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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

For the fiscal year ended September 30, 2003

Commission file number: 0-25137

CONCUR TECHNOLOGIES, INC.

(Exact name of Registrant as specified in its charter)

6222 185th Avenue NE Redmond, Washington 98052

(Address of principal executive offices)

(425) 702-8808

(Registrant’s telephone number, including area code)

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. Yes x    No ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ¨

Indicate by check mark whether the Registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2). x

As of December 8, 2003, 32,321,003 shares of Common Stock of the Registrant were outstanding. As of March 31, 2003, the last business day of the Registrant’s most recently completed second fiscal quarter, the aggregate market value of the shares held by non-affiliates of the Registrant (based upon the closing price of the Registrant’s Common Stock on March 31, 2003 of $5.10 per share) was approximately $94.5 million.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of Registrant’s definitive Proxy Statement to be filed pursuant to Regulation 14A promulgated by the Securities and Exchange Commission under the Securities Exchange Act of 1934, which is anticipated to be filed within 120 days after the end of the Registrant’s fiscal year ended September 30, 2003, are incorporated by reference in Part III hereof.

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CONCUR TECHNOLOGIES, INC.

FORM 10-K

SEPTEMBER 30, 2003

INDEX

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PART I

ITEM 1.    BUSINESS

Special Note Regarding Forward-Looking Statements

This Annual Report on Form 10-K contains forward-looking statements regarding our plans, objectives, expectations, intentions, future financial performance, future financial condition, and other statements that are not historical facts. You can identify these statements 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. Examples of sections containing forward-looking statements include “Business” and “Management’s Discussion And Analysis Of Financial Condition And Results Of Operations.” These forward-looking statements involve many risks and uncertainties. Examples of such risks and uncertainties are described under “Factors That May Affect Financial Condition And Results Of Operations” and elsewhere in this report, as well as in our other filings with the United States Securities and Exchange Commission. You should be aware that the occurrence of any of these risks and uncertainties may cause our actual results to differ materially from those anticipated in our forward-looking statements, which could have a material adverse effect on our business, results of operations, and financial condition. All forward-looking statements included in this report are based on information available to us as of the date of this report. We assume no obligation or duty to update any such forward-looking statements.

Overview

Concur Technologies, Inc. is a leading provider of Corporate Expense Management solutions. Our solutions are designed to automate and streamline business processes, reduce operating costs, improve internal controls, and empower businesses to apply greater intelligence to their spending patterns. Our solutions include the Concur Expense^™ services and software for automating travel and entertainment expense management, Concur Payment^™ services and software for automating employee requests for vendor payments, and value-added services and software to complement our core solutions, including Concur Imaging Service^™, Concur Travel Integration^™, Concur Business Intelligence^™, Concur Total Access^™, and Concur Transaction Assessment Module^™.

Our solutions are designed to accommodate a wide range of customer business needs, technical requirements, and budget objectives for businesses worldwide. We provide our solutions as a subscription service to customers on an outsourced basis over the Internet or through a dedicated telecommunications connection. Our service offerings range from highly-configurable to standardized solutions. We also license our software to customers that want highly-configurable solutions, which are typically installed at the customers’ premises, managed by the customers, and accessed over a corporate intranet.

Since 1996, companies in over 60 countries have contracted to use our market-leading solutions. Our customers include six of the top 10 Global 100 companies, including Ford Motor Company and General Motors, and 32 of the top 100 Fortune 1000 companies, including AT&T, Citigroup, Delphi Corporation, DuPont, Pfizer, and SBC Communications. Our strategic relationships include more than 50 leading companies, such as ADP, Microsoft Business Solutions, U.S. Bank, Accenture, EDS, VISA, MasterCard, and Worldspan.

We are incorporated under the laws of the state of Delaware. Our executive offices are located at 6222 185th Avenue Northeast, Redmond, Washington 98052 and our telephone number is (425) 702-8808.

Our Internet website address is www.concur.com. We provide free access to various reports that we file with or furnish to the United States Securities and Exchange Commission through our Internet website, as soon as reasonably practicable after they have been so filed or furnished. These reports include, but are not limited to, the following: our annual report on Form 10-K, our quarterly reports on Form 10-Q, our current reports on Form 8-K, and any amendments to those reports. Information on our website does not constitute part of this Report.

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Concur, the Concur logo, Concur Expense, Concur Payment, Concur Imaging Service, Concur Travel Integration, Concur Business Intelligence, Concur Total Access, Concur Transaction Assessment Module, Concur Offline Access, and Concur Voice Access Service are trademarks or registered trademarks of Concur Technologies, Inc. Other names or brands appearing in this report may be claimed as the property of others.

The Corporate Expense Management Market

We believe a significant market opportunity exists for products and services that automate and streamline processes involved in the management of corporate expenses. We call the marketplace for these products and services the “Corporate Expense Management” market. We believe two major trends are currently driving customer demand in this market:

In today’s business climate, companies are seeking innovative ways to reduce costs and improve operational efficiency. Next to payroll, corporate travel and entertainment expense is the second-largest controllable expense within an organization, according to META Group, an information technology research and consulting firm. However, for most companies, the management of corporate expenses involves manual, paper-based processes that require action by many individuals. Such manual, paper-based processes are time-consuming, inefficient, and costly because they involve the manual re-keying of data, manual tracking of forms and approvals, and limited data capture and reporting. By automating the expense management process, companies can realize significant cost savings. According to a 2002 study conducted by Aberdeen Group, an information technology market analysis firm, companies that automate the expense management process can drive down the average cost to prepare and process an expense report from $48 per expense report to less than $18 per report, an average savings of $30 per report. One of our customers, DuPont, recently reported savings in excess of $46 million over the past four years from increased operational efficiencies, tax reclassification, and negotiated vendor rates by using our solutions.

Companies are also seeking ways to improve the reliability of their financial data and visibility into their financial processes to ensure the integrity of their financial statements, particularly since the enactment of the Sarbanes-Oxley Act of 2002 and related regulations. Under these new governmental requirements, public companies are required to establish and maintain appropriate internal controls and procedures for financial management and reporting. By automating the expense management process and enhancing the reporting of captured data, companies can significantly improve the reliability of their financial data and visibility into their financial processes to reduce the potential for fraud and improve their compliance with these new governmental requirements.

Our Corporate Expense Management Solutions

Our Corporate Expense Management solutions are designed to automate and streamline business processes, reduce operating costs, improve internal controls, and empower businesses to apply greater intelligence to their spending patterns. Our subscription service and software solutions include:

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Our solutions benefit many groups within an enterprise, including corporate management, information technology professionals, and employees. For corporate management, our solutions can reduce the amount of time required to administer, manage, and process expense reports and payment requests, thereby increasing productivity and reducing operating costs. Our solutions also enable management to access information for purposes of internal controls compliance, trend analysis, vendor negotiation, and financial planning. For information technology professionals, our solutions provide simple, Web-based functionality for the administration, management, and monitoring of our products. This facilitates the management of employee information, database maintenance, and data interoperability. For employees, our solutions provide intuitive, easy-to-use interfaces for the creation of expense reports and payment requests, which reduce the amount of time required to create these documents.

We offer our solutions to customers through our subscription services and license delivery models.

Our subscription services models offer distinct advantages over traditional software licensing. Because our services are provided on a subscription basis, customers pay for the services as they receive the benefits of using them. This reduces the financial risk associated with traditional on-premise enterprise software licensing, which often requires significant up-front and continuing costs associated with licensing, installing, and maintaining the software application in-house. In addition, because our services are provided on an outsourced basis, we, as the service provider, are responsible for procuring and managing the hardware infrastructure necessary to perform the service and for delivering reliable, secure, and scalable performance, which reduces the impact on the customer’s internal information technology organization.

