           |        |   | 2007 |  
|Revenues:                                                       |  |                                |        |   |      |   |        |  
|Subscription                                                    |  | $                              | 56,560 |   |      | $ | 46,543 |  
|Consulting and other                                            |  |                                | 2,004  |   |      |   | 2,809  |  
|                                                                |  |                                |        |   |      |   |        |  
|Total revenues                                                  |  |                                | 58,564 |   |      |   | 49,352 |  
|Expenses (1):                                                   |  |                                |        |   |      |   |        |  
|Cost of operations                                              |  |                                | 17,874 |   |      |   | 15,983 |  
|Sales and marketing                                             |  |                                | 17,562 |   |      |   | 13,157 |  
|Systems development and programming                             |  |                                | 6,192  |   |      |   | 5,941  |  
|General and administrative                                      |  |                                | 7,188  |   |      |   | 6,840  |  
|Amortization of intangible assets                               |  |                                | 1,541  |   |      |   | 1,566  |  
|                                                                |  |                                |        |   |      |   |        |  
|Total expenses                                                  |  |                                | 50,357 |   |      |   | 43,487 |  
|                                                                |  |                                |        |   |      |   |        |  
|Operating income                                                |  |                                | 8,207  |   |      |   | 5,865  |  
|Other income (expense):                                         |  |                                |        |   |      |   |        |  
|Interest income                                                 |  |                                | 1,146  |   |      |   | 250    |  
|Interest expense                                                |  |                                | (133   | ) |      |   | (432   | )
|Other, net                                                      |  |                                | (145   | ) |      |   | (126   | )
|                                                                |  |                                |        |   |      |   |        |  
|Total other income (expense), net                               |  |                                | 868    |   |      |   | (308   | )
|                                                                |  |                                |        |   |      |   |        |  
|Income before income tax                                        |  |                                | 9,075  |   |      |   | 5,557  |  
|Income tax expense                                              |  |                                | 3,266  |   |      |   | 2,175  |  
|                                                                |  |                                |        |   |      |   |        |  
|Net income                                                      |  | $                              | 5,809  |   |      | $ | 3,382  |  
|                                                                |  |                                |        |   |      |   |        |  
|Net income per share:                                           |  |                                |        |   |      |   |        |  
|Basic                                                           |  | $                              | 0.12   |   |      | $ | 0.08   |  
|Diluted                                                         |  |                                | 0.11   |   |      |   | 0.07   |  
|Weighted average shares used in computing net income per share: |  |                                |        |   |      |   |        |  
|Basic                                                           |  |                                | 48,814 |   |      |   | 43,838 |  
|Diluted                                                         |  |                                | 51,760 |   |      |   | 47,822 |  
|(1)    Includes share-based compensation as follows:            |  |                                |        |   |      |   |        |  
|Cost of operations                                              |  | $                              | 384    |   |      | $ | 246    |  
|Sales and marketing                                             |  |                                | 1,003  |   |      |   | 383    |  
|Systems development and programming                             |  |                                | 433    |   |      |   | 154    |  
|General and administrative                                      |  |                                | 683    |   |      |   | 265    |  
|                                                                |  |                                |        |   |      |   |        |  
|Total share-based compensation                                  |  | $                              | 2,503  |   |      | $ | 1,048  |  
|                                                                |  |                                |        |   |      |   |        |  

See notes to financial statements.



3



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Concur Technologies, Inc.

Balance Sheets

(In thousands, except per share amounts)



|                                                                                                                    |  |                  |          |   |                   |   |          |  
|------------------------------------------------------------------------------------------------------------------- |  | ---------------- | -------- | - | ----------------- | - | -------- | -
|                                                                                                                    |  | December 31,2008 |          |   | September 30,2008 |  
|Assets                                                                                                              |  |                  |          |   |                   |   |          |  
|Current assets:                                                                                                     |  |                  |          |   |                   |   |          |  
|Cash and cash equivalents                                                                                           |  | $                | 209,658  |   |                   | $ | 267,725  |  
|Restricted cash                                                                                                     |  |                  | 804      |   |                   |   | 3,055    |  
|Accounts receivable, net of allowance of $5,062 and $5,543                                                          |  |                  | 39,640   |   |                   |   | 38,479   |  
|Prepaid expenses                                                                                                    |  |                  | 3,475    |   |                   |   | 3,160    |  
|Deferred tax assets                                                                                                 |  |                  | 22,655   |   |                   |   | 14,289   |  
|Deferred costs and other current assets                                                                             |  |                  | 12,304   |   |                   |   | 14,104   |  
|                                                                                                                    |  |                  |          |   |                   |   |          |  
|Total current assets                                                                                                |  |                  | 288,536  |   |                   |   | 340,812  |  
|Property and equipment, net                                                                                         |  |                  | 33,896   |   |                   |   | 32,304   |  
|Deferred costs and other long-term assets                                                                           |  |                  | 16,744   |   |                   |   | 16,067   |  
|Intangible assets, net                                                                                              |  |                  | 37,567   |   |                   |   | 39,108   |  
|Deferred tax assets                                                                                                 |  |                  | 35,626   |   |                   |   | 47,257   |  
|Goodwill                                                                                                            |  |                  | 165,471  |   |                   |   | 165,471  |  
|                                                                                                                    |  |                  |          |   |                   |   |          |  
|Total assets                                                                                                        |  | $                | 577,840  |   |                   | $ | 641,019  |  
|                                                                                                                    |  |                  |          |   |                   |   |          |  
|Liabilities and stockholders equity                                                                                |  |                  |          |   |                   |   |          |  
|Current liabilities:                                                                                                |  |                  |          |   |                   |   |          |  
|Accounts payable                                                                                                    |  | $                | 4,852    |   |                   | $ | 4,198    |  
|Customer funding liabilities                                                                                        |  |                  | 19,112   |   |                   |   | 22,470   |  
|Accrued compensation                                                                                                |  |                  | 4,947    |   |                   |   | 18,308   |  
|Acquisition-related liabilities                                                                                     |  |                  | 2,090    |   |                   |   | 2,036    |  
|Other accrued and current liabilities                                                                               |  |                  | 10,440   |   |                   |   | 8,442    |  
|Long-term debt, current portion                                                                                     |  |                  | 1,355    |   |                   |   | 1,505    |  
|Deferred revenues, current portion                                                                                  |  |                  | 30,983   |   |                   |   | 29,572   |  
|                                                                                                                    |  |                  |          |   |                   |   |          |  
|Total current liabilities                                                                                           |  |                  | 73,779   |   |                   |   | 86,531   |  
|Long-term debt                                                                                                      |  |                  | 1,055    |   |                   |   | 1,328    |  
|Deferred rent                                                                                                       |  |                  | 1,991    |   |                   |   | 2,126    |  
|Deferred revenues                                                                                                   |  |                  | 13,018   |   |                   |   | 12,511   |  
|Non-current tax liabilities                                                                                         |  |                  | 3,985    |   |                   |   | 3,985    |  
|                                                                                                                    |  |                  |          |   |                   |   |          |  
|Total liabilities                                                                                                   |  |                  | 93,828   |   |                   |   | 106,481  |  
|                                                                                                                    |  |                  |          |   |                   |   |          |  
|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 Authorized shares: 60,000 Shares issued and outstanding: 48,309 and 50,286 |  |                  | 48       |   |                   |   | 50       |  
|Additional paid-in capital                                                                                          |  |                  | 625,153  |   |                   |   | 679,526  |  
|Accumulated deficit                                                                                                 |  |                  | (139,019 | ) |                   |   | (144,828 | )
|Accumulated other comprehensive loss                                                                                |  |                  | (2,170   | ) |                   |   | (210     | )
|                                                                                                                    |  |                  |          |   |                   |   |          |  
|Total stockholders equity                                                                                          |  |                  | 484,012  |   |                   |   | 534,538  |  
|                                                                                                                    |  |                  |          |   |                   |   |          |  
|Total liabilities and stockholders equity                                                                          |  | $                | 577,840  |   |                   | $ | 641,019  |  
|                                                                                                                    |  |                  |          |   |                   |   |          |  

See notes to financial statements.



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Concur Technologies, Inc.

