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MICROS Systems (NASDAQ:MCRS)

Morgan Stanley Technology, Media & Telecom Conference

February 28, 2013 11:40 AM ET

Executives

Peter Rogers - EVP of Business Development & Head of IR

Analysts

Good morning everyone. Thank you for joining us. Our call on Morgan Stanley, I’m pleased to be here this morning with MICROS Peter Rogers, who is Executive Vice President of Business Development and Head of Investor Relations. So, as discussion go, what we’ll do is we’ll chat further a little bit and we’ll ask the audience for some questions. Maybe if you could spend a few minutes just to give me an overview I know you had an analyst day, not too long ago maybe just giving an updated perspective on the business starting with just the very basics of get there some new folks in the room, what you do and then an update and we'll get in some of the questions.

Unidentified Company Representative

Alright, thanks very much, appreciate the invite it’s actually always a pleasure to come up the west coast. MICROS public company credit in NASDAQ headquartered in Columbia in Maryland, we’re in business since 1977. We’re one of the first companies that we start back in mid 70s to create an electronic point of sale platform on the Intel chip. So, when you go in a restaurant, you see that terminal, hopefully sees MICROS on it. Actually fairly sophisticated terminal, but we one of the first companies to really create a platform pull back in mid to late 70s and we have this product of varies interest and actually found restaurants probably the best market for us plus augmenting sales.

When we look at the company today, 37% of our company is really focused on restaurants. In the early 1990s we made an investment by the small German software company called (inaudible) Germany that actually finished in the (inaudible) reservation business. When you look at technology, its highly important because we still can change today running some more platforms on most hotels up until mid-1980s, did not have a reservation system onsite, the onsite systems called the property management system.

A very large hotel has many mainframe, mainframes often back were very expensive but the development of PEC (inaudible) networks with Novell really changed the world of hotel technology relates 80s and 90s. We got a small company called (inaudible) is doing about $15 million at a dot based reservation flat in the European hotel chain. We acquired the company at various subs to mid-1990s. We moved that technology from unit to make at Florida but today MICROS with our other platform is really the dominant property management system platform globally, we're also the leading country reservation platform.

The hotels today represent 30% of revenue, restaurants 37%, we have about 26% is actual retail, but 10 years ago, 2003 we bought a company out of Cleveland called Datavantage, that put us into the retail space and we've drawn that business from $40 million to somewhere in mid-350 million range today, combination of acquisitions and again a growth.

When you look at MICROS 37% is restaurants, 37% is hotels and 26% fee is actually retail platforms. If I start to joke, I know what you eat, I know what you buy, I know what you're saying and what movie should watch, but I won't tell anybody. So do really our main business is providing very focused vertical platforms to our customers in hotels, restaurants and retail.

\We do that globally, we're in a 180 countries.

Unidentified analyst

Can you talk about just the macro environment, the growth dynamics in the end markets as one, you talked a little bit earlier about RevPAR is actually pretty good, restaurant sales are pretty good, you've got the overall economic backdrop, how do you think about the end markets in growth?

Unidentified Company Representative

Yes, when you look at the geographically the way we're set up, about 5% of the revenue comes out Latin America, about 12% comes out of Asia Pacific so that’s 17, about 43% comes out of Europe today another 40% comes out of North America, U.S. and Canada. When you look at our end markets, actually Asia is doing very well, compared with the growth of income there, there's a fair amount of (inaudible) construction hotels, restaurants and retail. Latin America same type, terms of Chile, Brazil, those countries are doing pretty well along with Mexico. We're actually seeing growth in Latin America and Asia.

North America and Europe really is basically in recession and so our growth basically is flat. We're not gaining organic growth this fiscal year, we're in June fiscal year. As I think organic we have purchased around a couple percent, we did do an acquisition last year, so we got a lot of reported revenue growth but organically we are being constrained by basically recession in Europe and North America.

