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MICROS Systems, Inc. (MCRS)

F1Q10 (Qtr End 09/30/09) Earnings Call Transcript

October 29, 2009 4:45 pm ET

Executives

Tom Giannopoulos – Chairman, President and CEO

Peter Rogers – EVP, IR and Business Development

Gary Kaufman – EVP, Finance & Administration, and CFO

Analysts

Mayank Tandon – Signal Hill

Corey Tobin – William Blair & Co.

Joe Laurette [ph] – Wedbush

Terry Tillman – Raymond James

Ross MacMillan – Jefferies

Dan Perlin – RBC Capitals

Liam Burke – Janney Montgomery Scott

Brad Reback – Oppenheimer

Brian Murphy – Sidoti & Co.

Presentation

Operator

Ladies and gentlemen, thank you for standing by, and welcome to the fiscal year 2010 first quarter conference call. During the presentation, all participants will be in a listen-only mode. Afterwards, we will conduct a question-and-answer session. (Operator instructions) As a reminder, this conference is being recorded today Thursday, October 29th of 2009.

It is now my pleasure to turn the conference over to Mr. Tom Giannopoulos, Chairman and CEO. Please go ahead, sir.

Tom Giannopoulos

Thanks, Shanna, and good afternoon, everyone, and thank you for being with us today. Again this is the conference call for the financial results for quarter one, September quarter of fiscal year 2010. As always with me are Gary Kaufman, Tom Patz, Peter Rogers, and we'll begin with Peter and his new disclaimer.

Peter Rogers

Good afternoon, Tom. Good afternoon, ladies and gentlemen. Some of the comments today are forward-looking statements that involve risks and uncertainties, such as uncertainties of product demand and market acceptance; the impact of competitive products and pricing on margins; the ability to attain on acceptable terms the right to incorporate in MICROS products and services; technologies patented by others; environmental and health-related events, unanticipated tax liabilities; and the effects of terrorist activity and armed conflict.

MICROS undertakes no duty to update any forward-looking statements to conform to actual results or changes in MICROS's expectations. Other risks and uncertainties associated with MICROS's business are identified in the management's discussion and analysis of financial condition and results of operations and businesses risks, investment risks sections of MICROS SEC filings. Tom?

Tom Giannopoulos

Okay. Thanks, Peter. Looking at the financial results for the quarter shown in our press release this afternoon, other than the revenue line which is compared to a record number from last year’s September quarter, the rest of the results are excellent. Even the revenue line of $212.473 million was one better than our own budgeted number. And number two, when adjusted for the Euro and UK Pound versus the Dollar, this year’s rate versus last year’s rate, the real difference is minimum.

The rest of the financial results are gross margin for the quarter came in at 54.8%, which is an all-time record for us, obviously a very good indicator. In the expenses, the R&D figure of $10.869 million was higher than last year’s $10.363 million consistent with our strategy of continuing to invest in product and services for the future, even in these difficult times.

Total operating expenses were at $77.089 million. These are all non-GAAP numbers excluding the stock option expense. And this number of $77 million was $10 million less than the year ago, again consistent with our strategy. We had a record operating profit of $39.423 million, an 18.6% versus revenue – versus last year’s $38.318 million which was up 15.7%.

The rest of the financial results down the line there, income before taxes at $40.467 million or 19% of revenue, a record number; net income of $27.267 million 12.83% ratio, again a record; and finally EPS of $0.34 for the quarter which was equal to last year’s $0.34 EPS as well.

Additionally, during the quarter, we generated another $50 million of cash, $30 million of which we used to buy back around 1.1 million shares during the September quarter. As a result, our cash now is at $525 million up from $501 million last June, still we continue to have practically no debt. Days outstanding were at 72.2 days lower than last year’s 74.9 days, and again a record low number for the September quarter as well.

Some additional information of interest, domestic versus international revenue, the ratio now is at 47% domestic and 53% international. The international operations, this is EME, Asia Pacific and South America, all exceeded their budgeted numbers both in revenue and IBT. Hopefully, this is a good sign that these regions are coming out of recession ahead of US, or in the case of Asia Pacific, they are growing a bit faster than what they had planned few months back.

In North America, profitability was higher. Revenue was off small amount from our budgeted numbers. And the retail business exceeded both revenue and profit budget numbers as well.

And I will ask Gary to give you some of the financial information.

Gary Kaufman

Thanks, Tom. The highlights of the balance sheet are as follows. MICROS had $525 million of cash at September 30th, an increase of $28 million from the June 30 year-end balance. During the quarter, we generated $42 million from operating activities, while spending $1.7 million on property, plant and equipment and net of $10 million on short-term investments and $30 million on the repurchase of common stock.

During the quarter, we purchased 1.1 million shares of common stock for the $30 million. Currently we have Board approvals to purchase an additional 2.2 million shares. During the quarter, we also received $4.9 million from the exercise of stock options along with the corresponding tax benefit of $2.2 million.

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