Cash Flow Statements

(In thousands)

(Unaudited)



|                                                                                  |  |                                |         |   |      |   |          |  
|--------------------------------------------------------------------------------- |  | ------------------------------ | ------- | - | ---- | - | -------- | -
|                                                                                  |  | Three Months EndedDecember 31, |        
|                                                                                  |  | 2008                           |         |   | 2007 |  
|Operating activities:                                                             |  |                                |         |   |      |   |          |  
|Net income                                                                        |  | $                              | 5,809   |   |      | $ | 3,382    |  
|Adjustments to reconcile net income to net cash provided by operating activities: |  |                                |         |   |      |   |          |  
|Amortization of intangible assets                                                 |  |                                | 1,541   |   |      |   | 1,566    |  
|Depreciation                                                                      |  |                                | 4,036   |   |      |   | 3,671    |  
|Allowance for uncollectible accounts receivable                                   |  |                                | (480    | ) |      |   | 1,259    |  
|Share-based compensation expense                                                  |  |                                | 2,503   |   |      |   | 1,048    |  
|Deferred income taxes                                                             |  |                                | 2,669   |   |      |   | 2,029    |  
|Changes in operating assets and liabilities, net of effects from acquisition:     |  |                                |         |   |      |   |          |  
|Accounts receivable                                                               |  |                                | (865    | ) |      |   | (530     | )
|Prepaid expenses and other assets                                                 |  |                                | (1,206  | ) |      |   | (1,579   | )
|Accounts payable                                                                  |  |                                | 693     |   |      |   | (750     | )
|Accrued liabilities                                                               |  |                                | (12,879 | ) |      |   | (7,753   | )
|Deferred revenues                                                                 |  |                                | 1,947   |   |      |   | 1,602    |  
|                                                                                  |  |                                |         |   |      |   |          |  
|Net cash provided by operating activities                                         |  |                                | 3,768   |   |      |   | 3,945    |  
|                                                                                  |  |                                |         |   |      |   |          |  
|Investing activities:                                                             |  |                                |         |   |      |   |          |  
|Decrease (increase) in restricted cash                                            |  |                                | 2,086   |   |      |   | (231     | )
|Decrease in customer funding liabilities                                          |  |                                | (3,193  | ) |      |   | (2,477   | )
|Purchases of property and equipment                                               |  |                                | (5,602  | ) |      |   | (2,480   | )
|Payments for acquisition, net of cash acquired                                    |  |                                | (14     | ) |      |   | (160,946 | )
|                                                                                  |  |                                |         |   |      |   |          |  
|Net cash used in investing activities                                             |  |                                | (6,723  | ) |      |   | (166,134 | )
|                                                                                  |  |                                |         |   |      |   |          |  
|Financing activities:                                                             |  |                                |         |   |      |   |          |  
|Net proceeds from share-based equity award activity                               |  |                                | 1,836   |   |      |   | 2,379    |  
|Proceeds from employee stock purchase plan activity                               |  |                                | 350     |   |      |   | 228      |  
|Payments on repurchase of common stock                                            |  |                                | (54,773 | ) |      |   |         |  
|Net proceeds from borrowings                                                      |  |                                |        |   |      |   | 15,398   |  
|Repayments on borrowings and capital leases                                       |  |                                | (422    | ) |      |   | (423     | )
|                                                                                  |  |                                |         |   |      |   |          |  
|Net cash (used in) provided by financing activities                               |  |                                | (53,009 | ) |      |   | 17,582   |  
|                                                                                  |  |                                |         |   |      |   |          |  
|Effect of foreign currency exchange rate changes on cash and cash equivalents     |  |                                | (2,103  | ) |      |   | (240     | )
|                                                                                  |  |                                |         |   |      |   |          |  
|Net decrease in cash and cash equivalents                                         |  |                                | (58,067 | ) |      |   | (144,847 | )
|Cash and cash equivalents at beginning of year                                    |  |                                | 267,725 |   |      |   | 168,835  |  
|                                                                                  |  |                                |         |   |      |   |          |  
|Cash and cash equivalents at end of year                                          |  | $                              | 209,658 |   |      | $ | 23,988   |  
|                                                                                  |  |                                |         |   |      |   |          |  
|Supplemental cash flow information:                                               |  |                                |         |   |      |   |          |  
|Cash paid for interest                                                            |  | $                              |        |   |      | $ | 86       |  
|Income tax payments, net                                                          |  |                                | 49      |   |      |   | 51       |  

See notes to financial statements.



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NOTES TO FINANCIAL STATEMENTS

December 31, 2008

(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 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. All dollar, option and share amounts (other than per share
dollar 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.

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 offer our solutions through flexible delivery models that range from highly configurable to
standardized. We sell our solutions primarily as subscription services. We market and sell our solutions worldwide through our direct sales organization and indirect distribution channels such as strategic resellers.

Concur®, Concur® Expense, Concur® Travel & Expense, Concur® Cliqbook Travel,
Concur® Invoice, Concur® Connect, and Concur® ExpenseLink, among
others, are registered trademarks and/or registered service marks of Concur or one of 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

These
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, 2008, filed with the Securities and Exchange Commission (SEC) on November 25, 2008.



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Reclassifications

Certain amounts previously presented for prior periods have been reclassified to conform with 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 these financial
statements in conformity with GAAP, which requires us to make estimates and assumptions affecting the amounts reported in our 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 sales allowances, allowances for uncollectible accounts receivable, product warranties, estimating useful
lives of property and equipment, valuing and estimating useful lives of intangible assets, valuing assets and liabilities acquired through business combinations, deferring certain revenues and costs, estimating expected lives of customer
relationships, valuing of share-based compensation and estimating tax valuation allowances.

Significant Accounting Policies

We discuss our significant accounting policies, which include business combinations, revenue recognition, allowances for uncollectible accounts
receivable, share-based compensation and income taxes, in our Annual Report on Form 10-K for the fiscal year ended September 30, 2008, filed with the SEC on November 25, 2008.

Recently Adopted Accounting Pronouncements

Fair Value Measurements

In September 2006, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS)
No. 157, Fair Value Measurements (SFAS 157). SFAS 157 defines fair value, establishes a framework and gives guidance regarding the methods used for measuring fair value, and expands disclosures about fair value
measurements. This standard does not require any new fair value measurements, but provides guidance on how to measure fair value by providing a fair value hierarchy used to classify the source of the information. We adopted SFAS 157 for financial
assets and liabilities in the first quarter of 2009. Adoption of SFAS 157 had no material effect on our financial statements.

In February
2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities(SFAS 159). SFAS 159 gives entities the option to measure eligible financial assets and financial liabilities at fair
value on an instrument by instrument basis, that are otherwise not permitted to be accounted for at fair value under other accounting standards. The election to use the fair value option is available when an entity first recognizes a financial asset
or financial liability. Subsequent changes in fair value must be recorded in earnings. We adopted SFAS 159 in the first quarter of 2009 and did not elect the fair value option.

Recently Issued Accounting Pronouncements

Business Combinations and Noncontrolling Interests in
Consolidated Financial Statements

In December 2007, the FASB issued SFAS No. 141 (revised 2007), Business Combinations
(SFAS 141R). SFAS 141R changes the accounting for business combinations including the measurement of acquirer shares issued in consideration for a business combination, the recognition of contingent



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consideration, the accounting for pre-acquisition gain and loss contingencies, the recognition of capitalized in-process research and development, the
accounting for acquisition related restructuring cost accruals, the treatment of acquisition related transaction costs and the recognition of changes in the acquirers income tax valuation allowance. SFAS 141R is effective for business
combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. We are required to adopt SFAS 141R in the first quarter of 2010. We will apply the provisions
of SFAS 141R when applicable.

In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in Consolidated Financial
Statements (SFAS 160). SFAS 160 requires all entities to report noncontrolling interests as equity in the financial statements. SFAS 160 is effective for fiscal years, and interim periods within those fiscal years, beginning on of
after December 15, 2008. We are required to adopt SFAS 160 in the first quarter of 2010. We are evaluating the impact of adopting SFAS 160 on our financial statements.