As Iris said, the retail things, the United States are actually much improved, I look at retail sales, restaurant sales and RevPAR, revenue (inaudible). The good news, the numbers in the United States actually are much better but those customers are still being cautious to upgrade their product yet. The dynamic in our business when you look at our business model, about 42% of revenue is actually recurring, customers paying for hardware-software support, plus we do a number of platforms on a (inaudible) that’s recurring revenue, but 58% of the revenue is actually transaction based. Transaction in the sense that the customer has to buy something from us, either operating, their all point of sale platform, (inaudible) non-MICROS platform to a new MICROS platform, expanding the size of the restaurant or hotel and unfortunately because there's a great recession, main unit growth has essentially gone to zero in Europe and same with North America. But customers just holding on to their platforms for longer period of time and that's what we really face today. We’ve got very good systems, they are rugged, people can postpone an upgrade from a definite period of time if they are concerned about lack of demand or they are constrained with cash in this environment.

So, we are hostage somewhat to the macro environment, we do have any platforms coming out but people are still very cautious at least in North America and Europe.

Unidentified Analyst

Okay. You mentioned SaaS, I think about $140 million of your revenues software sales is that right?

Unidentified Company Representative

That’s correct.

Unidentified Analyst

And how much of that is SaaS. Can you talk a little bit about this SaaS product, where you see it going and ultimately how much or what would you expect it to become as gross percentage of the total?

Unidentified Company Representative

That’s a quite question. If you look at our business model, about 21% of our business is actually hardware, it mainly goes to restaurants. When you look at that terminal in a restaurant, you see MICROS on it, it’s a very ruggedized point of sale platform designed by us, manufactured in Singapore. So restaurant application incorporates the terminal, the cash store, printers, kitchen display systems, digital menu boards and quick service promoting with the special day. So, the point of sale term is probably 40% of the total installation and these systems last eight to 12 years and the MICROS terminals is actually ruggedized. And people buy them because of their durability, any of it that works in the restaurant back in college as I did knows it’s a very harsh environment, that terminal was banged thousand times per day and we have loads of support globally to provide support to that local restaurant in San Francisco, my hometown of (inaudible) it doesn’t really matter we're global.

So 21% of our business is hardware and about 85% actually is related to restaurants. Our retail and hotel platforms just from run industry standard PCs, we're an HP reseller, major change come by themselves. So, 21% comes from hardware, about 12% comes from license software, plus we're buying the license upfront, pay a single support, rather 67% is actually services. Now the service component, and probably about two-thirds of that was actually recurring revenue. When you look at our business model, our software reported sales were actually license sales. We do have several thousand hotels, that we're actually hosting today paying us on an annual basis and incorporates the software license for support and hosting. That goes into our recurring revenue line. For 142 we had last year was all license and its actually growing this year. we are in a slow transition, may be still gradual transition vertical by vertical, moving larger accounts from the old clients server premise space to the SaaS based application. We're not rolling off to a single restaurant today primarily the change in hotels, restaurants, and retail we're starting to do that. But the launch transition of business, our customers are very conservative. They really want to upgrade their platforms every 10-12 years. So it's like our business model changed overnight, I can offer a customer a traditional license support, or if they want to go to our SaaS model, we are able to do that.

Unidentified Analyst

On a gross margin basis your hardware gross margins are roughly mid-30s?

Unidentified Company Representative

Correct.

Unidentified Analyst

Compared to a blended gross margin of about mid-50s, is that right? Would you ever, how critical is the hardware to the business thing. Do you ever see a day where it becomes, you either pursue a different avenue for the hardware, or just continue having it directly?

Unidentified Company Representative

When you look at the MICROS model, you look back 20 years ago, I've been at MICROS since 1987, really back early 1990s, we're just in restaurants and probably 70%-75% of our revenue was actually hardware. At that time we had embedded software. So at the advent of growing as part of the PC and Windows, we really moved to an open platform in the mid-1990s, and that’s where we bought Fidelio, digging into a different business, also the PCs are probably going to be retail business much more soft in service.

