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MICROS Systems, Inc. (MCRS)

F2Q10 (Qtr Ending 12/31/09) Earnings Call Transcript

February 4, 2009 4:45 pm ET


Tom Giannopoulos – Chairman, CEO and President

Peter Rogers – SVP, IR & Business Development

Gary Kaufman – EVP, Finance & Administration, and CFO


Corey Tobin – William Blair

Gil Luria – Wedbush

Mayank Tandon – Signal Hill

Ross MacMillan – Jefferies

Liam Burke – Janney

Eric Lemus – Raymond James

Brian Murphy – Sidoti & Company

Vincent Colicchio – Noble Financial



Ladies and gentlemen, thank you standing by. Welcome to the Micro System's Inc. second quarter fiscal year 2010 conference call conference call. During the presentation, all participants will be in a listen-only mode. Afterwards we'll conduct a question-and-answer session. (Operator instructions) As a reminder this conference is being recorded Thursday, February 4, 2010.

I would now like to turn the conference over to Tom Giannopoulos, CEO. Please go ahead, sir.

Tom Giannopoulos

Thank you, Sarah. And good afternoon, everyone. Thank you for joining us. As you know, this is a conference call to review the financial results of our December 2009 quarter. This is the quarter number two of our fiscal year 2010. Here with me are Gary Kaufman, Tom Patz, Peter Rogers. We'll begin with Peter and the disclaimer.

Peter Rogers

Good afternoon, Tom. And good afternoon, ladies and gentlemen. Some of the comments today are forward-looking statements involve risks and uncertainties such as uncertainty of product demand and market acceptant, impact of competitive product in pricing and margin, the ability to obtain on acceptable turns, the (inaudible) incorporate and Micros products and services. Technology patent by others, environmental and health related event, unanticipated tax liabilities, the effects of terrorist activity and armed conflict.

Micros undertakes no duty to update any forward-looking statements to confirm to actual results or changes to Micros expectations. Other risks and uncertainties associated with Micro's business are identified in the management's discussion and analysis of financial condition and results of operation and business investment risk section for Micro's SEC filings. Tom?

Tom Giannopoulos

Thank you, Peter. Looking at the financial results for the quarter and showing in our press release this afternoon, generally, we had a very good quarter with revenues, net income and EPS, exceeding expectations. With business additions still on the challenging side, we continue to work on improving the bottom line, continue our increase investment in developing new products and services and we believe, when revenue growth returns, this strategy will serve us well for the future.

Looking at the numbers on the second page of the press release, our revenue for the quarter was 25.647 million, better than expected and some 13 million better than the September quarter. Gross margin for the quarter came in 124 million or 55.4%, which is a very excellent ratio. As a matter of fact, it's a record gross margin ratio for our company. Year-to-date gross margin is at 55.1% versus last year's 52.5%, a very nice improvement over the last year.

Operating expenses on a non-GAAP basis, excluding the stock option expense, came in at actual dollars of 81 million with 35.9%, versus last year's 83.5 million or 35.3%. Income from operations as a result was a very excellent 19.5% or 43.976 million, higher than last year's 42 million, especially the percentage which last year was at 17.94%, even on the lower volumes that we had.

Income before taxes at a very healthy 19.7% or 44.3 million, which is from a dollar perspective, almost the same as last year's. Net income was at 29 million or 12.87% versus 29.299 million last year. First six months net income stands at 55.684 million or 12.7%. UPS as a result is $0.36 this quarter, the same as a year ago. Overall, we believe these are great results, again considering the business conditions.

Regarding our cash, we continue to generate cash at a very good rate and as always our debt is very minimal. During the first six months of the fiscal year, we generated close to a 100 million. Cash position now is at 531.532 million, excluding cash for the stock buy-back program and the acquisition of PIG. Days outstanding were at 59.4 days, down from 72 days in the September quarter and down from 66.1 days a year ago. Like I stated already, very excellent financial results across the board.

In regards to the note in our press release about the Japanese subsidiary, we'd like to make the following couple points. Number one, this was the fraudulent act of a single individual, a Japanese subsidiary. Number two, a detailed investigation conducted by internal and external resources have confirmed that no other subsidiaries or other macro personnel were involved and number three, we're confident that we have sized the financial impact correctly and have captured the full extent of this issue.

I will ask Gary to give you the additional details from the balance sheet.

Gary Kaufman

Thanks, Tom. The highlights of the balance sheet are as follows: Micro's had $531 million of cash at December 31, an increase of 6 million from the September 30 quarter end. Year-to-date, we generated $86 million from operating activities while spending 4 million on property plant and equipment, 29 million for the purchase of PIG and net of 19 million on short-term investments and 35 million on the repurchase of common stock.

During quarter two, we purchased 160,000 shares of common stock for a total price of 4.6 million and a total of 1.3 million shares for 35 million year-to-date. Currently we have board approval to purchase an additional 2 million 020 shares. During the fiscal year, we also received $7 million for the exercise of stock options, along with the corresponding tax benefit of 2.7 million.

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