In February 2008, the FASB issued FASB Staff Position 157-2, Effective Date of FASB Statement No. 157, which delays the effective date of
SFAS 157 for all non-financial assets and non-financial liabilities, except for items that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually). We believe the delayed items of SFAS 157 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 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 by the weighted-average number of shares of common stock outstanding during the period, plus any dilutive effect from share-based compensation awards and warrants outstanding during the
period, under the treasury stock method. The following table presents the computation of basic and diluted net income per share:



|                                                       |  |                                |        |      |   |       
|------------------------------------------------------ |  | ------------------------------ | ------ | ---- | - | ------
|                                                       |  | Three Months EndedDecember 31,
|                                                       |  | 2008                           |        | 2007
|Net income                                             |  | $                              | 5,809  |      | $ | 3,382 
|Weighted average number of shares outstanding:         |  |                                |        |      |   |       
|Basic                                                  |  |                                | 48,814 |      |   | 43,838
|Dilutive effect of share-based equity award plans (1)  |  |                                | 2,946  |      |   | 3,984 
|                                                       |  |                                |        |      |   |       
|Diluted                                                |  |                                | 51,760 |      |   | 47,822
|                                                       |  |                                |        |      |   |       
|Net income per share available to common stockholders: |  |                                |        |      |   |       
|Basic                                                  |  | $                              | 0.12   |      | $ | 0.08  
|Diluted                                                |  |                                | 0.11   |      |   | 0.07  



|(1) | For the three months ended December 31, 2008 and 2007, we did not exclude any options to purchase Concur common stock from the calculations of diluted net income per share.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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Note 4. Property and Equipment

Our property and equipment consisted of the following:



|                               |  |                  |         |   |                   |   |         |  
|------------------------------ |  | ---------------- | ------- | - | ----------------- | - | ------- | -
|                               |  | December 31,2008 |         |   | September 30,2008 |  
|Land and building              |  | $                | 5,496   |   |                   | $ | 5,490   |  
|Leasehold improvements         |  |                  | 4,991   |   |                   |   | 5,014   |  
|Computer hardware              |  |                  | 16,673  |   |                   |   | 16,170  |  
|Computer software              |  |                  | 39,799  |   |                   |   | 36,101  |  
|Furniture and equipment        |  |                  | 1,327   |   |                   |   | 1,249   |  
|                               |  |                  |         |   |                   |   |         |  
|Property and equipment, gross  |  |                  | 68,286  |   |                   |   | 64,024  |  
|Less: accumulated depreciation |  |                  | (34,390 | ) |                   |   | (31,720 | )
|                               |  |                  |         |   |                   |   |         |  
|Property and equipment, net    |  | $                | 33,896  |   |                   | $ | 32,304  |  
|                               |  |                  |         |   |                   |   |         |  

Note 5. Intangible Assets

Our intangible assets arise from our business acquisitions. The following table presents our intangible assets as of December 31, 2008, and
September 30, 2008:



|                         |  |                  |         |   |                   |   |        |  
|------------------------ |  | ---------------- | ------- | - | ----------------- | - | ------ | -
|                         |  | December 31,2008 |         |   | September 30,2008 |  
|Gross carrying amount    |  | $                | 48,600  |   |                   | $ | 48,600 |  
|Accumulated amortization |  |                  | (11,033 | ) |                   |   | (9,492 | )
|                         |  |                  |         |   |                   |   |        |  
|Intangible assets, net   |  | $                | 37,567  |   |                   | $ | 39,108 |  
|                         |  |                  |         |   |                   |   |        |  

The following table presents the components of our intangible assets as of December 31, 2008.



|                          |  |            |        |                         |   |                                     |  |                                       |        |  |     
|------------------------- |  | ---------- | ------ | ----------------------- | - | ----------------------------------- |  | ------------------------------------- | ------ |  | ----
|Description               |  | Fair Value |        | AccumulatedAmortization |   | Net Book Valueas ofDecember 31,2008 |  | Weighted AverageUseful Life (inyears)
|Trade name and trademarks |  | $          | 200    |                         | $ | 200                                 |  | $                                     |       |  |    
|Technology                |  |            | 12,700 |                         |   | 5,276                               |  |                                       | 7,424  |  | 4.8 
|Non-compete agreements    |  |            | 500    |                         |   | 387                                 |  |                                       | 113    |  | 2.0 
|Customer relationships    |  |            | 35,200 |                         |   | 5,170                               |  |                                       | 30,030 |  | 11.0
|                          |  |            |        |                         |   |                                     |  |                                       |        |  |     
|Total                     |  | $          | 48,600 |                         | $ | 11,033                              |  | $                                     | 37,567 |  |     
|                          |  |            |        |                         |   |                                     |  |                                       |        |  |     

For the three months ended December 31, 2008 and 2007, we recorded amortization expense of
$1.5 million and $1.6 million in our income statements.



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Estimated amortization expense for the remaining estimated useful life of the intangible assets is as
follows as of December 31, 2008:



|                                                   |  |                                  |       
|-------------------------------------------------- |  | -------------------------------- | ------
|Years ending September 30,                         |  | Amortization ofIntangible Assets
|2009 (January 1, 2009, through September 30, 2009) |  | $                                | 4,624 
|2010                                               |  |                                  | 5,933 
|2011                                               |  |                                  | 5,588 
|2012                                               |  |                                  | 3,445 
|2013                                               |  |                                  | 3,213 
|Thereafter                                         |  |                                  | 14,764
|                                                   |  |                                  |       
|Total                                              |  | $                                | 37,567
|                                                   |  |                                  |       

Note 6. Income Taxes

We make certain 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 assess the likelihood
that we will be able to recover our deferred tax assets. We consider all available evidence, both positive and negative, including historical levels of income, expectations and risks associated with estimates of future taxable income, ongoing,
prudent and feasible tax planning strategies in assessing the amount of the valuation allowance. If recovery is not likely, we record a valuation allowance against the deferred tax assets that we estimate will not ultimately be recoverable. Our
effective tax rate of 36% 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. Our effective tax rate is also affected
by share-based compensation and other non-deductible expenses.

As of December 31, 2008, we believe it is more likely than not that
the amount of the deferred tax assets recorded on our balance sheet would ultimately be recovered. In the event that actual results differ from our estimates or we adjust our estimates in future periods, our operating results and financial position
could be materially affected.

Note 7. 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, 2008, we had 2.4 million shares of common stock reserved for future grants under our Equity Plan, excluding shares of common stock reserved for future issue under our 2008 Employee Stock Purchase
Plan.

We have calculated an additional paid in capital (APIC) pool pursuant to the provisions of SFAS 123R, Share-based
Payment (SFAS 123R). The APIC pool represents the excess tax benefits related to share-based compensation that are available to absorb future tax deficiencies. We include only those excess tax benefits that have been realized in
accordance with SFAS No. 109, Accounting for Income Taxes. 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, 2008 and 2007, 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.

Net cash proceeds from the exercise of stock options were $0.3 million for the three months ended December 31, 2008, and $2.4 million for the
three months ended December 31, 2007. For the three months ended December 31, 2008 and 2007, we did not realize any income tax benefit from stock option exercises. In accordance with SFAS 123R, we present excess tax benefits from the
exercise of stock options, if any, as financing cash flows rather than operating cash flows.



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The following table presents our stock option activity for the three months ended December 31, 2008:



|                                     |  |        |   |  |                               |       |                                         |      |                          |   |       
|------------------------------------ |  | ------ | - |  | ----------------------------- | ----- | --------------------------------------- | ---- | ------------------------ | - | ------
|                                     |  | Shares |   |  | WeightedAverage ExercisePrice |       | WeightedAverageRemainingContractualTerm |      | AggregateIntrinsic Value
|Outstanding as of September 30, 2008 |  | 3,563  |   |  | $                             | 7.10  |                                         |      |                          |   |       
|Exercised                            |  | (34    | ) |  |                               | 8.24  |                                         |      |                          |   |       
|Forfeited or expired                 |  | (2     | ) |  |                               | 12.89 |                                         |      |                          |   |       
|                                     |  |        |   |  |                               |       |                                         |      |                          |   |       
|Outstanding as of December 31, 2008  |  | 3,527  |   |  |                               | 7.09  |                                         | 4.32 |                          | $ | 90,755
|                                     |  |        |   |  |                               |       |                                         |      |                          |   |       
|Exercisable as of December 31, 2008  |  | 3,307  |   |  |                               | 6.67  |                                         | 4.14 |                          |   | 86,477
|                                     |  |        |   |  |                               |       |                                         |      |                          |   |       

The aggregate intrinsic value in the table above represents total pretax intrinsic value (i.e.,
the difference between our closing stock price on December 31, 2008, and the weighted average exercise price of the outstanding options, multiplied by the number of shares subject to the outstanding options) that would have been received by the
option holders had all option holders exercised their options on December 31, 2008. Changes in the intrinsic value are based on fluctuations in the fair market value of our common stock. For the three months ended December 31, 2008, the
total intrinsic value of options exercised was $0.7 million.

