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Morgan Stanley Technology, Media & Telecom Conference

February 28, 2013 11:40 AM ET


Peter Rogers - EVP of Business Development & Head of IR



Good morning everyone. Thank you for joining us. Our call on Morgan Stanley, I’m pleased to be here this morning with MICROS Peter Rogers, who is Executive Vice President of Business Development and Head of Investor Relations. So, as discussion go, what we’ll do is we’ll chat further a little bit and we’ll ask the audience for some questions. Maybe if you could spend a few minutes just to give me an overview I know you had an analyst day, not too long ago maybe just giving an updated perspective on the business starting with just the very basics of get there some new folks in the room, what you do and then an update and we'll get in some of the questions.

Unidentified Company Representative

Alright, thanks very much, appreciate the invite it’s actually always a pleasure to come up the west coast. MICROS public company credit in NASDAQ headquartered in Columbia in Maryland, we’re in business since 1977. We’re one of the first companies that we start back in mid 70s to create an electronic point of sale platform on the Intel chip. So, when you go in a restaurant, you see that terminal, hopefully sees MICROS on it. Actually fairly sophisticated terminal, but we one of the first companies to really create a platform pull back in mid to late 70s and we have this product of varies interest and actually found restaurants probably the best market for us plus augmenting sales.

When we look at the company today, 37% of our company is really focused on restaurants. In the early 1990s we made an investment by the small German software company called (inaudible) Germany that actually finished in the (inaudible) reservation business. When you look at technology, its highly important because we still can change today running some more platforms on most hotels up until mid-1980s, did not have a reservation system onsite, the onsite systems called the property management system.

A very large hotel has many mainframe, mainframes often back were very expensive but the development of PEC (inaudible) networks with Novell really changed the world of hotel technology relates 80s and 90s. We got a small company called (inaudible) is doing about $15 million at a dot based reservation flat in the European hotel chain. We acquired the company at various subs to mid-1990s. We moved that technology from unit to make at Florida but today MICROS with our other platform is really the dominant property management system platform globally, we're also the leading country reservation platform.

The hotels today represent 30% of revenue, restaurants 37%, we have about 26% is actual retail, but 10 years ago, 2003 we bought a company out of Cleveland called Datavantage, that put us into the retail space and we've drawn that business from $40 million to somewhere in mid-350 million range today, combination of acquisitions and again a growth.

When you look at MICROS 37% is restaurants, 37% is hotels and 26% fee is actually retail platforms. If I start to joke, I know what you eat, I know what you buy, I know what you're saying and what movie should watch, but I won't tell anybody. So do really our main business is providing very focused vertical platforms to our customers in hotels, restaurants and retail.

\We do that globally, we're in a 180 countries.

Unidentified analyst

Can you talk about just the macro environment, the growth dynamics in the end markets as one, you talked a little bit earlier about RevPAR is actually pretty good, restaurant sales are pretty good, you've got the overall economic backdrop, how do you think about the end markets in growth?

Unidentified Company Representative

Yes, when you look at the geographically the way we're set up, about 5% of the revenue comes out Latin America, about 12% comes out of Asia Pacific so that’s 17, about 43% comes out of Europe today another 40% comes out of North America, U.S. and Canada. When you look at our end markets, actually Asia is doing very well, compared with the growth of income there, there's a fair amount of (inaudible) construction hotels, restaurants and retail. Latin America same type, terms of Chile, Brazil, those countries are doing pretty well along with Mexico. We're actually seeing growth in Latin America and Asia.

North America and Europe really is basically in recession and so our growth basically is flat. We're not gaining organic growth this fiscal year, we're in June fiscal year. As I think organic we have purchased around a couple percent, we did do an acquisition last year, so we got a lot of reported revenue growth but organically we are being constrained by basically recession in Europe and North America.

As Iris said, the retail things, the United States are actually much improved, I look at retail sales, restaurant sales and RevPAR, revenue (inaudible). The good news, the numbers in the United States actually are much better but those customers are still being cautious to upgrade their product yet. The dynamic in our business when you look at our business model, about 42% of revenue is actually recurring, customers paying for hardware-software support, plus we do a number of platforms on a (inaudible) that’s recurring revenue, but 58% of the revenue is actually transaction based. Transaction in the sense that the customer has to buy something from us, either operating, their all point of sale platform, (inaudible) non-MICROS platform to a new MICROS platform, expanding the size of the restaurant or hotel and unfortunately because there's a great recession, main unit growth has essentially gone to zero in Europe and same with North America. But customers just holding on to their platforms for longer period of time and that's what we really face today. We’ve got very good systems, they are rugged, people can postpone an upgrade from a definite period of time if they are concerned about lack of demand or they are constrained with cash in this environment.

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