So we actually planned for this transition over 20 years to reduce the importance of hardware in our business, hardware is still a necessary element in restaurants because they are harsh operating demand. But in retail, in hotels, for us to primarily a soft and service business. I do think there is a misunderstanding at times that we are just a hardware company or not. Hardware is a means to end in restaurants. I think we'll always be in the hardware business but as hotels and retail grow which is part of the design by design hardware becomes a smaller piece of the business.

Some of the terminals we have today, we bring in a new tablet in April, because we do want to have some mobility in the platforms, but restaurants are very harsh operating environment. No one size fits every restaurant. We have to do a very small restaurant, a large installation, well as actually Wembley Stadium over in London, we have a close to a 1,000 terminals, lot at the ball park stadium arenas, they are using MICROS. And so these systems need to be ruggedized to withstand those harsh operating demands. But if hardware drops the percent of a biz over time, that’s fine with us, that’s just the nature of the beast.

Unidentified Analyst

So you mentioned the iPad or the tablet, let’s talk about the competitive threat from tablets in general. What, when people go to restaurants now are you seeing folks take orders on tablets, talk about your vision for your product, where it is in its evolution you mentioned it during the analyst day but also just generally speaking the competitive threat that the tablets pose in general?

Unidentified Company Representative

So we have to go back 20 years ago, 1993 MICROS one of the first companies to introduced a handheld ordering computer, handheld we called it MICROS HT handheld terminal, remote ordering in restaurants. And then late 1990s when we used a platform, (inaudible) at the time putting on our credit card readers. So we've actually been mobile for 20 years. in 14, 15 years went to introduced a platform to provide a payment through mobile, used in a lot of ballparks around the world so tablets clearly is the new incarnation mobility.

This clearly has become today promoting an iPad as a basic point of sale terminal. And that's really coming to the low end of the restaurant marketplace; so be it square, company's POS (inaudible) that’s a whole series running on the tablet. A tablet has a role in restaurants and much with the system per se; we've actually had tablets for about three years from a company called DT Research.

We will bring our own tablet really in April because I do think it provides some mobility, it all depends on the environment, a large restaurant will buy some extra tablets made for us because we sell more software licenses. Each one of those we treat as a client and it has to be a software license to go along with it.

Lot of the questions about MICROS durability of our terminals, are we going to be displaced by tablets? The answer is no. There is a role in a very small restaurant; be it at a coffee shop or cupcake very limited (inaudible) trouble the owner, tablets may work, I am not sure about the durability.

Understand our platforms last, typical MICROS terminals 8-12 years. if you take a terminal, it costs $1,400, let`s say it's made your life, that's the capital cost per year of a $175. Clearly low cost per year, a tablet may cost $600, may last two years, but then again, our business we bring out new platforms to meet the different needs.

Our tablets become predominant and hardware drops percent of the business, so be it, we just some software license, but do think the tablets opens up as a new range of lowering of the restaurant marketplace. But our perspective tablets really are dealing no major impact in the retail and hotels because that's primarily a soft end service business. And I will bring up the point that with a large chain last year, that bought over 3,000 tablets for the retail environment, I had an analyst question, are they displacing MICROS, the answer is no, they use them at a retail platform, but they had to buy from us over 3,000 MStore licenses, a platform our retailers call extra which is a Java based POS. MStore is actually a mobile approximately. so for us, that created for us over 300,000 of a license deal, another quarter million dollars of services, the mobility actually expands the market so I think the questions that the (inaudible) because of iPads it’s just another hardware device that we figured how to manage in this business.

Unidentified Analyst

And your tablet is a propitiatory product, correct? And when do you expect it to roll out? When will people have it and…

Unidentified Company Representative

Yes, so we have a platform that was called project (inaudible). When we look at a restaurant environment, you actually need a stand to physically put the tablet in. Our stand will actually have the battery recharger and have the connection to internet, cash store and various ports you need to connect. What's probably start that shifting in April and then the tablet would be called the M tablet, M for MICROS. Now our workstation in the accommodated MICROS tablet are an iPad or another type really different, so we'll sell really two different pieces and our tablet will be actually be compared in price to an iPad. Now, the advantage I think with our tablet will be ruggedized, if you drop it from four or five feet, it won't break. Also you can take it outside in the pool side bar, there will be no glare, so it's highly functional. I think the key thing for restaurants is the fact you can actually lock that application down because the tablet really has no resale value in the open market because it’s just be key to our platform using our software.