Concur Expense Solutions

Our flagship Concur Expense solutions are designed to automate, simplify, reduce the costs of, and improve internal controls associated with, the travel and entertainment expense management process. Concur Expense automates each step of the expense management process, from expense report preparation and approval to business policy compliance, reimbursement, and data analysis. It provides information for managing expenses while improving internal controls and business policy compliance, reimbursement speed, and expense report accuracy. By streamlining the expense management process, our customers can achieve a substantial reduction in manual processing, increased internal controls and business policy compliance, and enhanced access to expense data to facilitate better decision making. We also provide Captura Expense subscription services and software to a number of our customers, as a result of our acquisition of Captura Software, Inc. in 2002. These Captura Expense solutions offer similar features and functionality to the Concur Expense solutions.

Report Preparation.    Our intuitive, easy-to-use interface for the creation of expense reports by end users reduces the amount of time required to create these reports, while reducing errors and improving policy

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compliance. To speed expense entry and improve accuracy, corporate charge or credit card information can be used to automatically populate the expense report with key information, including transaction date, type, vendor, location, method of payment, amount, and currency conversion. Employees then supply any additional expense-related information using the user interface. To eliminate the task of sorting receipts, Concur Expense allows users to enter data in any order. Commonly-incurred expense information is retained and can be used to help complete the next expense report. Other features include simple “checkbook-style” input screens, integrated “help” screens, the ability to create “attendees” lists, mileage reimbursement tracking, and automatic flagging of non-compliant and incomplete entries.

Report Routing and Approval.    Concur Expense allows the each customer to determine how expense reports should be processed based on customizable workflow rules. Once a report is submitted, the workflow policies defined by the company are applied, and, if manager approval is required, the designated approver receives an e-mail message containing a link to the application, where all reports awaiting approval are listed. Our solutions can be configured to route the report for approval based on cost center, dollar limit, or other criteria. Items that do not comply with corporate policy can be flagged for review, allowing approvers to reduce review time. Approvers can reject individual line items, while allowing the rest of the report to continue in the approval process. Once approved, the report is forwarded to the next phase in the process or to the customer’s accounting department, and the user is notified of the action.

Report Processing.    Concur Expense streamlines back-office processing of expense reports. Because all expense reports are prepared electronically, the processing department no longer needs to check the arithmetic of each report manually. Businesses can reduce the time spent auditing reports by choosing to audit only those reports flagged as non-compliant with corporate expense policy. Concur Expense reduces the number of status inquiries between employees and processing departments by updating the status of reports in the database, and alerting employees via e-mail to the status of their reports. It also allows significant time savings by posting expense report information to the customer’s enterprise resource planning (“ERP”) or accounting package used by our customers, eliminating the need for manual re-entry of the data. In addition, Concur Expense helps companies claim reimbursement of tax credits by tracking value added tax, goods and services tax, and other international taxes.

Data Capture and Reporting for Analysis.    Concur Expense offers business intelligence capabilities by capturing and reporting data for analysis, which gives companies greater visibility into their financial processes and allows them to make more informed business decisions, reduce the potential for fraud, and improve their compliance with governmental requirements, such as the internal controls reporting and certification requirements of the Sarbanes-Oxley Act. Concur Expense can be configured for business policy rules, which guides employees to make business-compliant decisions, flags transactions for appropriate approval, and allows for auditing when exceptions occur. Companies can use captured data to analyze trends, influence budget decisions, improve forecasting, and monitor for fraudulent activity.

Concur Payment Solutions

Concur Payment is designed to automate, simplify, and reduce the costs associated with the process of entering, approving, and managing non-purchase order vendor payments. It enables companies to streamline payment requests, facilitating flexible approval processes and automatic accounts payable system integration. The combination of increased productivity and availability of valuable data for improved cost management generates cost savings for our customers.

Streamlined Processing for Reduced Operational Costs.    Concur Payment can provide a rapid return on investment by automating the vendor payment request process from payment request preparation, account coding, and approval to payment tracking and integration with a company’s accounts payable system. It eliminates paper forms and manual processing, which, in turn, provides reductions in processing costs and the use of valuable resources.

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Automation for Increased Employee Productivity and Improved Vendor Relations.    For many companies, processing vendor payments is a paper-intensive, error-prone task. Concur Payment automates the entire process from submissions to approval. Employees and a customer’s accounts payable department are spared the administrative burden associated with employee-initiated requests and can capture the details of the payment request in advance, making information more readily available and allowing issues and questions to be resolved quickly and efficiently. By eliminating processing steps, Concur Payment also facilitates more timely payment to vendors, which enhances vendor management and relationships. Current information about each vendor payment is readily available to the employee making the request, as well as the accounts payable department, which facilitates ongoing tracking of the requests and prompt answers to vendor inquiries on payment status.

Intuitive Interface for an Improved User Experience.    An intuitive, easy-to-use interface for the payment request process reduces the amount of time required to create payment requests. Users are prompted for all necessary information, such as vendor data, account codes, special handling instructions, and payment details. The payment request is then electronically routed for approval and, once approved, it is automatically sent to the financial system for payment. Users have access to instant online status updates.

Improved Cost Control with Better Business Intelligence.    With access to comprehensive payment details, companies have the ability to analyze trends, influence budget decisions, and improve forecasting. The availability of detailed payment data provides the accounts payable department with the ability to better manage vendors, which can result in cost savings. Our solutions provide the insight and technology to help companies leverage the data they collect, allowing them to make informed, cost-saving decisions within the company.

Value-Added Solutions

We provide value-added services and software that are fully-integrated with our Concur Expense and Concur Payment solutions. Our primary value-added solutions are described below.

Concur Imaging Service.    The Concur Imaging Service provides companies with the ability to capture, store, archive and retrieve employee receipts and vendor invoices electronically. This enables our customers using our Concur Expense solutions to reduce the costs of handling paper receipts and invoices. Users can simply fax receipts and invoices to a designated Concur Imaging Service telephone number, and the user, approval managers, and accounting staff can then view electronic copies of the receipts and invoices online through Concur Expense. There is no postage, no need to store paper receipts and invoices in a central location, and no need to physically handle the enormous amounts of paper associated with expense reporting and invoice processing. Receipts or invoices and the associated supporting documentation are available online throughout the approval, payment, and audit processes.

Concur Travel Integration.    Concur Travel Integration provides customers an “end-to-end” travel procurement and expense management solution by integrating Concur Expense with the travel planning process. Users can access their corporate travel-booking tool to plan a trip. The itinerary is downloaded to Concur Expense and can be used to create a pre-trip authorization request, or to attach a printable version of the itinerary to the expense report. No re-keying is necessary. The user can review this information, add any additional expenses, and submit the expense report for approval. The captured itinerary data is then integrated for enhanced business intelligence reporting.

Concur Business Intelligence.    Through our strategic relationship with Cognos Inc., a leading global provider of business intelligence solutions, we offer Concur Business Intelligence to give customers enhanced reporting capabilities with respect to the data gathered by Concur Expense, providing customers an accessible means of analyzing expense data and enabling them to save money by managing spending more effectively and to transform captured data into valuable information that can be used for effective decision-making.

Concur Total Access.    Concur Total Access enables users to enter expense report data when disconnected from the Internet. Concur Total Access includes Concur Offline Access^™, which is a fully-functioning client

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software application that can be installed on a user’s laptop computer, allows the user to create and manage expense reports on the laptop when disconnected from the Internet. Upon reconnection, Concur Offline Access synchronizes with the customer’s Concur Expense solution, uploading new expense transactions that were created offline. Concur Total Access also includes Concur Access for Palm^®, which allows users to enter expense transactions using handheld computers, such as a personal digital assistant, or PDA, device running the Palm OS^® operating system. These transactions are loaded into Concur Expense when the user synchronizes the PDA device, and the transactions can then be incorporated into an expense report and routed for approval and payment. Concur Total Access also includes the Concur Voice Access Service^™, which uses voice recognition technology to allow users to “call in” their expenses transactions while they are traveling.