The following table presents a summary of RSU awards for the three months
ended December 31, 2008:



|                                     |  |        |   |  |                            |      
|------------------------------------ |  | ------ | - |  | -------------------------- | -----
|                                     |  | Shares |   |  | WeightedAverage ShareValue
|Outstanding as of September 30, 2008 |  | 772    |   |  | $                          | 27.49
|Cancelled                            |  | (3     | ) |  |                            | 26.81
|                                     |  |        |   |  |                            |      
|Outstanding as of December 31, 2008  |  | 769    |   |  |                            | 27.53
|                                     |  |        |   |  |                            |      

As of December 31, 2008, we expect $9.0 million of total unrecognized compensation costs
related to non-vested stock options and RSUs to be recognized over a weighted average period of 1.3 years. For the three months ended December 31, 2008, the total fair value of options and RSUs vested was $0.5 million, compared to $0.9 million
for the three months ended December 31, 2007.

Note 8. Fair Value Measurements

SFAS 157 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.

As of December 31, 2008, we have highly liquid investments classified as cash equivalents included in our balance sheet. Cash
equivalents consist of money market instruments that have original maturities of three months or less. As of December 31, 2008, the fair value and carrying amount of these instruments included in cash equivalents was $190.8 million. The
carrying amount of these instruments approximates fair value and is considered a Level 1 fair value measurement based on the criteria and fair value hierarchy of SFAS 157. We had no financial liabilities measured at fair value on a recurring basis
at December 31, 2008.



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Note 9. Comprehensive Income

The following table presents the components of our comprehensive income:



|                                             |  |                                |        |   |      |   |       |  
|-------------------------------------------- |  | ------------------------------ | ------ | - | ---- | - | ----- | -
|                                             |  | Three Months EndedDecember 31, |       
|                                             |  | 2008                           |        |   | 2007 |  
|Net income                                   |  | $                              | 5,809  |   |      | $ | 3,382 |  
|Other comprehensive loss:                    |  |                                |        |   |      |   |       |  
|Foreign currency translation adjustment loss |  |                                | (1,960 | ) |      |   | (209  | )
|                                             |  |                                |        |   |      |   |       |  
|Total comprehensive income                   |  | $                              | 3,849  |   |      | $ | 3,173 |  
|                                             |  |                                |        |   |      |   |       |  

Note 10. Stock Repurchase Program

Our Board of Directors has authorized a stock repurchase program (Repurchase Program) that expires in January 2011. During the three months ended
December 31, 2008, we repurchased and retired 2.0 million shares of our outstanding common stock for a total cost of $54.8 million under the Repurchase Program. As of December 31, 2008, we remained authorized to repurchase up to an
additional 2.1 million shares under the Repurchase Program.

Note 11. Segment Reporting

We operate in and report on one segment, which is on-demand Employee Spend Management Solutions based upon the provisions of SFAS No. 131,
Disclosures about Segments of an Enterprise and Related Information.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, 2008 and 2007, no
single customer accounted for more than 10% of our total revenues. The following table presents our revenues by geographic region:



|               |  |                                |        |      |   |       
|-------------- |  | ------------------------------ | ------ | ---- | - | ------
|               |  | Three Months EndedDecember 31,
|               |  | 2008                           |        | 2007
|United States  |  | $                              | 52,909 |      | $ | 43,362
|Europe         |  |                                | 3,132  |      |   | 3,676 
|Other          |  |                                | 2,523  |      |   | 2,314 
|               |  |                                |        |      |   |       
|Total revenues |  | $                              | 58,564 |      | $ | 49,352
|               |  |                                |        |      |   |       

Note 12. 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



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##### Table of Contents

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 have reached a settlement agreement in principle. As part of this tentative
settlement, our insurance carrier has agreed to assume our entire payment obligation under the terms of the settlement. Although the parties have reached a tentative settlement agreement, there can be no guarantee that it will be finalized or
receive approval from the district court. We believe that we have meritorious defenses to these claims. If the tentative settlement is not implemented and the litigation continues against us, we would continue to defend against this action
vigorously. Any liability we incur in connection with this lawsuit could materially harm our business and financial position and, even if we defend ourselves successfully, there is a risk that managements distraction in dealing with this
lawsuit could harm our results.

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 certain 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. We account for potential warranty claims in accordance with the guidance in
SFAS No. 5, Accounting for Contingencies, and base our estimates on historical experience and current expectations. 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
|------- | -------------------------------------------------------------------------------------

This Management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 the Financial Statements and Notes that are included with this report. Also, the
discussion of Critical 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, 2008, and we provide data for the same period in the prior year, we will refer to the prior period as 2007. 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, including, without limitation, statements relating to our expectations regarding the components of our total revenues and our operating expenses for the remainder of 2009 and
our expectation with respect to our liquidity and capital resources for the next 12 months. 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.



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These forward-looking statements involve many risks and uncertainties. Examples of such risks and uncertainties are described in Part II, Item 1A,
Risk Factors, and elsewhere in this report, as well as in our other filings with the United States Securities and Exchange Commission (SEC). In addition, adverse economic or market conditions, such as the current economic
downturn, may cause customers and prospects to delay or reduce purchases of our products and services or otherwise change their spending patterns in response to tighter credit and negative financial news, cause customers to reduce business travel
and correspondingly reduce the use of our products and services, reduce the ability of customers, channel partners, vendors and suppliers to fulfill their obligations to us, increase volatility of our stock price and foreign exchange rates, and
otherwise adversely affect our business. 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. Except as required by law, we assume no obligation or duty to
update any such forward-looking statements.

Overview

We are a leading provider of on-demand Employee Spend Management services. 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). Subscription revenues as a percentage of total revenues increased to 96.6% for the three months ended
December 31, 2008, compared to 94.3% for 2007. This reflects the markets continued shift toward the purchase of our services as subscription services rather than 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.

Our strategic focus in 2009 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 2009 compared to 2008, on both an absolute basis and as a percentage of total revenues, 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 2009 compared to 2008, primarily reflecting our continued emphasis on growing our sales and marketing personnel to support expected demand and create additional awareness in our target market.

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



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##### Table of Contents

RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED DECEMBER 31, 2008 AND 2007

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 EndedDecember 31, |  
|                                    |  | 2008                           |   |  | 2007  |  
|Revenues:                           |  |                                |   |  |       |  
|Subscription                        |  | 96.6                           | % |  | 94.3  | %
|Consulting and other                |  | 3.4                            |   |  | 5.7   |  
|                                    |  |                                |   |  |       |  
|Total revenues                      |  | 100.0                          |   |  | 100.0 |  
|Expenses:                           |  |                                |   |  |       |  
|Cost of operations                  |  | 30.5                           |   |  | 32.4  |  
|Sales and marketing                 |  | 30.0                           |   |  | 26.7  |  
|Systems development and programming |  | 10.6                           |   |  | 12.0  |  
|General and administrative          |  | 12.3                           |   |  | 13.9  |  
|Amortization of intangible assets   |  | 2.6                            |   |  | 3.2   |  
|                                    |  |                                |   |  |       |  
|Total expenses                      |  | 86.0                           |   |  | 88.2  |  
|                                    |  |                                |   |  |       |  
|Operating income                    |  | 14.0                           |   |  | 11.9  |  
|Other income (expense):             |  |                                |   |  |       |  
|Interest income                     |  | 2.0                            |   |  | 0.5   |  
|Interest expense                    |  | (0.2                           | ) |  | (0.9  | )
|Other, net                          |  | (0.3                           | ) |  | (0.3  | )
|                                    |  |                                |   |  |       |  
|Total other income (expense), net   |  | 1.5                            |   |  | (0.7  | )
|                                    |  |                                |   |  |       |  
|Income before income tax            |  | 15.5                           |   |  | 11.2  |  
|Income tax expense                  |  | 5.6                            |   |  | 4.4   |  
|                                    |  |                                |   |  |       |  
|Net income                          |  | 9.9                            | % |  | 6.8   | %
|                                    |  |                                |   |  |       |  



