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Executives

Tom Giannopoulos - Chairman, President, and Chief Executive Officer

Cynthia Russo - Executive Vice President, Chief Financial Officer

Thomas Patz - Executive Vice President, Strategic Initiatives, and General Counsel

Peter Rogers - Executive Vice President, Investor Relations and Business Development

Analysts

Mayank Tandon - Needham & Company

Dan Perlin - RBC Capital Markets

Ross MacMillan - Jefferies & Company

Gil Luria - Wedbush Securities

Keith Housum - Northcoast Research

MICROS Systems, Inc. (MCRS) F3Q12 Earnings Call April 26, 2012 4:45 PM ET

Operator

Ladies and gentlemen, thank you for standing by and welcome to the Fiscal Year 2012 Third Quarter conference call. During the presentation, all participants will be in a listen-only mode. Afterwards we will conduct a question-and-answer session. (Operator Instructions) As a reminder, this conference is being recorded, Thursday, April 26, 2012.

It is now my pleasure to turn the conference over to Mr. Tom Giannopoulos, Chairman and CEO at MICROS. Please go ahead sir.

Tom Giannopoulos

Thank you, Pascal, and good afternoon everyone. Thank you for being with us. As a reminder this is a conference call to review the financial results for the third quarter of our fiscal year which is the March quarter of our fiscal year 2012, which started in July and ends in June.

With me here are Cindy Russo, our CFO; Peter Rogers and Tom Patz. And we’ll begin with Peter Rogers and the disclaimer.

Peter Rogers

Thank you, Tom. Good afternoon, ladies and gentlemen. Some of the comments today are forward-looking statements that involve risks and uncertainties such as uncertainties of product demand and market acceptance, impact of competitive products and pricing on margins, the ability to obtain on acceptable terms the rights to incorporate in MICROS' products and services technology patented by others, unanticipated tax liabilities and the effect 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' expectations. Other risks and uncertainties associated with MICROS' business are identified in the management's discussion and analysis of financial condition results of operations and business and investment risk sections of MICROS' SEC filings. Tom?

Tom Giannopoulos

Okay. Peter, thank you. Looking at the financial results from the press release for the quarter and nine months year-to-date as far as revenue was concerned, we came in at for the quarter at $278.044 million versus last year’s $253.193 million. That’s a year-to-year growth of 9.82%. You can add some there $3.8 million, the result of negative impact of the exchange ratios. And then some couple of $1 million of license revenue that was converted to SaaS, then we could have had an increase quarter-to-quarter of about 12%.

From our point of view it’s an excellent performance, even though the economic conditions have not really improved. Year-to-date revenue increased to $805.005 million versus $733 million last year. That’s a 9.71% growth and if you adjust for the foreign exchange you would have been of to 10%. Gross margin for the quarter is $152.593 million, or 54.88. For the nine months gross margin came in at 55.83% for fiscal year 2012 versus 55.23% which was probably the fiscal year 2011 for the nine months. A slight improvement over last year.

Operating income for the nine months has improved to $176 million which is 21.87% from $154 million, 21.5%. An improvement on the operating income percentage and dollars as well. Still on a non-GAAP basis, and year-to-year and to first nine months, net income and EPS improved. Net income improved from $110 million to $126 million, that’s 14.75%. And EPS improved from $1.34 to $1.55 which is a plus 15 point, 6%-7%.

Cash now stands at $863.5 million. Last quarter we were at $785 million. And Cindy will explain the additional balance sheet numbers.

Cynthia Russo

Thanks, Tom. The highlights for the balance sheet for the quarter are as follows. Cash on hand at March 31, 2012 was a record $863.5 million, an increase of 10% or $78.5 million since our quarterly release. Year-to-date MICROS has generated $131. 6 million from operating activity while receiving $29.7 million from the net maturities of investments. These reserves are primarily located in our European region were planned to mature as part of our global cash strategy to fund an acquisition. More to come on that shortly from Tom.