Unidentified Analyst

And you made some comments about the impacts of the gross margin, in gross margin on the business on your investment in the tablet. Can you talk about that?

Unidentified Company Representative

Yes. I think what the real question in terms of MICROS if I’ve got a restaurant environment and I’ve got three MICROS terminals that sell for $1,400 and it’s three times 1,400 is $5,000, I got 35% gross margin, level of my goodness if they go with totally tablets with loss at hardware margin. And that perspective is partially at least product because they stop to buy a workstation. Yes, I made some hardware from revenue in profit. I do believe as we start to push our platforms down the low end of the marketplace. Traditionally, what we seen MICROS is that single store one or two terminal, very limited application. Not a lot of money there but we need to be in that segment. I believe it actually opens a much larger market today with our software application that can be deployed via the cloud.

So the market expense I have more opportunities to sell software service and if hardware comes with smaller piece. Yes they do have some hardware margin but that loss of potential profit is actually is really offset by higher software sales, albeit on a SaaS basis.

Unidentified Analyst

And in the near term as you develop the tablet, are you expecting any impact to your margin, as you continue to invest in the rollout of the evolution of the tablet.

Unidentified Company Representative

Not because my hardware margins, my tablets be in the low 40%. So, when you look at the weighted average margin of MICROS on hardware it runs around 35%, that is a blended average of my own MICROS terminals and printers probably up in the mid-40s. We do resell HP, so it's really a blended but my own proprietary when I say proprietary, it is an open platform, my hardware runs other companies' software, it really is in the mid-40s. So that’s been pretty consistent over time and our hardware sales are actually up this year. There's still, hardware is a means to an end in a restaurant of these very large complex sports arenas. So hardware is actually not going away, it's just sort of changing.

Unidentified analyst

Got it, so just sticking with the innovation theme, next generation payment systems, there is a lot being made about Square which obviously presented here, we talked about that, Near Field Communication, how does that impact the business; is that an opportunity, competitive threat and how are you positioning the business in light of that evolution?

Unidentified company representative

Yes, we actually had an analyst meeting a couple of months, really addressed that head on, there's really two separate things you’ve got, mobile payments different from the billing in terms of point of sale platforms. Mobile payments actually helps our business, so as I come back to our industry and our business, everything starts with a transaction, either hotel transaction, make a reservation at a hotel like this, I'm ordering at a restaurant in terms of wine, beer, stake, on retail I'm actually buying a SKU, stock keeping unit.

So the transaction has to be paid for, it's either paid by cash, credit cards, store value card, mobile payment. So, to me a mobile payment is just another way that that transaction was paid for and it links into our system. It doesn't replace the point of sale. As I said, I actually created for MICROS the team 20 years ago integrated credit card payments to our terminals. We only these from standalone terminal. So mobile payments actually creates for MICROS a new opportunity of selling new additional software license support to enable that platform.

So at MICROS today, we've got a really good relation with a company called Tab out of Austin, Texas, dropped in two years ago, actually paid by phone (inaudible). So mobile payments actually helps our business doesn't detract from it, have to separate mobility point of sale terminals from mobile payments.