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##### Table of Contents

Results of Operations

Revenues



|                     |  |                                |        |      |   |        |  |       |   
|-------------------- |  | ------------------------------ | ------ | ---- | - | ------ |  | ----- | --
|                     |  | Three Months EndedDecember 31, |       
|                     |  | 2008                           |        | 2007 |   | Change | 
|Subscription         |  | $                              | 56,560 |      | $ | 46,543 |  | 21.5  | % 
|Consulting and other |  |                                | 2,004  |      |   | 2,809  |  | (28.7 | %)
|                     |  |                                |        |      |   |        |  |       |   
|Total revenues       |  | $                              | 58,564 |      | $ | 49,352 |  | 18.7  | % 
|                     |  |                                |        |      |   |        |  |       |   



|               |  |                                |        |   |       |   |      |   |        |  |       |  
|-------------- |  | ------------------------------ | ------ | - | ----- | - | ---- | - | ------ |  | ----- | -
|               |  | Three Months EndedDecember 31, |       
|               |  | 2008                           |        | % |       |   | 2007 |   | %      | 
|United States  |  | $                              | 52,909 |   | 90.3  | % |      | $ | 43,362 |  | 87.9  | %
|Europe         |  |                                | 3,132  |   | 5.4   | % |      |   | 3,676  |  | 7.4   | %
|Other          |  |                                | 2,523  |   | 4.3   | % |      |   | 2,314  |  | 4.7   | %
|               |  |                                |        |   |       |   |      |   |        |  |       |  
|Total revenues |  | $                              | 58,564 |   | 100.0 | % |      | $ | 49,352 |  | 100.0 | %
|               |  |                                |        |   |       |   |      |   |        |  |       |  

Revenues. Subscription 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, 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. Subscription revenues are affected by pricing, the number of new customers, customer contract durations and our customer retention rate.

Subscription revenues increased 21.5%, or $10.0 million, for the three months ended December 31, 2008, compared to 2007. 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 subscription revenues to continue to grow in 2009, on an absolute basis and as a percentage of total revenues, as a result of the growing
demand for our subscription service offerings and our planned increase in spending on sales and marketing.

Consulting revenues consist of
fees for client services, which include system implementation and integration, planning, data conversion, training and documentation of procedures. Consulting and other revenues decreased primarily reflecting fewer consulting services as a result of
fewer upgrades and enhancements for existing license customers, since virtually all of our new customers utilize our subscription services and our historic license customers have generally transitioned to our subscription services.

We anticipate that consulting and other revenues in 2009 will fluctuate on a quarterly basis but be lower for 2009 compared to 2008 as a percentage of
revenues, as fewer existing customers upgrade their on-premise license software, fewer new customers purchase on-premise licensed software, and the market continues to shift to the subscription services model.

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



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##### Table of Contents

Expenses



|                                    |  |                                |        |      |   |        |  |      |   
|----------------------------------- |  | ------------------------------ | ------ | ---- | - | ------ |  | ---- | --
|                                    |  | Three Months EndedDecember 31, |       
|                                    |  | 2008                           |        | 2007 |   | Change | 
|Cost of operations                  |  | $                              | 17,874 |      | $ | 15,983 |  | 11.8 | % 
|Sales and marketing                 |  |                                | 17,562 |      |   | 13,157 |  | 33.5 | % 
|Systems development and programming |  |                                | 6,192  |      |   | 5,941  |  | 4.2  | % 
|General and administrative          |  |                                | 7,188  |      |   | 6,840  |  | 5.1  | % 
|Amortization of intangible assets   |  |                                | 1,541  |      |   | 1,566  |  | (1.6 | %)
|                                    |  |                                |        |      |   |        |  |      |   
|Total operating expenses            |  | $                              | 50,357 |      | $ | 43,487 |  | 15.8 | % 
|                                    |  |                                |        |      |   |        |  |      |   

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 30.5%
for the three months ended December 31, 2008, compared to 32.4% for 2007. Cost of operations expenses increased by 11.8%, or $1.9 million, for the three months ended December 31, 2008, compared to 2007. Depreciation, facilities, allocated
overhead costs, and other increased by 21.8%, or $0.7 million, for the three months ended December 31, 2008, compared to 2007. Initial costs that we incur in connection with our subscription services increased by 19.3%, or $0.7 million, for the
three months ended December 31, 2008, compared to 2007. These increases were primarily due to organic growth.

We expect cost of
operations expenses to continue to trend down as a percentage of total revenues 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 and, to a lesser extent, 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 30.0% for the three months ended December 31, 2008, compared to 26.7%
for 2007. Sales and marketing expenses increased by 33.5%, or $4.4 million, for the three months ended December 31, 2008, compared to 2007. Total salaries and related expenses increased by 38.1%, or $3.4 million, for the three months ended
December 31, 2008, compared to 2007. Initial costs that we incur in connection with our subscription services increased by 52.9%, or $0.8 million, for the three months ended December 31, 2008, compared to 2007. These increases were
primarily attributable to an increase in sales personnel and marketing programs.

We expect total sales and marketing expenses in 2009 to
increase as a percentage of revenue and in absolute dollars compared to 2008, driven primarily by an increase in sales personnel and marketing programs globally. These increases reflect a key part of our strategic focus in 2009, which is to ensure
that our sales and marketing efforts are expanded to create awareness in our target markets to support expected demand.



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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 10.6% for the three months ended December 31, 2008,
compared to 12.0% for 2007. This decrease reflects our higher revenues compared to relatively stable expenses in this area. Systems development and programming costs increased 4.2%, or $0.3 million, for the three months ended December 31, 2008,
compared to 2007.

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 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 $0.4 million, from $14.8 million at September 30, 2008, to $15.2 million at December 31, 2008.

We anticipate that recognized systems development and programming costs in 2009 will increase in absolute dollars and remain relatively consistent as a percentage of revenue compared to 2008 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, information technology and facilities, and, to a lesser extent, miscellaneous costs, such as professional fees and public company regulatory
compliance costs.

General and administrative expenses as a percentage of total revenues decreased to 12.3% for the three months ended
December 31, 2008, compared to 13.9% for 2007. General and administrative expense increased by 5.1%, or $0.3 million, for the three months ended December 31, 2008, compared to 2007. This increase was primarily due to the growth of the
business.

We expect the absolute dollar amount of general and administrative expenses to remain relatively consistent in 2009 compared to
2008. However, we expect general and administrative costs as a percentage of revenue to decrease due to economies of scale.

Amortization of Intangible Assets. Amortization of intangible assets represents the amortization of the intangible assets from acquisitions, which includes Outtask, Inc. (Outtask) in January 2006 and Gelco in October
2007. We are amortizing our intangible assets as non-cash charges to operations for Outtask over an expected useful life of 8.2 years and for Gelco over an expected useful life of 9.6 years, 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.



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Interest Income, Interest Expense and Other



|                                  |  |                                |       |   |      |   |      |        |  |        |   
|--------------------------------- |  | ------------------------------ | ----- | - | ---- | - | ---- | ------ |  | ------ | --
|                                  |  | Three Months EndedDecember 31, |      
|                                  |  | 2008                           |       |   | 2007 |   |      | Change | 
|Interest income                   |  | $                              | 1,146 |   |      | $ | 250  |        |  | 358.4  | % 
|Interest expense                  |  |                                | (133  | ) |      |   | (432 | )      |  | (69.2  | %)
|Other, net                        |  |                                | (145  | ) |      |   | (126 | )      |  | 15.1   | % 
|                                  |  |                                |       |   |      |   |      |        |  |        |   
|Total other income (expense), net |  | $                              | 868   |   |      | $ | (308 | )      |  | (381.8 | %)
|                                  |  |                                |       |   |      |   |      |        |  |        |   

Interest income increased for the three months ended December 31, 2008, compared to 2007,
which reflects higher levels of interest-earning cash and cash equivalent investments. 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 EndedDecember 31, |      
|                   |  | 2008                           |       | 2007 |   | Change | 
|Income tax expense |  | $                              | 3,266 |      | $ | 2,175  |  | 50.2 | %

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 assess the likelihood that we will be able to recover our deferred tax assets. We consider all available evidence, both positive and negative,
including historical levels of income, expectations and risk associated with estimates of future taxable income, ongoing, prudent and feasible tax planning strategies in assessing the amount of the valuation allowance. If recovery is not likely, we
record a valuation allowance against the deferred tax assets that we estimate will not ultimately be recoverable.