Concur Transaction Assessment Module.    The Concur Transaction Assessment Module provides fraud detection capability to customers of our Concur Expense solutions, adding an additional layer of oversight and intelligence to the expense reporting process. Through our strategic relationship with ACL Services, a global provider of audit and data analysis technology, we have introduced the Concur Transaction Assessment Module to help customers reduce the potential for expense-related fraud and comply with the internal controls reporting and certification requirements of the Sarbanes-Oxley Act. The solution is comprised of a set of tests that recognize patterns in the data, including excessive and duplicate claims and threshold amounts, providing administrators with the ability to review cumulative expense information to identify potential fraudulent activity and deter unauthorized use.

Professional Services

Our professional services organization offers consulting, customer support, and training services in connection with our Corporate Expense Management solutions.

Consulting.    We offer consulting services in connection with implementation of our solutions to assist customers in maximizing their return on investment in our solutions. Our consulting staff meets with customers prior to implementation to review the customers’ existing business processes and information technology infrastructure, and to provide advice on ways to improve these processes, leveraging industry best practices and our experience in the Corporate Expense Management market. Our consultants also install, configure, and test our applications and integrate them with our customers’ existing systems, as well as help customers develop a strategy for enterprise-wide deployment of our applications. After deployment, our consultants work with customers to identify additional opportunities to further improve their return on investment.

Customer Support.    We provide customer support as well as new releases and updates of our services and software through our CustomerOne Services support program. Under this program, we provide telephone and Internet support, including online case entry and review, access to technical information documents, and technical tips. We also provide new releases and updates of our services and software for customers who subscribe to our CustomerOne Services program. Our CustomerOne Services program is typically included as part of our subscription service offerings. For our license offerings, most customers subscribe for the first year of the CustomerOne Services program at the time they license an application; thereafter, support is typically renewable on an annual basis.

Training Services.    We offer a variety of training programs for our services and software. These programs are tailored to particular user groups, such as administrators, help desk personnel, or trainers. Training can be either Web-based or offered onsite for the customer. Additionally, training simulations can be designed to meet the specific needs of each customer. All training programs are designed to assist our customers with managing the transition to our products and services and minimizing help desk calls.

Customers

Since 1996, companies in over 60 countries have contracted to use our market-leading solutions. Our customers include six of the top 10 Global 100 companies, including Ford Motor Company and General Motors,

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and 32 of the top 100 Fortune 1000 companies, including AT&T, Citigroup, Delphi Corporation, DuPont, Pfizer, and SBC Communications. No customer accounted for 10% or more of our total revenues in fiscal 2003, 2002, or 2001.

Sales and Marketing

We market our solutions worldwide to companies ranging from large-market companies with 2,000 or more employees to middle-market companies with less than 2,000 employees. In the large market, we sell our solutions primarily through our direct sales organization, with field sales professionals located in metropolitan areas throughout the United States, the United Kingdom, and Australia. Field-based sales engineers provide technical sales support. Direct telemarketing representatives based at our headquarters in Redmond, Washington support the field sales force through lead-generation and lead-tracking activities. We also have a number of marketing referral alliances that provide our sales force with prospects. Our sales efforts in the large market involve contact with multiple decision makers, frequently including the prospective customer’s chief financial officer, vice president of finance, controller, and corporate travel manager. While the average large-market sales cycle varies substantially, for initial sales it has generally ranged from six to twelve months.

In the middle market, we sell our solutions through both our direct sales organization and strategic relationships with third parties. Our middle market sales efforts frequently include contact with the prospective customer’s chief financial officer, vice president of finance, or controller. While the average sales cycle varies substantially from customer to customer, for initial sales it has generally ranged from two to six months. We have several strategic relationships focused primarily on middle market sales opportunities. In 2000, we entered into a strategic relationship with ADP, Inc., a subsidiary of Automatic Data Processing, Inc., a global payroll solutions and computing services provider. Sales through our ADP channel in fiscal 2003 represented more than 75% of our overall new unit sales of subscription services in the middle market. In 2001, we entered into a strategic relationship with Microsoft Business Solutions, a leading provider of business management solutions, under which Microsoft Business Solutions is authorized to resell our subscription services in the middle market through its global value-added reseller network. More recently, in 2003, we entered into a strategic relationship with U.S. Bank, a leading provider of corporate banking service and the leading issuer of Visa corporate card products, under which U.S. Bank is authorized to resell our subscription services in the middle market.

Our marketing programs are designed to position and promote the Concur brands widely in our target markets and to extend the product leadership position of our subscription services and software. These efforts are specifically targeted to accounting, finance, information technology, and travel executives.

We engage in a variety of marketing activities, including e-mail and direct mail campaigns, co-marketing strategies designed to leverage existing strategic relationships, Web-site marketing, seminars and “webinars”, public relations campaigns, speaking engagements and forums, and industry analyst visibility initiatives. We actively participate and sponsor finance and shared-service conferences and we demonstrate and promote our products at trade shows targeted to accounting, finance, information technology, and travel executives.

We actively communicate with our existing customers in order to enhance customer satisfaction, gain input for our future product strategy, and promote the adoption of additional services and software. In addition to our standard newsletter communication and conference calls, we also sponsor regional user groups, an advisory board and an international user conference. Through these forums, as well as frequent one-on-one communications, we are able to stay abreast of emerging trends and provide information to customers to help them maximize their return on investment from our solutions.

Product Development

We believe we pioneered the development of automated subscription services and software for the Corporate Expense Management market and are a leading provider in that market today. We believe that we were

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one of the first vendors to introduce a travel and entertainment expense reporting software application, and one of the first vendors to deliver Corporate Expense Management solutions under a subscription services model.

Our software engineering organization is responsible for developing new services and software as well as enhancing our existing services and software. We believe that a technically skilled, quality-oriented, and highly productive software engineering organization will be important for the success of new product offerings. As of September 30, 2003, we employed 83 people in research and development. Our software engineering team is organized into six disciplines: development, quality assurance, documentation, product design, configuration management, and program management. Members from each of these disciplines, along with a product manager from our marketing department, form separate product teams that work closely with sales, marketing, professional services, customers, and prospects to further understand market needs and requirements. When required, we also use independent development firms or contractors to expand the capacity and technical expertise of our internal research and development team. Additionally, we may license third-party technology that is incorporated into our products. We have a well-defined software development methodology that we believe allows us to deliver products that satisfy business needs and meet commercial quality expectations.

Competition

The market for our subscription services and software solutions is highly competitive and subject to rapid change. The direct competition we face depends on the market segment focus and delivery model capabilities of our competitors. 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. Our principal direct competition comes from independent vendors of Corporate Expense Management services and software, and from financial institutions and providers of ERP software that sell, along with their products and services, offerings similar to ours. These competitors include, but are not limited to, American Express, Bank of America, Geac Computer Corporation, Gelco Information Systems, IBM, JD Edwards, Necho Systems Corporation, Oracle Corporation, Outtask, Inc., PeopleSoft, Inc., SAP AG, and Wells Fargo Bank. We also expect to face competition from new entrants including financial institutions and ERP vendors that do not already market products similar to ours.

We believe that the principal competitive factors considered in selecting Corporate Expense Management services and software are functionality, interoperability with existing information technology infrastructure, ability to deliver solutions on an outsourced basis, price, and an installed base of referenceable customers. With respect to functionality, we believe that we offer products with generally more features than other competing products, and that we have often been the first to offer many new features. Our products were designed and built to interoperate with existing information technology systems and to operate as a service on an outsourced basis. We believe that a significant number of companies are seeking to reduce their operating costs by outsourcing their back-office processes, such as the management of corporate expenses. We have a well-established and scalable hosting infrastructure that allows us to provide cost-competitive solutions to our customers on an outsourced basis. We believe our outsourced subscription services are cost-competitive alternatives to the customer-hosted and -managed software products provided by many of our competitors. Overall, we believe that our products are competitively priced when compared to our competitors’ products, and that our installed base of customers for expense management solutions is larger than that of our primary competitors.