Yes there's a lot of questions about Square. Square's done a great job providing credit card processing, and they really are a payment acquirer for micro merchants, it's a fairly high rate, 2.75%, typical MICROS restaurants probably doing $2-3 million a year, they get a relationship in existing acquirer probably paying 2-2.1%, so the Square at 2.75 is really too expensive for a larger restaurant or hotel. Their credit card acquiring fees are a lot lower. But Square's done a nice job providing a basic platform for very small merchants and I think that's actually started displacing what I call electronic cash registers with a standalone credit terminal. There is always innovation and about but for MICROS, we are actually with the Starbucks last summer, Starbucks says okay we are going just bring in Squares and payment application that was integrated into our symphony point of sale platform, there was no displacement. We had to right some code to accept payments via the Square Wallet and they really just placed the payment acquirer. So mobile payments actually helps a business, there is nothing negative about that whatsoever.

Unidentified Analyst

You announced the Torex acquisition, can you give an update on the integration, how that’s going in the business evolution and may be also talk a little bit about whether there has been product overlap and how you may be dealing with that?

Unidentified Company Representative

So last May 31st, we are actually announcing the end of April last year close to May 31st, we bought a UK company called Torex was owned by a couple of private equity firms and the Torex was actually one of the leaders, head quartered outside of London was really in the restaurant business and retail business primarily in Northern Europe and UK. Strategically, bought them because we really want to scale our European retail business, or else to get rid of a UK restaurant competitor. So this business is about $190 to $200 million, when you look at the business, about 55% is actually recurring revenue, about 10% licensed software, up 15% hardware and remaining services.

So strategically for us, we dropped the Torex and they fall off into the MICROS retail. So really a double base of the size of a retail business globally. So that’s the strategic reason. Additionally, actually we had some key products that we can use here in the states and they have a very good workforce management for labor scheduling, they have a demand planner for product managers and retail. They also have a web-based point of sale platform that’s not coming to states, they also have a POS product that’s actually used in over 17,000 petroleum convenience stores in Europe. So we're actually working we are bring that to states. So actually quite a very good company, high quality people sales, people infrastructure, now operating under the MICROS retail name. We've got some platforms we're actually bringing aboard to North America. We do plan on taking some of those retail platforms out of Europe, bring them to Latin America and Asia. So, strategically it’s a big deal for us we pay $250 million all cash, previous acquisition we done was no more than $15 million, so it’s largest by a factor of five. We've really done a 18 month integration charge, so it’s actually pretty much on track. So my European team has actually done a great job, we are doing some restructuring, operating under MICROS name and we are starting to see some organic growth, additional license sales coming out of that business unit.

Unidentified Analyst

And any case studies yet of the cross selling of the workforce management or any of the other product into the U.S., or is it too early?

Unidentified Company Representative

It’s too early; we actually launched those platforms at the National Retail Federation Show, literally five weeks ago in New York. I think we'll see in the next couple of months some international sales, of our Torex software in some large accounts we mentioned. But this will take several months to get these platforms presented to customers. But for us it’s actually a very big deal. We probably want to do another European acquisition until Torex is fully integrated that maybe in another nine to twelve months. We are looking for additional companies to buy, in Latin-America or Asia; we've got the cash to do it.

Unidentified Analyst

The NCR acquired Radiant, can you talk about how you are seeing them competitively, has their posture changed at all in light of the acquisition.

Unidentified Company Representative

So our key competitor, and really North America has actually been Radiant Systems. At Atlanta Georgia they were acquired by NCR a year ago, July, about 18 months ago. When I go back in time, when I top of the history of MICROS, NCR actually created the Point-Of-Sale platforms really dominated the restaurants, really through the 70s, early 1980s. Early 1980s they actually moved the business doing the general disk computing and actually created the niche in restaurants that we actually occupied took over. So NCR, has been in the restaurant business providing terminals, some really aging software but really there is not a major factor, Radiant became the largest competitor in North America, in a much international exposure.

Well, now NCR approached them a year ago, July, paid I think $1.2 billion for a company doing about $330 million. All I can say is that, we went from two competitors to one. I am not seeing much impact internationally from NCR. I think they did buy the Brazilian subsidiary. But there are viable competitor in North America. They are probably, if you look at platforms today, see the MICROS is winning a deal or NCR/Radiant winning a deal. But those are large market. And anybody who know me, I do a lot of market analysis. I believe in the next five years, you will see the MICRO is winning a Radiant, a NCR, the Radiant name is actually gone.