During the nine months period, MICROS capitalized $5.9 million in internally developed software cost, while capital expenditures totaled $13.4 million, predominantly to fund the expansion of our global data center. Additional cash for our pilots this year included an adverse impact of foreign exchange amounting to $32.9 million and the repurchase of $53.7 million in common stock. During the third quarter we purchased a total of 102,000 shares at an average price of $51.6 per share. Thus far in fiscal 2012, the company has repurchased 1.2 million shares, leaving an additional 1.75 million available for purchase.

The company’s cash split by segment remains steady at U.S. 42%, international 58%. Days sales outstanding at quarter end were 67.4 days. As you recall our third quarter is typically our highest from a DSO perspective as international biannual maintenances selling and domestic calendar year invoicing occurred simultaneously in January. Domestic DSOs were 44 days, while international DSOs were 86.6 days. The inventory balance of $36.7 million is a nominal decrease of $600,000 or 160 basis points over the December period.

Inventory turns in the period were 9.1, a match to our Q3 record in fiscal 2011. The combined current and long-term deferred revenue balance of $174.9 million has increased $33.7 million since Q2. A few additional items related to the income statement are as follows. On the revenue side, the segment split for both the quarter and the year are domestic 43%, international 57%. As Tom mentioned, on a constant currency basis, MICROS sales grew 11.3 over the parallel period affected by an FX decrease amounting to $3.8 million.

From an EPS perspective, foreign exchange caused a one penny decrease in Q3 and had a neutral effect for the year. The recurring revenues for the quarter grew 11.1% from the prior year to $109.2 million or nearly 40% of total revenue. The SaaS and hosting portion of recurring revenues grew 46% over the parallel quarter. We forecast SaaS revenues in fiscal 2012 to come in around the $75 million marl above our internal budget and initial expectation. Non-operating income for the quarter was $1.6 million, this figures includes $1.8 million in interest income offset by $0.2 million in interest expense.

The currency loss this quarter amounted to $0.3 million and the company recognized $300,000 in other income. Finally, as you may recognize, our Q3 tax rate is reduced to the expiration of FIN 48 statute of limitation. From a modeling perspective, we recommend that you model a 30% to 31% full year tax rate from both a GAAP and non-GAAP perspective. Tom?

Tom Giannopoulos

In summary we had a nice Q3. We are very pleased with our performance there. And the first nine months of the fiscal year 2012 have been excellent performance as well. We have had close to double digit revenue growth. We had gross margins at 55.83%, which is a very healthy number. Operating income for the nine months stands at 21.87%, $176 million. And then double-digit net income and EPS growth as well.

And all these numbers were accomplished for us considering very challenging business conditions as well. GDP growth around the world have been cut even further since the last time we talked, with China, India, Germany, UK. The debt issues continue in Europe, now it’s Italy and Spain before that it was Greece. And as a result we continue to invest and introduce new products and services which as I said in February will drive our revenue growth in the next five years, at least. And we will continue to use our cash to reach our goal of $2 billion in five years by 2016 thereabouts, as I have said a number of times before. By not 2016 and (inaudible). And Pascal we will take questions now.

Question-and-Answer Session

Operator

(Operator Instructions) And our first question comes from the line of Mayank Tandon with Needham & Company. Please proceed.

Mayank Tandon - Needham & Company

Thank you, good evening. Congrats Tom on another solid trend. I wanted to first ask you if you are reaffirming guidance. I know you have provided guidance before for fiscal ’12. Are you reaffirming or any changes to your guidance for revenues....?

Tom Giannopoulos

We are reaffirming the present guidance, yes.

Mayank Tandon - Needham & Company

So just for the reminder, that would be $1.11 billion in revenue and 2.09 in EPS.

Tom Giannopoulos

Correct. That’s the number that we gave in August. I think the number that is out there now is 11107 and 2.15 for EPS.

Mayank Tandon - Needham & Company

Okay. So basically you are reaffirming the expectations out there. I just wanted to be clear.

Tom Giannopoulos

Correct, yes.

Mayank Tandon - Needham & Company

And then just moving on to business trends. Could you comment on maybe the pace of activity that you have seen across your three key segments. Hotels, restaurants and retail and also some color on bookings trends.

Tom Giannopoulos

The trends are really you know slow but moving forward. The restaurant business is a bit more active. The hotel is beginning to be active. As you know we count on two large opportunities that we have there for the future. And we look very good there. And retail, it depends. Hot and cold. But at the end of the day I think there is a good opportunity for us on the retail sector since we still have a small base in this difficult time.