Although we believe we offer highly competitive services and software, many of our competitors have longer operating histories, greater financial, technical, marketing, and other resources, greater name recognition, and a larger number of total customers for their products and services. Moreover, a number of our competitors, particularly major financial institutions and ERP vendors, have well-established relationships with our current and potential customers as well as with systems integrators and other vendors and service providers. In addition, these competitors may be able to respond more quickly to new or emerging technologies and changes in customer requirements, or to devote greater resources to the development, promotion, and sale of their products, than we can. It is also possible that new competitors or alliances among competitors or other third parties may

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emerge and rapidly acquire market share. Increased competition may result in price reductions, reduced gross margins, and change in market share, any of which could harm our business.

Intellectual Property Rights

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 copyright, trade secret, and trademark laws, confidentiality procedures, contractual provisions, and other similar measures to protect our proprietary information. Currently, we do not own any issued patents or have any patent applications pending. As part of our efforts to protect our proprietary information, we enter into license agreements with our customers and nondisclosure agreements with certain of our employees, consultants, corporate partners, customers, and prospective customers. These agreements generally contain restrictions on disclosure, use, and transfer of our proprietary information. We also employ various physical security measures to protect our software source codes, technology, and other proprietary information.

Despite our efforts to protect our proprietary rights, unauthorized parties may attempt to copy or otherwise obtain and use our products or technology that we consider proprietary, and third parties may attempt to develop similar technology independently. In particular, 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, effective protection of intellectual property rights may be unavailable or limited in certain countries. The laws of some foreign countries do not protect our proprietary rights to the same extent as the laws in the United States.

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 prove adequate to secure all necessary intellectual property rights or to protect us from claims by third parties, either domestically or in foreign countries. There also can be no assurance that any of our copyrights or trademarks will not be challenged and invalidated.

While we are not aware that our products, trademarks, copyrights, or other proprietary rights infringe the proprietary rights of third parties, third parties may assert infringement claims against us in the future with respect to current or future products. Further, we expect that providers of expense management services and software may become subject to infringement claims as the number of products and competitors in our industry segment grows and the functionality of products in different industry segments overlaps. From time to time, we hire employees and retain consultants who have worked for independent software vendors or other companies developing products similar to those offered by us. Such vendors or companies may claim that our products are based on their products and that we have misappropriated their intellectual property. Any such claims, with or without merit, could cause a significant diversion of management attention, result in costly and protracted litigation, cause product shipment delays or require us to enter into royalty or licensing agreements with third parties. Such royalty or licensing agreements, if required, may not be available on terms acceptable to us or at all, which would have a material adverse effect upon our business and financial position.

Employees

As of September 30, 2003, we had approximately 313 full-time employees. No employees are known by us to be represented by a collective bargaining agreement, and we have never experienced a strike or similar work stoppage. We consider our relations with our employees to be good.

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ITEM 2.    PROPERTIES

Our principal administrative, sales, marketing, and research and development facility is located in Redmond, Washington and consists of approximately 81,000 square feet of office space held under leases that expire on May 31, 2005. As of September 30, 2003, we also leased sales offices in Atlanta, Chicago, Dallas, London, Miami, New York, Phoenix, and Sydney.

ITEM 3.    LEGAL PROCEEDINGS

In July 2001, we and several of our current and former officers were named as defendants in two securities class-action lawsuits filed in the United States District Court for the Southern District of New York. In April 2002, these lawsuits were consolidated. The consolidated complaint generally alleges claims against us, several of our current and former executives, and the underwriters of our initial public offering in December 1998, based on alleged errors and omissions concerning underwriting terms in the prospectus for our initial public offering. The plaintiffs in this lawsuit seek damages in unspecified amounts, which, if awarded, could be substantial. This lawsuit is one of 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 October 2002, the court dismissed the individual defendants from the consolidated lawsuit, without prejudice, pursuant to a stipulated agreement between the parties. In February 2003, the presiding judge denied a motion to dismiss all claims. In July 2003, we decided to participate in a proposed settlement being 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 have decided to participate in the proposed settlement to avoid the cost and distraction of continued litigation. We do not believe that the proposed settlement will have any material adverse effect on our business, financial condition, or results of operations. The proposed settlement is expected to be funded by a group of insurers on behalf of the issuer defendants. The proposed settlement agreement would dispose of all remaining claims against us and the individual defendants, without any admission of wrongdoing by us or the individual defendants. The proposed settlement is subject to final approval by the parties and the court. There is no guarantee that the parties or the court will approve the proposed settlement. Should the parties and the court fail to approve the proposed settlement, we would continue to defend ourselves vigorously.

ITEM 4.    SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matter was submitted to a vote of our stockholders, through the solicitation of proxies or otherwise, during the fourth quarter of fiscal 2003.

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PART II

ITEM 5.    MARKET FOR REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

Market Information

Our common stock is traded on the NASDAQ National Market under the symbol “CNQR.” The following table sets forth the range of the high and low closing sales prices by quarter for fiscal 2002 and 2003, as reported on the NASDAQ National Market:

On September 30, 2003, there were approximately 400 stockholders of record of our common stock.

Dividends

We have never paid cash dividends on our common stock. We currently intend to retain earnings for use in our business and, therefore, do not anticipate paying any cash dividends on our common stock in fiscal 2004.

Recent Sales of Unregistered Securities

None.

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ITEM 6.    SELECTED CONSOLIDATED FINANCIAL DATA

The following selected consolidated financial data should be read in conjunction with our Consolidated Financial Statements and Notes thereto and “Management’s Discussion And Analysis Of Financial Condition And Results Of Operations” that are included with this report.

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ITEM 7.    MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis provides information which 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 our Consolidated Financial Statements and Notes thereto that are included with this report.

Overview

Concur Technologies, Inc. is a leading provider of Corporate Expense Management solutions. Our solutions are designed to automate and streamline business processes, reduce operating costs, improve internal controls, and empower businesses to apply greater intelligence to their spending patterns. Our subscription service and software solutions include:

Our solutions are designed to accommodate a wide range of customer business needs, technical requirements, and budget objectives for businesses worldwide through our flexible subscription services and license delivery models.

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We were incorporated in 1993 and began selling travel and entertainment expense management software in fiscal 1995. In fiscal 1996, we released a client-server based edition of Concur Expense, and in fiscal 1998, we released a Web-based version of Concur Expense. This product has accounted for a majority of Concur Expense license revenues in every year since its release.

In October 1999, we began offering Concur Expense as a subscription service, principally to mid-size companies that wanted a standardized solution provided on an outsourced basis over the Internet. In December 1999, we introduced additional outsourced subscription services, for large companies that wanted a highly configurable solution provided on an outsourced basis. Today, we refer to these outsourced subscription services as the Concur Expense Service. As a complement to our Concur Expense solutions, we began offering our Concur Payment solutions in May 2000 to accommodate the demand for the management of employee requests for vendor payments.

In March 2001, we sold our Concur Human Resources product line to MBH Solutions, Inc. as part of our efforts to focus more on our Concur Expense products and services. The transaction consisted of the sale of certain assets to, and assumption of certain obligations by, MBH Solutions, Inc. We added Concur Human Resources to our product offerings through our acquisition of Seeker Software, Inc. in June 1999.

In July 2002, we completed our acquisition of Captura Software, Inc. (“Captura”). Prior to the acquisition, Captura was a privately-held corporation that provided hosted Corporate Expense Management solutions under outsourced subscription services and license models. Following the acquisition, Captura’s operations were consolidated into our operations at our headquarters in Redmond, Washington.