Viable competitor, take them seriously. I do think that putting more money and trying to grow international, but does take a long time to develop those international subsidiaries, and we actually did it over a 20 year time span, from really the mid-1980s to middle part of last decade. So from my MICROS perspective, we are directly over 60 countries. It just takes a long time to develop international business. Find a company developing, hiring the people, general manager, and ensure those have a global platform, but it's really not focused on restaurants, that takes a long time to build.

Unidentified Analyst

I'll ask one more question and then I'll open it up to the audience. Open Table, you have a competitive product to open table. It's been I think out for approximately a year and two years, okay. So can you just talk about how it's going, has there been traction with the product?

Peter Rogers

So we have a platform meters, about a year ago last spring, the success has also not been great in Middle E. We got some large tables or restaurants since we use it. Let's step back in terms of restaurant marketplace, it helps to find out. If I look at North America, it's about 300,000 quick service restaurants, US and Canada about 280,000 table service. So I let emphasize the table for table service North America, the 280,000 restaurants sit down; talking about 30,000 and 35,000 actually take reservation since it a fairly contained market.

Now you go internationally, some of the things maybe 10% to 15% of tables restaurants take reservations, Open Table done a great job in the business, I think they have about half the market in the United States. We developed a platform because a number of customers use Open Table, didn’t like to see and developing around those types of marketings. so my platform is actually better suited for restaurants including our marketing.

I don’t have that network effect nor am I going to build 18,000 so I think there is some integration if we are looking at doing with Open Table. But for us, I am much more concerned selling a complete platform and selling really online ordering, online ordering, would go not only to a table service, to a quick service, it's a much larger market. We can't be all things to our people, so we actually provide connectivity, we're looking how do we integrate Open Table under a table management. so then again I come back, think that MICROS is really the sun if we can provide the platform, we are very open to third party solutions like under our database pulling data out.

Unidentified Analyst

Peter I was wondering if you could comment across your install base, how many customers deploy to a single sight versus multiple locations across your install base today?

Peter Rogers

That’s a week time install base in restaurants below the 350,000 sites; that's a great question, it's hard to be precise. My best analysis is about 70% of our restaurant business; install base would be independent. The 30% would be chain based. (Inaudible) when you look at the amount of stage; I come back with a 280,000 tables of restaurants. The chains only represent about 45,000 sites so only about 12 or 13% of sit down restaurants, tables sort of is chain related, it's very much an independent marketplace. In the quick service, the 330,000 North America that change represent about a 180,000 sites. So, it’s clear we're chain down, but still a lot of independence and we provide platforms both the largest chains, down to very small restaurants then again I am probably too expensive from that single store ethnic run restaurant via Greek, Chinese, Thai. Family run business will well will not spend a lot of money on technology they have a really low end system and there is some other dynamics about that. I am really better off to a restaurant where the owner doesn’t want to be there all the time. They need a system in place to run the business, to prevent their employees from stealing.

Now internationally, chains made, if you went to Italy, you may have some quick service, but most of the restaurants in Italy are family run, they don’t really have chain restaurants and table service. So an odd business, if I have to be attuned of all the various regional country differences. But I would say from our business, 70% independent 30% chain, but the chain clearly is one of the largest opportunities for us as a lot of these plat chains have platforms, when companies run out of business and they are really up for renewal in the next five years, that’s based in North America, and they see the MICROS and NTR.

Unidentified Analyst

If you see any collaboration going on with some of the equipment manufacturers such as Middle B around integrating with the point of sale with the equipment.

Unidentified Company Representative

From a restaurant side, I have my own point of sale terminals and the retail in hotel side, we're running on an industry PC. So, there we resell HP, or actually IBM reseller and that thing is now Toshiba. But we're an open platform. Even restaurants my software can run on someone else’s hardware platform. I use the term I've got proprietary hardware, but my hardware is actually an open platform just like my hardware runs other company's software, so we’re fairly open. But what people like more restaurants, question is that we can provide a complete platform to a restaurant. So, we collect all the hardware and we sell it, if I don’t some piece, but then we'll collaborate for a reseller, or some type of licensing with platforms we don’t provide.