Mayank Tandon - Needham & Company

Can you give us an update in terms of the timing on those two larger hotel opportunities?

Tom Giannopoulos

Well, we are still going through the learning the gaps between the products and I would say then we will go through development of specific items for these customers. So I am not counting, at this particular time we are not counting on any revenue other than some development revenue probably until fiscal year 2014 period. Believe it or not, 2014.

Mayank Tandon - Needham & Company

Fair enough. And then you talked also about potential product cycle upgrades especially around Symphony and just wanted to see if that’s starting to actually hit the broader market and are you seeing traction for that, just given the strength in or the hardware.

Tom Giannopoulos

Right. Right. Especially, Symphony is gaining good traction. It’s a very good product and the strategy there is to replace not only our own product but competitive products in hosted environment.

Mayank Tandon - Needham & Company

Just two more quick questions. One is, IBM recently sold their POS business. I wanted to see what your thoughts were around that. Is that going to help you or does that create more competitive pressure? And also wanted to just get some talks around the impact of the Radiant acquisition by NCR last year, you know how has that played for you competitively?

Tom Giannopoulos

I think both of them are status quo from that point. The IBM isn’t going to do anything and then the NCR Radian acquisition is replacing two competitors with one. So we don’t see anything other than normal business.

Operator

Thank you. And our next question comes from the line of [Alan Winfield of Wedbush Securities]. Please proceed. (Operator Instructions). Thank you. And our next question is going to be from the line of Dan Perlin with RBC Capital Markets. Please proceed.

Dan Perlin - RBC Capital Markets

Thanks, guys. I have several questions. First of which is, you announced Torex. And in the press release it was pretty thin in terms of detail, so if you could maybe give us a little more that would be fairly appreciated?

Tom Giannopoulos

I will have Tom Patz, who is besides bring our Chief Counsel is also our business development person, executive. I think this is the first time you will hear his voice even though he has been in for ten years, I think. Anyway, Tom?

Thomas Patz

Dan, let me clear for everyone just kind of a brief overview of what's happened. We are pleased to confirm that just earlier today, about 60 minutes ago, we signed a definitive agreement to acquire all the stock of Torex Retail Holdings from two private equity firms. Based right outside of London, Torex has offices in most of European countries. It has a broad array of retail technology product that accordingly fits very very well with our footprint. Specifically Torex offers advanced point of sale product to multiple back office products. Many types of retailers including specialty retailers, telco retailers, a few in convenience store industry and the pub marketplace. Its products are complementary to those offered by our U.S. retail division. Actually adding many capabilities we currently do not offer today. Such as merchandizing software, warehouse management software and certain business intelligence software.

The acquisition is consistent with our stated global objective, our stated objective to grow internationally our MICROS retail technology business. Approximately 95% of which today is still in North America. Compare that with what Torex got, 98% of Torex’s business and customers are in Europe, spanning Germany, the UK, Benelux and the Nordic countries. Because Torex is present in New York, we add in established sales and service infrastructure which will help launch our retail technology initiatives in Europe. We hope that we can introduce many of our U.S. products now more effectively in Europe.

In terms of some of the financials, we paid approximately £114.5 million for Torex. Part of the transaction we also assumed about £48 million of debt which we intend to discharge in full. As always has been our practice, we will provide full fiscal year guidance on our earnings call in August as the dust is still settling on the transaction as we are still really in the process of reconciling all of Torex’s IFRS numbers. The International Financial Reporting Standard numbers with our GAAP numbers. We will provide only very high level overview at this time with more precise guidance during our August call.

So specifically in the 12 months following closing, and again, we haven’t closed yet. We just signed a definitive agreement. We are currently projecting Torex will add about $140 million to the $150 million in sales and will be EPS neutral on a GAAP basis. On a non-GAAP basis we believe Torex will add approximately $0.04 to $0.06 per share, in the 12 months following the closing of the acquisition. Again, the acquisition has not yet closed so there will be no material impact on our financial performance, if any at all for fiscal year 2012. The closing is still subject to certain mandatory government approvals and which we hope we will have in the next 60 to 90 days. Okay, Dan.