Critical Accounting Policies and Estimates

Our discussion and analysis of financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. 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. “Critical accounting policies and estimates” are defined as those most important to the financial statement presentation and that require the most difficult, subjective, or complex judgments. We base our estimates on historical experience and on various other factors that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Under different assumptions and/or conditions, actual results of operations may materially differ. We periodically re-evaluate our critical accounting policies and estimates, including those related to revenue recognition, provision for doubtful accounts and sales returns, expected lives of customer relationships, fair value of acquired intangible assets and goodwill, useful lives of intangible assets and property and equipment, provision for income taxes, valuation of deferred tax assets and liabilities, and contingencies and litigation reserves. We presently believe the following critical accounting policies involve the most significant judgments and estimates used in the preparation of our consolidated financial statements.

Revenue Recognition.    We recognize revenue in accordance with accounting standards for software and service companies including American Institute of Certified Public Accountants (“AICPA”) Statement of Position (“SOP”) 97-2, Software Revenue Recognition (“SOP 97-2”), as amended by SOP 98-9, the consensus reached in Emerging Issues Task Force Issue (“EITF”) No. 00-3, Application of AICPA Statement of Position 97-2 to Arrangements That Include the Right to Use Software Stored on Another Entity’s Hardware (“EITF 00-3”), the consensus reached in EITF Issue No. 00-21, Revenue Arrangements with Multiple Deliverables (“EITF 00-21”), the United States Securities Exchange Commission (“SEC”) Staff Accounting Bulletin 101, Revenue Recognition in Financial Statements (“SAB 101”), SOP 81-1, Accounting for Performance of Construction-Type and Certain Production-Type Contracts, and related interpretations including AICPA Technical Practice Aids. We also utilize interpretative guidance from regulatory and accounting bodies which include, but are not limited to, the SEC, the AICPA, the Financial Accounting Standards Board (“FASB”), and various professional organizations.

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We derive our revenues from the delivery of subscription services, software maintenance services, consulting and training services, and the sale of licensed software.

Subscription revenues consist of monthly fees paid for services provided under our subscription delivery models, together with related value-added services and the amortization of one-time set-up fees in connection with those services. Monthly subscription fees are recognized as the service is provided to the customer. In arrangements that include only subscription services, set-up fees are recorded to deferred revenue and recognized over the subscription service period. The associated direct and incremental costs, such as labor and commissions, are deferred and expensed over the subscription service period. In certain subscription offerings, the subscription service period is open-ended and, therefore, the date upon which the monthly fees will end is undetermined. For these offerings, the subscription set-up fees, as well as the associated direct and incremental costs, are typically deferred and recognized over the expected lives of the customer relationships, which are typically two to five years, based on the particular service offering and our experience in delivering that offering. We continue to evaluate and adjust the length of these amortization periods as we gain more experience with customer contract renewals and contract cancellations. Based on that experience, it is possible that, in the future, the estimates of expected customer lives may change and, in such event, the period over which such subscription set-up fees are amortized will be adjusted. Any such change in estimated expected customer lives will affect our future results of operations. Additionally, subscription revenues are adjusted for estimates in sales allowances on subscription revenues, which are based on our historical collection experience.

Service revenues consist of fees for software maintenance and consulting services. Software maintenance services relate to software license arrangements, and 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 deferred and recognized ratably over the respective maintenance terms, which are typically one year. Consulting services consist of system implementation and integration, planning, data conversion, training, and documentation of procedures. Consulting service fees are primarily billed and recognized as revenue on a time-and-materials basis. In some instances, we sell our consulting services under milestone or fixed-fee contracts, and in such cases, consulting revenues are recognized on a percentage-of-completion basis. Additionally, service revenues are adjusted for estimates in sales allowances on service revenues, which are based on the respective historical collection experience.

In service arrangements that include both consulting and subscription services, but not the license of software, we apply the provisions of a new accounting pronouncement, which applies to revenue arrangements entered into in fiscal periods beginning after June 15, 2003. This new accounting pronouncement provides guidance on how to account for arrangements that involve the delivery or performance of multiple products, services and/or rights to use assets. This pronouncement addresses how contract consideration should be measured and allocated to the separate deliverables in an arrangement. Under this new guidance, the consulting services are recognized as performed if they qualify as a separate unit of accounting within the arrangement. The consulting services qualify as a separate unit of accounting if they have value to the customer on a stand-alone basis, there is objective and reliable evidence of the fair value of the subscription services, and delivery or performance of the subscription services is considered probable and substantially in our control. We have determined that, in these arrangements, the consulting services qualify as a separate unit of accounting and, accordingly, the consulting revenue is recognized as the services are performed. Our judgment as to whether the consulting services qualify as a separate unit of accounting may materially affect the timing of our revenue recognition and our results of operations. Prior to the adoption of this new accounting pronouncement, the consulting revenue in these arrangements was typically deferred and recognized over the expected lives of the customer relationships.

License revenues consist of all fees earned from granting customers licenses to use our software products. We recognize license revenues when we obtain a contract signed by the customer, we have delivered the software, the amount of the transaction is fixed or determinable, collection is probable, and vendor-specific objective evidence of fair value exists for any undelivered element of the arrangement. Elements are deliverables

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such as products and services contractually provided for in an 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. 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 evaluated as a single contractual arrangement.

In software license arrangements that include rights to multiple elements, we allocate the total arrangement fee among each of the elements using the residual method, under which revenue is allocated to undelivered elements based on vendor-specific objective evidence of their fair value and the residual amounts of revenue are allocated to the delivered elements. Vendor-specific objective evidence is based on the price charged when an element is sold separately or, in the case of an element not yet sold separately, the price established by authorized management, if it is probable that the price, once established, will not change prior to separate market introduction. We are required to exercise judgment in deciding how to interpret the evidence of fair value to determine the arrangement consideration to allocate to a given element, and in determining whether an established price is likely to change prior to separate market introduction. These judgments may materially affect the timing of our revenue recognition and results of operations.

In software license arrangements where we also provide consulting services, software license revenues are generally recognized upon delivery of the software, provided that the above criteria are met, payment of the license fees is not dependent upon the performance of the consulting services, and the consulting services are not essential to the functionality of the licensed software. If we determine that the consulting services are essential to the functionality of the licensed software, or payment of the software license fees is dependent upon the performance of the consulting services, both the software license and consulting fees are recognized under the percentage of completion method of contract accounting. In our judgment, our consulting services are typically not considered essential to the functionality of the software and, therefore, revenues related to software licenses are typically recognized upon delivery of the software and revenues related to consulting services are recognized as the services are performed. If collection is not considered probable, revenue is recognized when the fees are collected. If the fees are not fixed or determinable, revenue is recognized as payments become due from the customer. Accordingly, our judgments as to whether consulting services should be considered essential to the functionality of the licensed software, and 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, revenues are recognized upon the earlier of satisfaction of the acceptance/performance criteria or the expiration of the period, if applicable.

In software license arrangements where we also provide subscription hosting services for licensed software products, a software element is only present in a subscription hosting arrangement if the customer has the contractual right to take possession of the software at any time during the hosting period without significant penalty, and it is feasible for the customer to either run the software on its own hardware or contract with another vendor to host the software. If the arrangement meets these criteria, as well as the other software license criteria mentioned above, then the license revenue is recognized when the software is delivered, and the subscription revenues are recognized as delivered. The subscription set-up fees therefore are recognized in full upon commencement of the subscription services. The associated direct and incremental set-up costs, such as labor and commissions, are matched with the related subscription revenues, and therefore, are treated as deferred costs and then fully expensed upon commencement of the subscription services. Subscription usage fees are recognized monthly as the service is provided to the customer. If the arrangement does not meet the criteria above, we combine the license fees with the total subscription fees and recognize them over the subscription service period. Our judgment as to whether we meet the criteria above could have a material affect on the timing of our revenue recognition and results of operations.

