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MICROS Systems (MCRS)

Q2 2014 Earnings Call

January 30, 2014 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

Analysts

Daniel R. Perlin - RBC Capital Markets, LLC, Research Division

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

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

Ross MacMillan - Jefferies LLC, Research Division

Eric Lemus

Keith M. Housum - Northcoast Research

Presentation

Operator

Ladies and gentlemen, thank you for standing by, and welcome to the MICROS Systems Inc. Fiscal 2014 Second Quarter Conference Call. [Operator Instructions] As a reminder, this conference is being recorded Thursday, January 30, 2014. It is now my pleasure to turn the conference over to Peter Rogers. Please go ahead, sir.

Peter J. Rogers

Thank you, Claudine. Good afternoon, ladies and gentlemen. This is Peter Rogers, EVP of Investor Relations. On behalf of the entire MICROS team assembled here today, let me thank you for joining us to discuss our fiscal 2014 second quarter results.

I'm here today with Peter Altabef, our President and CEO; Cindy 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.

Safe Harbor statement. Some of the comments today are forward-looking statements that 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 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 Business 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 file our fiscal year 2014 second quarter 10-Q this evening. Peter?

Peter A. Altabef

Thank you, Peter, and good afternoon, everyone. We reported revenue of $345.6 million, an increase of 6.5% over the year-ago quarter. On a constant currency basis, we grew 6.7%. For the 6-month period, we reported revenue of $660.2 million, an increase of $35.9 million, or 5.8%, over a year ago and 5.9% in constant currency. The revenue growth is all organic, spurred by improving macro conditions in most of our markets and by sharpened sales execution.

Our second quarter non-GAAP income was 43 point -- excuse me, $48.3 million, producing an EPS of $0.63, in line with expectations. We experienced balanced revenue growth around the world this quarter, with the U.S./Canada growing 6.2% and international growing 6.7%. On a constant currency basis, U.S./Canada grew 6.4% and international grew 6.8%.

Looking at the 3 regions of our international reporting segment. We had revenue growth for EAME, that's Europe, Africa, Middle East, of 7.2%; Asia Pacific of 5.6%; and Latin America of 5%. On a constant currency basis, EAME grew 4.1%, Asia Pacific, 13.8%; and Latin America, 11.5%.

On a vertical market basis, food and beverage grew 7.8% this quarter, driven by strong demand. By way of example, we just installed our 100th SONIC restaurant. Major new Simphony client wins in the quarter were Compass of Canada with more than 200 sites, Ovation brands with more than 325 locations and MAC Services, an Australian company, which selected Simphony and our Materials Control application for use in 9 employee mining camps.

Our food and beverage offerings can be provided either on-premise or in a SaaS hosting model, and we think that our flexibility is an important differentiator.

Our hotel vertical grew 4.6% versus last year. We're experiencing good demand as many clients are undertaking new projects. We see growing demand for a broader range of MICROS applications such as the MICROS Payment Gateway, Sales & Catering and channel management.

Significant client wins include the new SLS Casino in Las Vegas, with OPERA and Simphony, a 40-plus hotel chain in Croatia, the CABINN hotels in Denmark with OPERA and several prominent independent hotel wins in the U.S. and Canada such as the Sea Island Resort of Sea Island, Georgia.

While our front office application is central solution that hotels deploy, we have a broad portfolio of applications, and our large install base of front office applications enables us to cross-sell many additional applications.

Our retail vertical grew 7.4% versus last year. Significant client wins include a Fortune 100 media communications company, deploying Xstore and several other applications in their retail stores and service centers, Sally Beauty with Xstore, Joules Clothing chain in the U.K. with our Retail-J enterprise platform and multinational -- multi-channel demand management; and our MICROS Payment Gateway with a payments partner in China for use in hundreds of retail outlets.

Similar to the other verticals, an improved macro environment and strong interest among retailers to upgrade their systems and e-commerce applications are important demand drivers.

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