Financial Condition

Our total assets decreased by 9.9%, or $63.2 million, to $577.8 million at December 31, 2008, from $641.0 million at September 30, 2008. Our
cash and cash equivalents decreased by 21.7%, or $58.1 million, to $209.7 million at December 31, 2008, from $267.7 million at September 30, 2008. Our cash flow activity is described in more detail in the Liquidity and Capital
Resources section below. Our accounts receivable balances were $39.6 million at December 31, 2008, and $38.5 million at September 30, 2008, representing an increase of 3.0%, or $1.2 million. Our property and equipment increased to
$33.9 million at December 31, 2008, from $32.3 million at September 30, 2008.

Our total current liabilities decreased by 14.7%,
or $12.8 million, to $73.8 million at December 31, 2008, from $86.5 million at September 30, 2008. This decrease was primarily due to the payment and subsequent decrease in accrued bonus and commissions.

Our common stock and additional paid in capital decreased by 8.0%, or $54.4 million, to $625.2 million at December 31, 2008, from $679.5 million at
September 30, 2008. The decrease reflects $54.8 million used to repurchase shares of our outstanding common stock, partially offset by the exercise of stock options under our stock-based compensation plans, and the sale of stock under our
employee stock purchase plan.



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Liquidity and Capital Resources

Our available sources of liquidity as of December 31, 2008 consisted principally of cash and cash equivalents totaling $209.7 million. Our cash and cash equivalents held at financial institutions generally are in
excess of the current Federal Deposit Insurance Corporation (FDIC) 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 $3.8 million for the three months ended December 31, 2008, compared
to $3.9 million for 2007.

Our investing activities used $6.7 million in the three months ended December 31, 2008, compared to $166.1
million for 2007. Investing activities for the three months ended December 31, 2007, included payments of $160.9 million related to our acquisition of Gelco Information Network, Inc. Purchases of property and equipment were $5.6 million for the
three months ended December 31, 2008, compared to $2.5 million for 2007. The change in customer funding liabilities resulted in a decrease in cash provided of $3.2 million for the three months ended December 31, 2008, compared to $2.5
million for 2007.

Our financing activities used $53.0 million in the three months ended December 31, 2008, provided $17.6 million for
the three months ended December 31, 2007. Financing activities included $54.8 million in cash used for repurchases of our common stock during the three months ended December 31, 2008. Proceeds from financing activities included borrowings
of $15.4 million during the three months ended December 31, 2007, which we used to help fund our acquisition of Gelco Information Network, Inc. The exercise of stock options provided $1.8 million for the three months ended December 31,
2008, compared to $2.4 million for 2007.

We entered into a credit agreement with a financial institution on June 1, 2007 and amended
it on October 1, 2007 (Amended Credit Agreement). The Amended Credit Agreement provides for a revolving credit facility for up to $70 million and expires in June 2012, or such earlier date as provided in the Amended Credit
Agreement. At our option, the interest rate on the revolving credit facility is equal to either (1) the greater of the Federal Funds Rate plus 0.5% and the financial institutions publicly announced prime rate at that time, or (2) the
London Interbank Offered Rate (LIBOR) divided by the result of 1.00 less the Federal Reserve Systems maximum reserve percentage for Eurocurrency funding. We granted security interests in substantially all of our assets as
collateral for the loans under the Amended Credit Agreement. The Amended Credit Agreement requires compliance with certain covenants, which limit among other things our ability to consummate a sale of assets, make changes in our capital structure
and pay out dividends.

As of December 31, 2008, and September 30, 2008, we were in compliance with all loan covenants under the
terms of the Amended Credit Agreement. As of December 31, 2008, we had no outstanding borrowings under this agreement.

Our Board of
Directors has authorized a stock repurchase program (Repurchase Program) that expires in January 2011. During the three months ended December 31, 2008, we repurchased and retired 2.0 million shares of our outstanding common
stock under the Repurchase Program. As of December 31, 2008, 2.1 million shares remained eligible for repurchase under the Repurchase Program. Repurchases may be made 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. We did not repurchase any shares of our outstanding common stock under the Repurchase Program during the three months ended December 31, 2007.



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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, 2008:



|                                                   |  |               |       |                 |   |                     |  |   |      
|-------------------------------------------------- |  | ------------- | ----- | --------------- | - | ------------------- |  | - | -----
|Years ended September 30,                          |  | CapitalLeases |       | OperatingLeases |   | PurchaseObligations
|2009 (January 1, 2009, through September 30, 2009) |  | $             | 1,082 |                 | $ | 2,056               |  | $ | 1,379
|2010                                               |  |               | 1,129 |                 |   | 2,599               |  |   | 686  
|2011                                               |  |               | 199   |                 |   | 2,399               |  |   | 253  
|2012                                               |  |               |      |                 |   | 2,363               |  |   |     
|2013                                               |  |               |      |                 |   | 1,621               |  |   |     
|2014 and thereafter                                |  |               |      |                 |   | 401                 |  |   |     
|                                                   |  |               |       |                 |   |                     |  |   |      
|Total                                              |  | $             | 2,410 |                 | $ | 11,439              |  | $ | 2,318
|                                                   |  |               |       |                 |   |                     |  |   |      

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, 2008, 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, Czech Republic, France, Germany 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.



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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 accounting principles generally accepted in the United States (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, internal-use software, 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
certain of the intangible assets include but are not limited to: 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 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.



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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.

Subscription Revenues

Our subscription 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;
| | - |  | ------------------------------------



| |  |  | amortization of fees paid for software maintenance services under software license arrangements; and
| | - |  | ----------------------------------------------------------------------------------------------------

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 longer of the contractual lives, or the expected lives of the customer relationships, which generally range from two to five years. 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.

Subscription 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.

Consulting and Other Revenues

Consulting revenues consist of fees for professional services, which relate to system implementation and integration, planning, data conversion, training
and documentation of procedures. Consulting service fees are typically billed and recognized as revenue on a time-and-materials basis. In some instances, we sell consulting services under milestone or fixed-fee contracts and, in such cases,
recognize consulting revenues on a percentage-of-completion basis. Consulting 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.

Other revenues consist of fees earned from, and allocable to, grants of licenses to use our software products. We
recognize license revenues when evidence of a license arrangement exists, we have delivered the software, the amount of the transaction is fixed or determinable, collection is probable and VSOE exists for any undelivered elements of the arrangement.
Elements included in our multiple-element software arrangements consist of various licensed software products and services such as software maintenance services, consulting services and subscription services.



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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
make certain 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 assess the likelihood that we will be able to recover our
deferred tax assets. We consider all available evidence, both positive and negative, including historical levels of income, expectations and risks associated with estimates of future taxable income and ongoing prudent and feasible tax planning
strategies in assessing the need for the valuation allowance. If recovery is not likely, we record a valuation allowance against the deferred tax assets that we estimate will not ultimately be recoverable. A release of valuation allowance as a
result of an acquisition is recorded as reduction of goodwill recognized in the acquisition rather than a tax benefit in the income statement.

As of December 31, 2008, we believe it is more likely than not that the amount of the deferred tax assets recorded on our Balance Sheet will ultimately be recovered. However, should there be a change in our ability to recover our
deferred tax assets, our tax provision would increase in the period in which we determine that recovery is not probable.



|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, which 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.



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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, 2008, 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 conduct business in certain international markets, primarily in Australia, Canada and the United Kingdom. Because
we operate in international markets, we have exposure to different economic climates, political arenas, tax systems and regulations that could affect foreign exchange rates. Changes in exchange rates between the U.S. dollar and these other
currencies will result in transaction gains or losses, which we recognize in our income statements.