Portions of our revenues are generated from sales made through our reseller partners. Where we assume a majority of the business risks associated with performance of the contractual obligations, we record the associated revenues on a gross basis, with amounts paid to our reseller partners being recognized as cost of sales.

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Our assumption of such business risks is evidenced when, among other things, we take responsibility for delivery of the product or service, we establish pricing of the arrangement, and we are the primary obligor in the arrangement. Where our reseller partner assumes the majority of the business risks associated with the performance of the contractual obligations, we record associated revenues net of the amounts paid to our reseller partner. Therefore, 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 revenues.

Our software license contracts typically include an industry-standard software performance warranty provision. We account for potential warranty claims in accordance with the guidance prescribed by the FASB in its Statement of Financial Accounting Standards (“SFAS”) No. 5, Accounting for Contingencies. Historically, we have experienced minimal warranty claims. Our ability to estimate the quantity and amount of any potential future software warranty claims requires judgment, and could have a material affect on our results of operations and financial position. Our standard software license contracts typically do not include contingencies such as rights of return or conditions of acceptance.

Recently Issued Accounting Pronouncements.    In July 2003, the EITF reached a consensus on Issue No. 03-5, Applicability of AICPA Statement of Position 97-2 to Non-Software Deliverables in an Arrangement Containing More-Than-Incidental Software (“EITF 03-5”). On August 13, 2003, the FASB ratified the EITF’s consensus. This issue addresses whether non-software deliverables (elements) included in an arrangement that contains software that is more than incidental to the products or services as a whole are included within the scope of SOP 97-2. Software-related elements include software products and services such as those listed in SOP 97-2, as well as any non-software deliverable(s) for which a software deliverable is essential to its functionality. If the software element that is more than incidental to the products or services as a whole is not essential to the functionality of any of the unrelated elements, the unrelated elements would not be considered software-related, and therefore, would be excluded from the scope of SOP 97-2. In interpreting EITF 03-5, we have determined that, in software arrangements that also include various subscription services, the software element is not essential to the functionality of the subscription services. Currently, in accordance with SOP 97-2, in those software arrangements that also include various subscription services, we defer and then recognize the subscription set-up fees in full upon commencement of the subscription services. The associated direct and incremental costs, such as labor and commissions, are matched with the related subscription revenues, and therefore, are treated as deferred costs and then fully expensed upon commencement of the subscription services. When EITF 03-5 is adopted, because we have determined that the software element is not essential to the functionality of the subscription services, the subscription set-up fees as well as the associated direct and incremental costs, such as labor and commissions, will be matched with the subscription monthly revenue and recognized over the subscription service period. The provisions of EITF 03-5 will become effective for us on October 1, 2003. We are currently evaluating the impact that the application of this consensus will have on our consolidated financial position and results of operations.

Allowances for Sales and Doubtful Accounts.    We record an estimated provision for sales allowances to subscription and service 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 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 current economic trends. If the data used to estimate the allowance provided for doubtful accounts does not adequately reflect the future ability to collect outstanding receivables, additional provisions for doubtful accounts may be needed and future results of operations could be materially affected.

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Business Combinations and Valuation of Intangible Assets.    We account for business combinations in accordance with SFAS No. 141, Business Combinations (“SFAS 141”) and the related acquired intangible assets in accordance with SFAS No. 142, Goodwill and Other Intangible Assets (“SFAS 142”). In accordance with SFAS 141, the cost of the acquired company is allocated to the identifiable tangible and intangible assets and liabilities acquired, and any remaining amount is classified as goodwill. Certain intangible assets, such as the acquired customer base, are amortized over their expected economic lives in proportion to their expected future cash flows, while in-process research and development costs, if any, are expensed at the acquisition date. In accordance with SFAS 142, goodwill is not amortized, but instead goodwill is tested for impairment at least annually and, if impaired, the value of goodwill is adjusted accordingly. Our future operating performance will be impacted by amortization of intangible assets and potential impairment charges related to goodwill. The allocation of the purchase price of the acquired company to intangible assets and goodwill requires management to make significant estimates and assumptions, including estimates of future cash flows expected to be generated by the acquired assets and the appropriate discount rate for these cash flows. Should different conditions prevail, material write-downs of intangible assets and/or goodwill could occur.

Impairment of Goodwill and Certain Other Long-Lived Assets.    Under SFAS 142, we are required to test goodwill for impairment at the reporting unit level (operating segment or one level below an operating segment) on an annual basis and between annual tests in certain circumstances. We have determined that we have only one reporting unit. Goodwill is tested for impairment annually in a two-step process. First, we determine if the carrying value of the reporting unit exceeds its fair value, which would indicate that goodwill may be impaired. If we determine that goodwill may be impaired, we compare the implied fair value of the goodwill to its carrying amount to determine if there is an impairment loss. We performed our initial test for impairment as of October 1, 2002, the date of adoption of SFAS 142, and the required annual test, in March 2003, and determined in each case that goodwill was not impaired. Application of the goodwill impairment test requires judgment, including the identification of reporting units, assigning assets and liabilities to reporting units, assigning goodwill to reporting units, and determining the fair value of the goodwill assigned to each reporting unit. Significant judgments that are required to estimate the fair value of reporting units include estimating future cash flows, determining appropriate discount rates, and other assumptions. Changes in these estimates and assumptions could materially affect the determination of fair value for each reporting unit and the impairment of goodwill, if any.

Stock-Based Compensation.    We have elected to continue to account for our employee stock-based compensation plans using the intrinsic value method prescribed by APB No. 25, Accounting for Stock Issued to Employees, and related interpretations, as opposed to the fair value method allowed by SFAS No. 123, Accounting for Stock-Based Compensation. Accordingly, no stock-based employee compensation cost has been reflected in our net income (loss) for any of the fiscal years presented, as all options granted under these plans had an exercise price equal to the fair market value of the underlying common stock on the date of grant.

Income Taxes.    We are required to estimate our income taxes in each of the jurisdictions in which we operate. This involves estimating our current tax liabilities in each jurisdiction, including the impact, if any, of additional taxes resulting from tax examinations as well as making judgments regarding our ability to realize our deferred tax assets. Such judgments can involve complex issues and may require an extended period to resolve. In the event we determine that we will not be able to realize all or part of our net deferred tax assets, an adjustment would be made in the period such determination is made. We recorded no income tax expense in any of the periods presented, as we have experienced significant operating losses to date, as well as assumed significant net operating loss carryforwards from acquisitions. If utilized, the benefit of our total net operating loss carryforwards may be applied, in part, to reduce the recorded value of goodwill, as well as to reduce future tax expense. Since our utilization of these deferred tax assets is dependent on future profits, which are not assured, we have recorded a valuation allowance equal to the net deferred tax assets. These carryforwards would also be subject to limitations, as prescribed by applicable tax laws. As a result of prior equity financings and the equity issued in conjunction with certain acquisitions, we have incurred ownership changes, as defined by applicable tax laws. Accordingly, our use of the acquired net operating loss carryforwards may be limited. Further, to the extent that any single year loss is not utilized to the full amount of the limitation, such unused loss is carried over to subsequent years until the earlier of its utilization or the expiration of the relevant carryforward period.

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Results of Operations

Revenues

We derive our revenues from the delivery of subscription services, software maintenance services, consulting and training services, and licensed software.

Subscription Revenues.    Subscription revenues consist of monthly fees paid for subscription services and the amortization of set-up fees in connection with those services. Large-market subscription revenues contributed approximately 75% and 45% of the absolute dollar increase in fiscal 2003 and in fiscal 2002, respectively. The acquisition of Captura in July 2002 accounted for the majority of the fiscal 2003 increase in large-market subscription revenues. In fiscal 2002, the increase was primarily a result of the increasing size of the customer base contributing to our recurring revenue stream. Middle-market subscription services contributed approximately 25% and 55% of the absolute dollar increase in subscription revenues in fiscal 2003 and in fiscal 2002, respectively. These increases were primarily attributable to continued growth in our customer base for middle-market subscription services, which was largely driven by growth of our indirect sales channels as our relationships with strategic partners became more established.

