MICROS Systems (MCRS) Beats on Q4 Earnings, Revenues; Up Y/Y

Zacks

MICROS Systems Inc. (MCRS) reported adjusted earnings on a proportionate tax basis of 79 cents per share for the fourth quarter of fiscal 2014, beating the Zacks Consensus Estimate of 67 cents.

Adjusted earnings excluding the effect of amortization and restructuring costs related to Torex and expenses related to the Oracle (ORCL) deal but include stock-based compensation expenses. Moreover, earnings increased 36.2% on a year-over-year basis primarily due to higher revenue base and lower share count.

MICROS’ revenues for the fourth quarter increased 20.6% year over year to $396.1 million and beat the Zacks Consensus Estimate of $359 million.

Segment-wise, Service revenues came in at $244.7 million, up 12.4% from the year-ago quarter. Hardware revenues came in at $103.3 million, increasing 39.3% from the year-ago quarter, while revenues from the Software segment were up 31.3% from the year-ago quarter to $48.2 million.

Coming to the operational metrics, MICROS’ adjusted gross margins were up 34 basis points (bps) from the year-ago quarter to 53% primarily due to higher revenue base. The company’s adjusted operating margins expanded 289 bps on a year-over-year basis to 20.7%, while operating expenses as a percentage of revenues were down 255 bps during the period.

MICROS reported adjusted net income of $59.6 million or 79 cents compared with $45.6 million or 59 cents reported in the year-ago quarter.

MICROS exited the quarter with cash and cash equivalents and short-term investments of $699.8 million versus $658.4 million at the end of the previous quarter. Accounts receivable were $287.6 million. The company did not have any long-term debt on its balance sheet. The company generated $239.5 million cash from operating activities during fiscal 2014.

Recommendation

MICROS manufactures and sells point-of-sale (:POS) hardware, software and services to restaurant, hotel, hospitality, specialty retail markets and other similar markets. Expansion of the company’s software-as-a-service capabilities and an increase in licensed software sales remain the growth catalysts, going forward.

MICROS’ diverse offerings and expanding client base have prompted Oracle to bid for the company. Impending investigations on the deal, however, remain an overhang.

Nonetheless, MICROS faces competition from the likes of Square, Revel, Groupon Inc (GRPN) and NCR Corp. (NCR), which provide mobile and tablet-based offerings to the hospitality sector that cannibalize MICROS’ legacy POS workstations.

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

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