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 to ensure that 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, 2008, 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
|------- | -----------------

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



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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 have reached a settlement agreement in principle. As
part of this tentative settlement, our insurance carrier has agreed to assume our entire payment obligation under the terms of the settlement. Although the parties have reached a tentative settlement agreement, there can be no guarantee that it will
be finalized or receive approval from the district court. We believe that we have meritorious defenses to these claims. If the tentative settlement is not implemented and the litigation continues against us, we would continue to defend against this
action vigorously. Any liability we incur in connection with this lawsuit could materially harm our business and financial position and, even if we defend ourselves successfully, there is a risk that managements distraction in dealing with
this lawsuit could harm our results.



|ITEM 1A. | RISK FACTORS
|-------- | ------------

We operate in a dynamic and rapidly
changing business environment that involves substantial risk and uncertainty. The following discussion addresses the risks and uncertainties that could cause, or contribute to causing, actual results to differ materially from expectations. 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.

Because we depend on sales of a relatively small number of our solutions, decreases in demand for any of those solutions could substantially harm our results of
operations.

We generated 95% of our total revenues for the three months ended December 31, 2008, from four solutions 
Concur Travel & Expense, Concur Expense, Concur ExpenseLink and Concur Cliqbook Travel. We expect these solutions to continue to constitute a similar percentage of our total revenues for the foreseeable future. Our future financial
performance and revenue growth are dependent upon continued market acceptance of these solutions. Our revenues would decline significantly if our customers reduce or cancel their subscriptions for our products due to current economic conditions or
if competing products achieve greater market acceptance, either because our competitors (some of which have substantially greater resources than we do) develop new offerings, or we do not keep up with technological advancements in services and
software platforms, delivery models or product features. There can be no assurance that our solutions will continue to maintain widespread market penetration or that we will continue to derive significant revenues from sales of these solutions in
the future.

Our future performance and revenue growth will depend on the growth of our subscription services.

We anticipate that our future financial performance and revenue growth will depend upon the growth of our subscription services. Subscription revenues
represented 97% of our total revenues for the three months ended December 31, 2008. We expect subscription revenues to represent a large majority of our total revenues for the foreseeable future and that our future financial performance and
revenue growth will depend, in large part, upon the growth in customer demand for our services. As a result, we have invested significantly in infrastructure, operations and strategic relationships to support on-demand subscription services, which
represent a significant departure from traditional software delivery strategies.



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If our subscription services business does not grow sufficiently, our cost of revenues may exceed such
revenues, which would harm our operating results. Our costs of providing subscription services are relatively fixed in the short term, so we may not be able to adjust our expenses quickly enough to offset any potential slowdown 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 subscription services
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.

Adverse economic conditions may affect our business, operating results and financial condition.

Our operations and financial performance depend on the state of the economy, which has deteriorated in recent months due to, among other things, the
effects of the credit and housing markets crises, lower economic activity and increases in the rates of unemployment, default and bankruptcy. Unfavorable economic conditions may result in lower information technology spending and deceased revenue
for us. Customers may delay, reduce, or curtail purchasing decisions due to, among others, difficulty in assessing and forecasting future business activity and impaired ability to pay for our products and services. The economic downturn may also
result in increased expenses for us 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 the current economic downturn continues
or worsens, our business, operating results and financial condition could be materially and adversely affected.

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

The market for our solutions is intensely competitive and rapidly changing, so the competitive landscape is complex. Our principal direct competition comes from independent vendors of corporate travel and/or 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; greater financial, technical, marketing and other resources; greater name recognition and a larger total number of 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.
Increased competition may 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, including American Express Travel Related Services Company, Inc., our revenues will 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 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. For example, we recently entered into a



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strategic referral relationship with American Express Travel Related Services Company, Inc., through which we expect to expand our market presence and
broaden our distribution capacity. In addition, the global economic downturn may negatively affect 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 revenues. 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.

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 will
depend on our ability to maintain and develop relationships with travel suppliers. Adverse changes in existing relationships, including any impact of 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 determine 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 for which we are responsible. 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 is able to circumvent our security measures could misappropriate proprietary or
confidential customer information or cause interruptions in our operations. We may be required to incur significant costs to protect against security breaches or to alleviate problems caused by breaches. Any general concern regarding security in the
marketplace could deter customers or prospects from using the Internet to conduct transactions that involve transmitting confidential information. Our failure to prevent security breaches, or well-publicized security breaches affecting the Internet
in general, could significantly harm our business, operating results and financial condition.

Privacy concerns are increasing, which 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 in which we operate. The United States and various other countries have imposed restrictions and requirements on the use of personal information by those collecting such information. Any new or existing privacy laws, if applicable to our
business, could impose additional costs and liability on us and could limit our use and disclosure of such information. If such privacy laws were deemed to apply to us, we may be required to change our activities and revise or eliminate our
services, which could significantly harm our business.



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

Significant portions of our operations depend 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. We back up software and
related data files regularly and store the back-up files at various off-site locations. However, there can be no assurance that our disaster preparedness will eliminate the risk of extended interruption of our operations.

We have engaged third-party hosting facility providers to provide the hosting facilities and related infrastructure for our subscription services. We do
not control the operation of these hosting facilities. Our service to customers could be interrupted in the event of the occurrence of a natural disaster, the decision by a hosting provider to close a facility without adequately notifying us,
termination of operations by a hosting provider, or other unanticipated problems. We also retain third-party telecommunications providers to provide Internet and direct telecommunications connections for our services. Any of these third-party
providers may fail to perform their obligations adequately. Any damage to, or failure of, our systems could result in interruptions in our service and/or litigation. Interruptions in our service may reduce our revenue, cause us to issue credits or
pay penalties, cause customers to terminate their subscriptions and adversely affect our renewal rates. Our business will be harmed if our customers and potential customers believe our service is unreliable.

If we acquire additional companies, products, or technologies, we expect to face risks associated with those acquisitions.

In the future, we may acquire or make investments in other companies, products, or technologies. We may not realize the anticipated benefits of those
acquisitions or investments to the extent that we anticipate, or at all. We may have to 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 improving our earnings per share, our stock price may decline. In addition, we may incur non-cash amortization charges from acquisitions, which could harm our operating
results. Any completed acquisitions would also require significant integration efforts, diverting our attention from our business operations and strategy.

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

Our international operations, which are subject to risks associated with operating outside of the United States, are becoming an increasingly important component of our business. Revenues from customers outside
the United States represented 10% of total revenues for the three months ended December 31, 2008. These international operations are subject to many difficulties and incremental costs, including:



| |  |  | costs of customizing products for foreign countries;
| | - |  | ----------------------------------------------------



| |  |  | laws and business practices favoring local competitors;
| | - |  | -------------------------------------------------------



| |  |  | uncertain regulation of electronic commerce;
| | - |  | --------------------------------------------



| |  |  | compliance with multiple, conflicting and changing governmental laws and regulations;
| | - |  | -------------------------------------------------------------------------------------



| |  |  | longer sales cycles;
| | - |  | --------------------



| |  |  | greater difficulty in collecting accounts receivable;
| | - |  | -----------------------------------------------------



| |  |  | import and export restrictions and tariffs;
| | - |  | -------------------------------------------



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



| |  |  | difficulties staffing and managing foreign operations; and
| | - |  | ----------------------------------------------------------



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| |  |  | political and economic instability.
| | - |  | -----------------------------------

Our international operations also face foreign currency-related risks. To date, most of our revenues have been denominated in United States dollars, but we believe that an increasing portion of our revenues will be denominated in foreign
currencies. The current economic downturn has 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. In addition, our ability to expand into international markets will depend on our ability to develop and support services and products that incorporate the tax laws, accounting
practices and currencies of applicable countries.

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 indirect 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.

Our quarterly revenues and
operating results may fluctuate in future periods and we may fail to meet expectations of investors and public market analysts, 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. If quarterly revenues or operating results 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;
| | - |  | ---------------------------------------



| |  |  | developments in the integration of Gelco;
| | - |  | -----------------------------------------



| |  |  | the evolving demand for our services and software;
| | - |  | --------------------------------------------------



| |  |  | 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 services and software offerings;
| | - |  | ------------------------------------------------------



| |  |  | the mix of sales channels through which our services and software are sold;
| | - |  | ---------------------------------------------------------------------------



| |  |  | costs of developing new products and enhancements;
| | - |  | --------------------------------------------------



| |  |  | our ability to adequately provide services and software; and
| | - |  | ------------------------------------------------------------



| |  |  | global political conditions.
| | - |  | ----------------------------



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Our reported financial results may be adversely affected by changes in accounting principles generally accepted in
the United States.