We have a strategic relationship with ADP, under which ADP markets our middle-market subscription services to its existing customers and to potential new customers. Sales through this channel commenced in the fourth quarter of fiscal 2000. In May 2002, we amended our agreement with ADP to transfer to ADP the majority of the business risks associated with any new customers signed through this channel. As a result, we are recording subscription revenues from new customer contracts after May 2002 on a net basis. Contracts sold prior to this amendment are accounted for on a gross basis. This change did not have a material effect on our results of operations. More than 75% of new customer contracts for middle-market subscription services during fiscal 2002 and 2003 occurred through ADP. We expect subscription revenues to continue to grow in fiscal 2004 as a result of the growing demand for subscription services delivered to the large market, continued development of our existing strategic relationships, and the addition of new strategic relationships.

Service Revenues.    Service revenues consist of fees for software maintenance and consulting services. Maintenance revenues are affected by the number of new license customers added as well as the retention rate for annual maintenance contracts of existing customers. Consulting revenues are affected by implementation of our solutions for new customers and implementation of upgrades and enhancements to these solutions for existing customers. The modest increase in service revenues in fiscal 2003 reflects an increase in maintenance revenues of approximately $2.2 million, partially offset by a decrease in consulting revenues of approximately $0.7 million. The modest increase in service revenues in fiscal 2002 was almost entirely attributed to increased maintenance revenues. The growth in maintenance revenues in these periods reflects continued growth in our overall installed customer base compared to the corresponding prior year periods, as well as high retention rates of our existing customers. The modest decrease in consulting revenues in fiscal 2003 was due in part to reduced demand for consulting services, which stemmed from a decrease in new license sales in the period. We expect future service revenues to fluctuate based on new sales of our products and services and the related consulting and maintenance services provided, as well as the demand for upgrades and enhancements to our products.

License Revenues.    License revenues consist of software license fees. The decreases in license revenues in fiscal 2003 and fiscal 2002 reflect a trend in large-market prospects to select our subscription services model,

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rather than our license model, as the market demand for our outsourced services continues to grow. We believe this trend is in part related to the market’s growing acceptance of outsourced services, limited information technology capital budgets, and limited information technology resources available to manage such business-critical services in a traditional self-hosted license model. We expect future license revenues as a percentage of total revenues to continue to decline in fiscal 2004 as a result of the trend in typical license customers to purchase our solutions through our large-market subscription services.

International Revenues.    We market our software and services through our direct sales organization in the United States, the United Kingdom, and Australia, and through strategic referral and reseller arrangements in the United States and international markets. Revenues from licenses and services to customers outside the United States were $7.6 million, $6.6 million, and $4.4 million in fiscal 2003, 2002, and 2001, respectively. Historically, as a result of the relatively small amount of our international sales, fluctuations in foreign currency exchange rates have not had a material effect on our operating results. As our products and services become more widely accepted in international markets and in particular with the expansion of international functionality within our products and services, we expect international revenues to continue to grow, both in total dollars and as a percentage of total revenues.

Revenue Concentrations.    A substantial amount of our revenues has been derived from the sales of Concur Expense and related services. Revenues from Concur Expense and related services represented approximately 80%, 95%, and 95% of our total revenues in fiscal 2003, 2002, and 2001, respectively. We anticipate that revenues from Concur Expense and related services will continue to represent a significant portion of our total revenues in fiscal 2004. No single customer accounted for more than 10% of our revenues in any of the periods presented.

Cost of Revenues

Cost of Subscription Revenues.    Cost of subscription revenues consists primarily of salaries and related expenses, server and storage fees, telecommunication charges, strategic referral and reseller fees, and amortization of related deferred set-up costs. The $1.1 million increase in cost of subscription revenues in fiscal 2003 reflects a $1.3 million increase in infrastructure costs, such as telecommunication and server storage fees, resulting from the addition of the Captura customer base. The $1.3 million increase in cost of subscription revenues in fiscal 2002 reflects increases in various costs to support a larger customer base, totaling $1.2 million. Of this amount, $0.7 million related to increased infrastructure costs, primarily due to our investment in infrastructure to accommodate the current and future growth of our subscription business. Additionally, referral and reseller fees increased $0.5 million as a result of the increase in sales generated through our strategic partners. The cost of subscription revenues as a percentage of subscription revenues decreased in fiscal 2003 and fiscal 2002 primarily due to the low incremental cost incurred to host each additional new customer. We expect the cost of subscription revenues to increase modestly in fiscal 2004 as we expect the incremental cost to support our anticipated customer growth to remain low.

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Cost of Service Revenues.    Cost of service revenues is comprised primarily of the salaries and related expenses (including travel and entertainment expenses) associated with employees and contractors who provide maintenance and consulting services. There have been no material changes in total cost of service revenues in fiscal 2003. The decrease in cost of service revenues in fiscal 2002 was primarily due to a decrease in consulting services personnel, which was made possible by improvements in our solutions and implementation methodology that enable us to provide consulting services more efficiently. In addition, this decrease reflects personnel reductions related to our sale of Concur Human Resources in fiscal 2001, as well as our company-wide cost reduction efforts. Cost of service revenues, both in absolute dollars and as a percentage of service revenues, may vary between periods due to changes in the level and mix of services provided as well as volatility of license sales.

Cost of License Revenues.    Cost of license revenues consists mainly of royalties for sub-licensing third-party software, and, to a lesser extent, the costs of manuals, media, and duplication for our licensed products. There have been no material changes in cost of license revenues in any of the years presented. We expect that the cost of license revenues will continue to fluctuate modestly in relation to changes in the overall demand for our license products as well as the cost for sub-licensing third-party software.

Operating Expenses

Sales and Marketing.    Sales and marketing expenses consist of salaries and related expenses (including sales commissions and travel and entertainment expenses) as well as allocated overhead costs, all associated with our sales and marketing personnel, and, to a lesser extent, costs of advertising, trade shows, and other promotional activities. Salaries and related expenses together with allocated overhead costs represented approximately $1.6 million and $7.3 million of the decreases in sales and marketing expenses in fiscal 2003 and fiscal 2002, respectively. These decreases were primarily due to personnel reductions that we were able to effect as a result of measures taken to improve our direct sales force’s productivity and an increase in the productivity of supporting our indirect sales channels, as well as additional reductions related to our sale of Concur Human Resources in fiscal 2001. The remainder of the absolute dollar decreases in sales and marketing expenses were attributable to reductions in costs incurred for advertising and other promotional activities. We expect total sales and marketing expenses in fiscal 2004 to continue to decrease as a percentage of total revenues as existing subscription revenues are not expected to have any incremental sales and marketing costs.

Research and Development.    Research and development expenses consist of salaries and related expenses as well as allocated overhead costs, all associated with employees and contractors engaged in software engineering, program management, and quality assurance. There were no material changes in total research and development expenses in fiscal 2003. The decrease in research and development expenses in fiscal 2002 was primarily related to a reduction in the number of outside contractors and employees engaged in research and development, primarily due to the sale of our Concur Human resources product line in fiscal 2001. In fiscal 2004,

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we anticipate modest increases in research and development resources as we continue to focus on product innovation and enhancement. However, we expect our total research and development costs to remain relatively consistent with those from fiscal 2003, as we expect expense relating to additional resources to be offset by reductions in overhead and other related costs.