Unidentified Analyst

There is talk around M2M, the machines communicate with the point of sale to gain some efficiencies within restaurants.

Unidentified Company Representative

I am not with M2M, I just…

Unidentified Analyst

Two questions, first could you just remind me of your market share and the three segments and your current appetite for further consolidation, acquisitions over the next couple of years.

Unidentified company representative

All right, in terms of market share, great question, when you look at the restaurant, there's something called bi-vertical, in restaurants there is 6.5 million restaurants globally, about 1 million in North America. So when I look at our install base, we're a large market. I guess mainly about 2 million restaurants of the 6.5 actually have a sophisticated system. So two-thirds of the market today actually have very low end, still cash based, to very low end cash registers. Over time they will start to move, but of the two million we probably have globally of 350,000 sites maybe about 15-18% market share globally.

If I put it down to the U.S. we're a little bit more definitive, probably have about a 35% market share and tables for those restaurants about 25 in quick service. In hotels it's about 470,000 hotels globally. If I look at the chains, it's about 65,000 of the 470 actually related to chains. So really of that segment we have approximately about 30% of the chain sites install representing about 40% of hotel rooms. It's really a dominant position in the chain, they're always provide the internal platforms. So MICRCOS is 30, internal platforms some of the chains run around 35, so two-thirds are really by two internal the other 35 a series of small companies. So we really see tremendous growth. A lot of these chains are moving off their internal platforms to our platform offer. In retail, there is about 5 million retail establishments in North America and Europe, we have an install base about of 150,000, so we're actually pretty small.

When I look at growth potential, retail is actually the largest untapped market, just because of the number of sites, but in chains, we're actually only focused on, I mean (inaudible) we're only focused on chains, another solution today for that single store, when a platform you got from Torex, called MICROS (inaudible), whether you will actually start offering that to a very small retail merchants here in North America. So we eventually plan to get into that segment but that's about a year out.

Unidentified analyst

And just one second question. On the 50% of your revenue that is recurring revenue, how much of that is SaaS and software maintenance and how much of that is support for hardware?

Unidentified company representative

Well the question really relates to our recurring revenue in SAS, if you look at our recurring revenue this year, it's probably somewhere trending about $550 million. of that $550 about $90 to $100 million is actually SaaS related. So its only about 18% and that SaaS does incorporate the license support and hosting and difficult from accounting perspective prospect to separate that but that particularly yes, has actually grown about 25% per year and to me we'll continue to grow as we get customers especially, some of these major change we are working on as a displacement internal platform, should be moving for SaaS, that’s actually the most exciting key for our business, as moving these large chains up the old client server, at the hotels and restaurants and eventually retail. And we're well enough to do that, we've got our infrastructure in place, with hostings around the world and our software is actually well attuned to do that. But still my customers especially restaurants who are very cautious, it's been slower pick up than we have anticipated, I think as the (inaudible) start to recover and our Symphony platform matures, we really start to see significant pick up over the next 18 to 24 months.

Unidentified Analyst

(Question inaudible)

Unidentified Company Representative

No, it’s all bundled but about 25% of our recurring revenue outside of SaaS is actually related to hardware. The part of hardware exposure in the business is probably about 30%, 20% of our hardware sales, about 10% of our revenue would relates to hardware and maintenance. Remember, this goes back to a tail of 10 to 12 years, even with the growth of tablets, there is still support needed in terms of a hardware.

Unidentified Analyst

Great, we're actually out of time. so I want to thanks Peter for joining us.

Unidentified Company Representative

Thank you.

Question-and-Answer Session

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Source: MICROS Systems Management Presents at Morgan Stanley Technology, Media & Telecom Conference (Transcript)
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