MCRS (MM)

MICROS Systems Inc.(MCRS) reported adjusted earnings per share (“EPS”) of 58 cents for the third quarter of fiscal 2013. This exceeded the Zacks Consensus Estimate and 8.6% higher than the year-ago quarter.

Revenues

Revenues were $315.1 million, up 13.3% year over year. Barring the Torex acquisition in May 2012, revenues for the company declined 4.0% on a reported basis.

Segment-wise, service revenues came in at $213.7 million, rising 20.5% from $177.4 million in the previous-year quarter. Hardware revenues came in at $64.5 million, increasing 2.3% from the year-ago quarter. Software revenues came in at $36.8 million, down 2.0% year over year, as software sales were affected while retail sales was higher.

Operating Results

Reported gross margin was 52.5%, down from 54.9% in the year-ago quarter. The year- over-year decline was due to the low margin Torex business. After taking into account the company’s new Torex customers and the legacy outsourcing contracts in the second half of calendar 2014, the company anticipates Torex margins to increase.

Selling, general and administrative expenses came in at $78.3 million, increasing 3.0% from the year-earlier quarter. Research and development expenses amounted to $18.0 million, up 33.9% year over year. Operating margin dropped 162 basis points year over year to 18.5%.

On a GAAP basis, earnings came in at 55 cents per share versus 53 cents in the year-ago quarter. Adjusting one-time items and including stock-based compensation expenses, non-GAAP earnings were 57 cents versus 53 cents in the year-ago quarter.

Balance Sheet

MICROS ended the quarter with cash and cash equivalents and short-term investments of $669.3 million versus $631.8 million at the end of the previous quarter. Receivables increased 10.8% sequentially to $238.7 million. Inventory increased 3.5% from the prior quarter to $54.5million.

Share Repurchase

The company spent around $37.5 million on repurchase of shares, thereby buying back 861,000 shares with an average price of $43.59 per share. Moreover, during the fourth quarter, MICROS has repurchased 164,000 shares of common stock for a total price of $7.3 million.

Guidance

As per the current estimation, MICROS has projected its fiscal 2013 revenue guidance in the range of $1.256 billion and $1.272 billion, while the non-GAAP EPS is expected to hover in the range of $2.37 to $2.39, this would result in a fourth quarter revenue of between $317.0 million and $333.0 million, while the non-GAAP EPS for the same quarter is expected to be between 61 and 63 cents.

Our Take

MICROS third-quarter results were modest, with EPS exceeding the Zacks Consensus Estimate, while revenues increasing on a year–over–year basis. The company is expected to take care of its margin position and control expenses. The revenue guidance for fiscal 2013 is at a decent range which projects some improvement in business.

Although MICROS has a decent cash position and providing valuable solutions to Apple Inc.’s (AAPL) 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) and NCR Corp. (NCR).

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

 
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