General and Administrative.    General and administrative expenses consist of salaries and related expenses as well as allocated overhead costs associated with employees and contractors in finance, human resources, legal, information technology, and facilities, and to a lesser extent, the provision for bad debts. There were no material changes in total general and administrative expenses in fiscal 2003. Approximately 75% of the absolute dollar decrease in general and administrative expenses in fiscal 2002 was due to our company-wide efforts to reduce costs, which included reductions in salaries and related expenses for employees and contractors, as well as associated overhead costs. Reductions in bad debt expense represented approximately 15% of the absolute dollar decrease in general and administrative expenses in fiscal 2002. During fiscal 2004, we expect general and administrative expenses to increase from fiscal 2003 as a result of increased public company compliance expenses, including costs of complying with the laws and regulations related to the Sarbanes-Oxley Act.

Acquisition and Restructuring Charges.    Acquisition and restructuring charges include in-process research and development, amortization of intangibles, and restructuring costs. Acquisition charges in fiscal 2003 represented amortization of the acquired customer base intangible asset in connection with our July 2002 acquisition of Captura. This intangible is being ratably amortized over five years, consistent with the expected cash flows from the underlying customer contracts. Acquisition charges in fiscal 2002 consisted of a one-time write-off of acquired in-process research and development costs totaling $1.3 million, as well as amortization of the acquired customer base intangible asset. Restructuring charges in fiscal 2001 consisted of restructuring costs of approximately $0.9 million related to the sale of our Concur Human Resources product line, offset by a gain of approximately $0.2 million on the sale of these assets, and a reduction of approximately $0.5 million in the amount accrued for our June 2000 restructuring as a result of changes in the estimated amounts required for severance and related benefits, facilities, and product marketing commitments.

Interest Income and Interest Expense

Interest Income and Interest Expense.    The decreases in interest income in fiscal 2003 and fiscal 2002 were due to the decreases in cash, cash equivalents and marketable securities upon which we earn interest, and to a lesser extent, to lower interest rates earned on our investment portfolio. The decrease in interest expense in both fiscal 2003 and fiscal 2002 were primarily due to lower outstanding interest-bearing obligations related to bank borrowings and capital lease obligations.

Provision for Income Taxes.    No provision for federal and state income taxes has been recorded as we have accumulated significant net losses since inception, resulting in deferred tax assets. Since our utilization of these deferred tax assets is dependent on future profits, which are not assured, we have recorded a valuation allowance equal to the net deferred tax assets.

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Selected Quarterly Financial Data (Unaudited)

Financial Condition

Our total assets were $43.0 million and $39.7 million at September 30, 2003, and 2002, respectively, representing an increase of $3.3 million, or 8.3%. The increase consisted primarily of greater cash and cash equivalents balances at September 30, 2003, partially offset by decreases in marketable securities and restricted cash balances, as well as depreciation of property and equipment. Cash, cash equivalents, marketable securities, and restricted cash totaled $22.2 million as of September 30, 2003, compared to $17.0 million at September 30, 2002, representing an increase of $5.2 million, or 30.6%.

Our accounts receivable balance, net of allowances for sales and doubtful accounts of $0.5 million and $1.0 million, was $7.9 million and $8.9 million as of September 30, 2003 and 2002, respectively, representing a decrease of $1.0 million, or 11.2%. Average days’ sales outstanding in accounts receivable was 51 days and

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64 days for the quarters ended September 30, 2003 and 2002, respectively, and 51 days and 72 days for the years ended September 30, 2003 and 2002, respectively. This improvement in days’ sales outstanding was primarily the result of improved collections of outstanding accounts receivable, as well as a full year of revenue recognized for Captura customers in fiscal 2003, as opposed to only two months of revenue from these customers recognized in fiscal 2002.

Our total current liabilities were $15.2 million and $17.6 million as of September 30, 2003 and 2002, respectively, representing a decrease of $2.4 million, or 13.6%. This decrease consisted primarily of a reduction in accounts payable and accrued liabilities, including accrued costs relating to the acquisition of Captura, totaling $4.0 million, or 47.6%, offset by an increase in deferred revenues resulting from growth in license and maintenance revenues resulting from the continued growth of our installed license customer base.

Liquidity and Capital Resources

Our sources of liquidity as of September 30, 2003 consisted principally of cash and cash equivalents totaling $21.6 million. Our operating activities provided $4.7 million in fiscal 2003 and used $8.3 million and $22.4 million in fiscal 2002 and 2001, respectively. The increase in our cash flow from operations in fiscal 2003 as compared to prior years was primarily a result of continual improvement in our operating results. For fiscal 2002 and 2001, net cash used by operating activities was primarily a result of funding normal, ongoing operations.

Our investing activities provided $0.2 million, $1.6 million, and $37.6 million in fiscal 2003, 2002, and 2001, respectively. Investing activities have consisted primarily of purchases of property and equipment, and purchases and related maturities of marketable securities. Property and equipment acquisitions were lower in fiscal 2003, compared to the corresponding prior year period, primarily due to the build-out of our hosting infrastructure in fiscal 2002. However, acquisition costs paid in fiscal 2003 largely offset the decrease in purchases from fiscal 2002. Cash provided by investing activities was substantially lower in fiscal 2002 than in fiscal 2001, primarily as a result of decreased investments in and maturities of our marketable securities portfolio.

Our financing activities provided $3.0 million in fiscal 2003 and used $1.2 million and $4.8 million in fiscal 2002 and 2001, respectively. Financing activities have consisted primarily of payments made on existing loans and capital leases, offset by the issuance of common stock from the exercise of stock options and in connection with our employee stock purchase plan, and by proceeds from borrowings under our equipment credit facility.

In March 2002, we entered into a loan and security agreement with a bank for a $1.0 million equipment credit facility (“Term I Advance”). The loan and security agreement for the Term I Advance allowed for borrowings in the amount of actual equipment purchases made through December 2002. As of September 30, 2003, the outstanding indebtedness under the Term I Advance was approximately $0.5 million, bears interest at the bank’s prime rate (4.0% at September 30, 2003), and matures in December 2004.

In September 2002, we amended the terms of the loan and security agreement to add Captura as a borrower, and to include a one time additional term loan (“Term II Advance”) of $0.4 million, the proceeds of which were used to refinance certain indebtedness owed by Captura to another creditor. As of September 30, 2003, the outstanding indebtedness under the Term II Advance was approximately was $0.2 million, bears interest at the bank’s prime rate (4.0% at September 30, 2003), and matures in October 2004.

In September 2003, we amended the terms of the loan and security agreement to add a revolving line of credit in an amount not to exceed the lesser of 80% of eligible accounts receivable or $5.0 million, bearing interest at a rate equal to the bank’s prime rate (4.0% at September 30, 2003). Amounts under this line of credit may be repaid and reborrowed at any time prior to September 2004, at which time all amounts outstanding under this line of credit are due and payable. As of September 30, 2003, no amounts were outstanding under this line of credit. We also added an additional equipment facility (“Term III Advance”) for borrowings in the amount of

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actual equipment purchases up to $1.0 million, made through September 2004. The Term III Advance bears interest at a rate equal to the bank’s prime rate (4.0% at September 30, 2003), and matures in September 2006. As of September 30, 2003, no amounts were outstanding under the Term III Advance. This amendment also eliminated the restricted cash balance requirement of $1.4 million.

In December 2002, we financed our directors’ and officers’ insurance policy renewal. Borrowings bear interest at 6.25% and mature in November 2003. As of September 30, 2003, the balance owed on this policy was $97,000.

In January 2003, our Board of Directors authorized a stock repurchase program under which we may repurchase up to one million shares of our outstanding stock over a two-year period. Stock purchases under the stock repurchase program may be made from time to time in the open market based on market conditions. Any purchases will be made at the then-current market prices, and repurchased shares will be retired. No purchases had been made as of September 30, 2003.

The following are contractual commitments associated with our long-term debt, capital lease, operating lease, and purchase obligations, as of September 30, 2003: