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MICROS Q1 Earnings Miss by a Whisker

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MICROS Systems Inc. reported adjusted earnings (excluding one-time items and including stock-based compensation expenses) of 46 cents per share for the first-quarter of fiscal 2014, missing the Zacks Consensus Estimate of 47 cents.


Revenues of $314.7 million increased 4.9% year over year and came above the Zacks Consensus Estimate of $310.0 million. Year-over-year improvement in revenues was primarily attributed to strong demand across the U.S. and Canada. Moreover, year-over-year revenue growth from MICROS’s Food & Beverage and Hotels vertical positively impacted total revenue..

Segment wise, Service revenues came in at $213.8 million, up 4.1% from the previous-year quarter. Hardware revenues came in at $66.5 million, increasing 4.4% from the year-ago quarter. Software revenues increased 11.6% from the year-ago quarter to $34.4 million.

Geographically, international revenues grew 2.0% from the year-ago-quarter to $185.1 million. Revenues from the U.S. & Canada increased 9.5% from the year-ago period to $129.6 million.

Operating Results

Gross margin was 51.6%, up 50 basis points (bps) from the year-ago quarter, primarily due to favorable business mix.

Adjusted operating expenses increased 8.8% on a year-over-year basis to $101.3 million due to an increase in selling, general and administrative expenses and research and development expenses. Moreover, as percentage of revenues, operating expenses increased 113 basis points from the year-ago quarter to 32.2%.This in turn impacted MICROS’ operating performance.

Adjusted operating income increased marginally (up 0.3%) to $56.1 million from the year-ago quarter while margins contracted 83 bps to 17.8%.

Adjusted net income (excluding one-time items and including stock-based compensation expenses) came in at $35.1 million or 46 per share versus $43.5 million or 53 cents in the year-ago quarter.

Balance Sheet and Cash Flow

MICROS ended the quarter with cash and cash equivalents and short-term investments of $595.6 million versus $634.1 million at the end of the previous quarter. The company did not have any long-term debt on its balance sheet.

Share Repurchase

The company spent around $91.6 million to buy back 1.9 million shares for an average price of $49.52 per share.


MICROS reiterated its fiscal 2014 revenue guidance. The company expects its fiscal 2014 revenues to be in the range of $1.295 billion to $1.320 billion, while non-GAAP earnings per share are expected to be in the range of $2.46 to $2.50.

Our Take

MICROS’ first-quarter fiscal 2014 results were mixed with the top line beating the Zacks Consensus Estimate and increasing on a year-over-year basis and the bottom line missing the same. The company is expected to take care of its margins and control expenses. The company also reiterated its fiscal 2014 guidance.

Although MICROS has a decent cash position and is providing valuable solutions to Apple Inc.’s (AAPL - Free Report) iPad, we remain concerned due to increasing competition from innovative (tablet-based) Point-of-Sales (POS) solutions by its peers Square, Revel, Groupon Inc. (GRPN - Free Report) and NCR Corp. (NCR - Free Report) . Moreover, the company’s European exposure and a sluggish macro-economic environment are the other headwinds, going forward.

Currently, MICROS has a Zacks Rank #3 (Hold).

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