Accounting principles generally accepted in the U.S. are subject to interpretation and change over time. A
change in these principles or different interpretation of an existing principle could have a significant effect on our reported financial results and could affect the reporting of transactions completed before the announcement of a change. For
example, revenue recognition rules are complex and require significant interpretation by us. Changes in circumstances, interpretations, or accounting principles or guidance may require us to modify our revenue recognition policies. Such
modifications could impact the timing of revenue recognition and our operating results. See Managements Discussion And Analysis Of Financial Condition And Results Of Operations regarding our critical revenue recognition policies.

If our internal controls are not effective, there may be errors in our financial information that could require a restatement or delay our SEC
filings, and investors may lose confidence in our reported financial information, which could lead to a decline in our stock price.

At the end of 2006 we determined that we had a material weakness in our internal controls, which pertained to controls over changes in accounting principles. At the end of 2007, our auditors determined that we have adequately remediated
this weakness. However, it is possible that we may discover other significant deficiencies or material weaknesses in our internal control over financial reporting in the future. Any failure to maintain or implement required new or improved controls,
or any difficulties we encounter in their implementation, 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 our stock price.

Compliance with public company corporate governance
and reporting regulations is uncertain and expensive.

Many new laws, regulations and standards, notably those adopted by the SEC
and the NASDAQ Stock Market in connection with the Sarbanes-Oxley Act of 2002, impose significant obligations on public companies such as us Additional regulatory and compliance requirements may be adopted in the future. The new laws and regulations
have increased the scope, complexity and cost of corporate governance, reporting and disclosure practices and have created uncertainty for companies such as us. These new laws, regulations and standards are subject to varying interpretations in many
cases due to their lack of specificity and as a result, their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies, which could result in continuing uncertainty regarding compliance matters and
higher costs necessitated by ongoing revisions to disclosure and governance practices. Our compliance with these reforms and enhanced new disclosures has resulted in and will likely continue to result in general and administrative expenses and a
significant diversion of management time and attention from revenue-generating or cost-reduction activities to compliance activities. If we are not able to prepare for and implement the reforms required by new laws, regulations and standards, our
business, operating results and financial condition could be harmed. Further, these laws, regulations and standards may make it more difficult for us to attract and retain qualified members to serve on our board of directors and to attract and
retain qualified executive officers, which could harm our business.

Our lengthy sales cycle could adversely affect our financial results.

Because of the high costs involved over a significant period of time, our 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. Our sales cycle, which is the time between initial contact with a potential customer and the ultimate
sale, is often lengthy and unpredictable. As a result, we have limited ability to forecast the timing and size of specific sales. In addition, customers may delay their purchases from a given quarter to another as they elect to wait for new product
enhancements. Due to unfavorable economic conditions, 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.



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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 will depend, in part, upon the successful development, introduction and customer acceptance of new
and enhanced versions of our products and services and on our ability to integrate the products and services we acquire into our existing and future products and services. Our business could be harmed if we fail to deliver enhancements to our
current and future products and services that our customers desire, or fail to integrate acquired products and services into our existing and future products. From time to time, we experience delays in the planned release dates of enhancements to
our products and services and we have discovered errors in new releases after their introduction. New product versions or upgrades may not be released according to schedule, or may contain errors when released. 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, without limitation, 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 successfully develop new services or products, or to introduce in a timely manner and gain acceptance of such new products or services in the marketplace.

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 services and products 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 a number of factors. In particular,
the stock market as a whole recently has experienced extreme price and volume fluctuations that have 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:



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



| |  |  | the announcement of a merger or acquisition;
| | - |  | --------------------------------------------



| |  |  | variations in our actual and anticipated operating results;
| | - |  | -----------------------------------------------------------



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| |  |  | changes in our earnings estimates by analysts;
| | - |  | ----------------------------------------------



| |  |  | failure to achieve earnings expectations;
| | - |  | -----------------------------------------



| |  |  | the volatility inherent in stock prices within the emerging sector within which we conduct business; 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. 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 has been preliminarily approved by the court. However, in December 2006, the court found that nine focus cases could not be certified as class actions, but in April 2007 the court acknowledged that it 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 nine focus cases in
September 2007. In November 2007, defendants in the nine focus cases filed a motion to dismiss the complaint for failure to state a claim, which the district court denied in March 2008. All matters in this lawsuit, including any settlement proposal,
await further determination by the court. If a new complaint is filed against us, we would continue to defend ourselves vigorously. Any liability we incur in connection with this lawsuit could materially harm our business and financial position and,
even if we defend ourselves successfully, there is a risk that managements distraction in dealing with this lawsuit could harm our results.

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 Gelco. 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



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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 rights agreement, charter documents and Delaware law could discourage or prevent a change in control of Concur.

We have a shareholder rights agreement in place, under which our stockholders have special rights, in the form of additional
voting and beneficial ownership, in the event that a person or group not approved by the board of directors were to acquire, or to announce the intention to acquire 15% or more of our outstanding shares (or 15.2% with respect to American Express
Travel Related Services Company, Inc.). This plan is designed to have the effect of discouraging, delaying or rendering more difficult an acquisition of us that has not been approved by our Board of Directors.

In addition, there are provisions in our certificate of incorporation and bylaws, as well as provisions in the Delaware General Corporation Law, that 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;
| | - |  | --------------------------------------------------------



| |  |  | 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.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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|ITEM 2. | UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
|------- | -----------------------------------------------------------

Share repurchase

As of October 1, 2007, our Board of Directors had authorized a stock repurchase program
(Repurchase Program) that allowed Concur to repurchase up to 4.0 million shares of its common stock, consisting of 2.0 million shares that had been authorized in January 2005 and 2.0 million shares that had been authorized
in September 2006, both of which were scheduled to expire in January 2009. During fiscal 2008, the January 2005 authorization was exhausted. In July 2008, our Board of Directors increased the number of shares authorized to be repurchased under the
Repurchase Program by 3.0 million shares, and extended the Repurchase Program to expire in January 2011. 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. During the three months ended December 31, 2008, we repurchased and retired 2.0 million shares of our outstanding common stock under the Repurchase Program. As of
December 31, 2008, we remained authorized to repurchase up to an additional 2.1 million shares under the Repurchase Program

A
summary of our repurchase activity during the three months ended December 31, 2008, is as follows:



|                    |  |                                |  |                            |       |                                                                              |           |                                                                            |          
|------------------- |  | ------------------------------ |  | -------------------------- | ----- | ---------------------------------------------------------------------------- | --------- | -------------------------------------------------------------------------- | ---------
|Period              |  | Total Numberof SharesPurchased |  | AveragePrice PaidPer Share |       | Total Number ofShares Purchasedas part of PubliclyAnnounced Plansor
Programs |           | Maximum Numberof Shares that Mayyet be PurchasedUnder the Plans orPrograms
|October 1-31, 2008  |  | 1,450,000                      |  | $                          | 29.15 |                                                                              | 1,450,000 |                                                                            | 2,723,459
|November 1-30, 2008 |  | 575,000                        |  |                            | 21.75 |                                                                              | 575,000   |                                                                            | 2,148,459
|December 1-31, 2008 |  |                               |  |                            |      |                                                                              |          |                                                                            | 2,148,459
|                    |  |                                |  |                            |       |                                                                              |           |                                                                            |          
|Total               |  | 2,025,000                      |  | $                          | 35.07 |                                                                              | 2,025,000 |                                                                            |          
|                    |  |                                |  |                            |       |                                                                              |           |                                                                            |          



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|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 ofFirst Filing |  | ExhibitNumber |  | ProvidedHerewith
|               |  |                                                                                                                          |  |                           |  |         
|10.01          |  | 2008 Employee Stock Purchase Plan                                                                                        |  |                          |  |         |  |                    |  |              |  | X               
|               |  |                                                                                                                          |  |                           |  |         
|10.02          |  | Outside Director Compensation Policy                                                                                     |  |                          |  |         |  |                    |  |              |  | X               
|               |  |                                                                                                                          |  |                           |  |         
|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.
|- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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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 to sign on behalf of the registrant and as the principal financial officer thereof.

Dated: February 5, 2009



CONCUR TECHNOLOGIES, INC.By

/s/ John F. AdairJohn F. AdairChief Financial Officer




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