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Micros Systems (MCRS)

F1Q2011 Earnings Call

October 28, 2010 4:45 p.m. ET

Executives

Tom Giannopoulos – Chairman, President & CEO

Peter Rogers – EVP, IR & Business Development

Cindy Russo – EVP & CFO

Analysts

Mayank Tandon – Signal Hill Capital

Ross MacMillan – Jeffries

Liam Burke – Janney Capital Markets

Gil Luria – Wedbush Securities

Eric Lemus – Raymond James

Brian Murphy – Sidoti & Company

Presentation

Operator

Ladies and gentlemen, welcome to the fiscal year 2011 first quarter conference call. [Operator Instructions.] As a reminder this conference is being recorded Thursday, October 28, 2010.

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

Tom Giannopoulos

Thanks operator, and good afternoon everyone. Thank you for being with for another fiscal year. As a reminder, this is the conference call for Q1 of our fiscal year 2011, which started in July. Here with me are Cindy Russo, Tom Patz and Peter Rogers, and we will commence with Peter and the disclaimer.

Peter Rogers

Thank you. Good afternoon, ladies and gentlemen. Some of the comments today are forward-looking statements that involve risks and uncertainties, such as levels of product demand and market acceptance, impact of competitive 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’s expectations. Other risks and uncertainties associated with MICROS's businesses are identified in the Management’s Discussion and Analysis of Financial Condition and Results of Operations and Business and Investment Risks sections of MICROS SEC filings.

Tom?

Tom Giannopoulos

Thank you, Peter. Looking at the financial results for the quarter and as shown in the press release this afternoon, revenue grew 10.4% from $211 million to $233.4 million, a very healthy double-digit growth considering the conditions. The $233.4 million is the second highest quarter ever for us. On a constant currency basis you could add another $2.6 million to the number. That would have brought the revenue to $236 million.

Gross margin for the quarter came in at 54.2%, or $126.42 million, versus last year's 54.8%, or $115.826 million. The 54.2% number is way above the norm for a Q1 for us. Hardware gross margin at 32.3% versus 35% last year, software at 79.1% versus 78% last year and service at 55.8% versus 56.7% last year. Overall a very good gross margin performance for a Q1.

Total operating expenses - this is on a non-GAAP basis without the stock option expense - expenses were at $76.97 million, or 32.98% versus last year's $76.928 million, or 36.39%, a very nice improvement from a ratio perspective.

Income from operations, again on a non-GAAP basis was at $489.485 million, or 21.2%, versus $38.898 million, or 18.4% last year. And honestly for Q1, the 21.2% ratio is a very good number.

Net income for the quarter at $33.381 million. This is again on a non-GAAP basis versus $26.643 million. That's a 25.3% increase from last year, and EPS at $0.41 versus $0.33 last year. That's a 24.2% increase from last year.

Additionally, our cash position increased from $605 [million] in June to $680 [million] at the end of the quarter. Cindy will give you some additional numbers here. We continue, of course, to have no debt.

Days outstanding for the quarter were down to 60.4 days, which is a record low number for a Q1.

The split between domestic and international is at 49.63% is domestic, 50.37% is international.

In Q1 most of the business entities exceeded their budgeted numbers.

Cindy?

Cindy Russo

Thanks Tom. The highlights of the balance sheet for the quarter are as follows. MICROS has $680.9 million of cash and investments at September 30, an increase of $75.7 million from the June 30 year end, and an increase of $156.2 million from the same quarter last year.

During the first quarter we generated $34.8 million from operating activities, while spending a combined $4.6 million on property plant and equipment and internally capitalized software. Also, $7.7 million for the purchase of investments.

During the September quarter as seen on our balance sheet, the company spent $1.5 million to pay down its international line of credit, and also received $10.7 million from the exercise of stock options and the related tax benefits.

The accounts receivable balance of $156.7 million is an increase of $3.6 million from the June quarter and a decrease of $10.7 million from the Q1 fiscal 2010. As Tom stated, days sales outstanding at quarter end were a company first quarter record at 60.4 days, compared to 71.3 days last year. International DSOs were 79.8 days, down 11.8 days from our prior September quarter. Domestic DSOs were a company all-time record - 43.3 days, down 2.6 days from our last release and down 7.7 from a year ago.

The inventory balance of $35.6 million is an increase of $500,000 from last quarter and a decrease of $3 million from last year. Inventory turns from the first quarter were 8.8, another Q1 record, up from 7.6 turns in the prior September quarter.

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