MCRS

MICROS Systems, Inc. (MCRS)

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MICROS Systems (MCRS)

Q1 2014 Earnings Call

October 24, 2013 4:45 pm ET

Executives

Peter J. Rogers - Executive Vice President of Investor Relations & Business Development

Peter A. Altabef - Chief Executive Officer, President and Director

Cynthia A. Russo - Chief Financial Officer, Principal Accounting officer and Executive Vice President

Thomas L. Patz - Executive Vice President of Strategic Initiatives, General Counsel and Corporate Secretary

Analysts

Gil B. Luria - Wedbush Securities Inc., Research Division

Mayank Tandon - Needham & Company, LLC, Research Division

Matthew V. Roswell - RBC Capital Markets, LLC, Research Division

Arvind Rajamohan - Stifel, Nicolaus & Co., Inc., Research Division

Thomas C. McCrohan - Janney Montgomery Scott LLC, Research Division

Keith M. Housum - Northcoast Research

Presentation

Operator

Ladies and gentlemen, thank you for standing by. Welcome to the Fiscal 2014 First Quarter Call. [Operator Instructions] As a reminder, this conference call is being recorded, Thursday, October 24, 2013.I will now turn the conference call over to Peter Rogers, Executive Vice President, Investor Relations. Please go ahead, sir.

Peter J. Rogers

Good afternoon, ladies and gentlemen. On behalf of the MICROS team assembled today, I want to thank you for joining us to discuss our fiscal 2014 first quarter results. I'm here today with Peter Altabef, our President and CEO; Cynthia Russo, our CFO; and Thomas Patz, our Chief Legal Counsel and EVP of Strategic Initiatives. I will start by reading our Safe Harbor statement and then turn the call over to Peter Altabef for his comments.

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

MICROS undertakes no duty to update any forward-looking statements to conform to actual results or changes in MICROS' expectations. Other risks and uncertainties associated with MICROS' business are identified in the management's discussion and analysis of financial condition and results of operations, and the business and investment risk sections of MICROS' SEC filings. We will post our financial fact and data sheets in the Investor Relations section of our website, www.micros.com, after this call. We will also file our fiscal year 2014 first quarter 10-Q this afternoon. Peter?

Peter A. Altabef

Thank you, Peter, and good afternoon, everyone. We are pleased with the results of our first quarter of fiscal 2014. We reported revenue of $314.7 million, an increase of 5% over the previous year. On a constant currency basis, we grew 5.1%. The revenue is all organic. Our revenue growth is being spurred by our focused sales efforts and the recovery in our end markets, most significantly in the U.S., Canada segment in all 3 verticals.

Our first quarter non-GAAP income was $38.6 million, with an EPS of $0.50, in line with expectations. As Cindy will explain, our GAAP and non-GAAP net income and EPS are lower than a year ago, primarily due to tax changes in the United Kingdom and the charge with respect to a settlement for a lawsuit dating back to 2000. The change in tax rate was expected and is consistent with the explanation we've provided in our last conference call.

On a geographic reported basis, U.S./Canada returned to growth with a strong 9.5% increase, while international grew 2%. Our international segment revenue was affected by currency swings. EAME grew a reported 3.6% and 0.8% on a constant currency basis. Asia Pacific declined 3.3% on a reported basis, yet grew 4.4% on a constant currency. Latin America grew a reported 2.1% and 7.6% on constant currency. On a vertical revenue basis, food and beverage grew 11.1% quarter-over-quarter. The growth was spurred by the U.S./Canada and EAME regions. In the U.S./Canada, we are seeing improved demand in all 3 Food & Beverage sub verticals: Independents, major accounts and Leisure & Entertainment. We are now recognizing revenue from the food and beverage major account chain wins we reported in our August conference call. For hardware, the launch of our mTablet and mStation platforms early in the quarter is creating excitement with our client base. In software, we have globally deployed several pilot sites with our MICROS Payment Gateway PayPal integration with a targeted release in the first quarter of 2014.

Our client activity was broad-based across all 4 regions, encompassing new clients and an expansion of existing relationships. And most notably, we saw an increase in client wins in the small independent food and beverage market.

Our hotel vertical grew 4.7% quarter-over-quarter. Globally, we are seeing good demand and winning many new clients. We also signed an important agreement with a long-standing global hotel client. This agreement provides for the installation of OPERA Xpress front office, OPERA Mobile and Simphony in the client's limited service brand of over 200 sites, many of which will be hosted by MICROS.

This agreement demonstrates the increasing recognition by hotel chains of the significant benefits gained from deploying both Opera and Simphony. Additionally, we received approval from 2 large global hotel chains to offer these applications on a hosted basis to their franchisees.

In terms of software, we're excited about our OPERA Mobile solution, which can run on both Android and Apple devices. Our hotel development teams are also enhancing our sales and catering, customer information and business intelligence offerings.

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