Dan Perlin - RBC Capital Markets

Yeah, that’s great. Just to be clear the 140-150, that’s in U.S. dollar or in pounds?

Thomas Patz

That’s correct. In U.S. dollars.

Dan Perlin - RBC Capital Markets

Okay. That’s super. It’s nice to hear your voice. Can you come on more often? Just another couple of follow-ups, if I could. The mix in the quarter was, at least in terms of its revenue was different then I was certainly anticipating. Now I know you put in a price increase in January for maintenance. I would have thought services would have had a sequential uptick. So first can you talk about the drop off in services in the quarter, reconciling that with the commentary that you did convert some stuff over the staff. And then secondly, the hardware was incredibly strong at least relative to our forecast here again, as was software. And I just want to make sure I understand the dynamic that kind of took place in the quarter.

Peter Rogers

Dan, in terms of hardware, we are seeing a continuing trend of cyclical demand at the street level both in U.S. and abroad, internationally. So I think it’s almost like this year is an inflection point of just restaurant demand really picking up at the street level. Major accounts are still somewhat hindered I think by the global economy, but we have just seen a good pick of the street business here and abroad. License revenue in against a very strong quarter. A lot of people ask is everything moving to SaaS, the answer is no. Large parts of the world still apply to license and we had a very good quarter in the restaurant demand for license revenue.

Service revenue in terms of maintenance. I mean they moved up a bit we did a take a rate increase in January, of course that’s timing. In only three months we had this quarter. Our service number does have other things in there in terms of professional services. I know a year ago we had some recognition of some large retail delta. So it is a bit lumpy. So yes, the service is a bit lower than anticipated but not really any major change in secular trends.

Dan Perlin - RBC Capital Markets

Okay. And then, Tom, you made a comment about development revenue. You thought you would recognize development revenue in 2014 as a result of these two bigger sales. Did I hear you right on that?

Tom Giannopoulos

No. Development, yeah, yeah. Some features and functionality that they may want. Sometimes we charge for development, sometimes we don’t, it depends. So, yes, there will be some development that we will invoice at that particular time, 2013.

Dan Perlin - RBC Capital Markets

2013, you release that, okay. Which indicates you are going down -- you are obviously down the pipe with these guys pretty far, if you are potential development. Now the other question I have is, there is still a pretty large RFP out there for (inaudible). And there is talk about you guys being in a pretty good position for that. I was wondering out there if you can give us, sounds like there might be Symphony, it could be some hardware associated with that. Anything updated from there?

Tom Giannopoulos

I can't give you any information at this time.

Dan Perlin - RBC Capital Markets

Fair enough. And then also just lastly on Starbucks. Someone asked a question earlier about the sale of IBM’s point of sale business. My understanding is a lot of that stuff is still tied in the IBM at the point of sale. For Starbucks that would seem to open up the opportunity for you guys to sell hardware into that relationship you have, I mean the software that you sell to them. What are your thoughts there?

Tom Giannopoulos

Absolutely, yes.

Dan Perlin - RBC Capital Markets

Okay.

Tom Giannopoulos

Yeah. We are basically -- you know we have basically no opportunity before we have been told now, because of IBM and relationship and so forth. Now, yes, you are right it opens up slightly the door for us to go in and see what we can do with our own hardware.

Dan Perlin - RBC Capital Markets

Okay. Excellent. Good deal and I am excited with the excellent performance. Thanks so much guys.

Operator

Thank you. Our next question comes from the line of Ross MacMillan with Jefferies. Please proceed sir.

Ross MacMillan - Jefferies & Company

Thanks a lot. Tom, I just wanted to recap of what you said early on about software revenue and the fact that maybe it was understated by $2 million because of a shift to SaaS. Is that what you said?

Tom Giannopoulos

Yeah. There is some revenue there and probably why you see the hardware number being a little bit better than expected and that is a lot of our customers -- not a lot of our customers -- some customers today instead of buying a brand new system and then pay on a license basis like they used to, they will buy a system and pay on a SaaS basis simply because economic conditions are not strong. So that’s what you see I think with those particular numbers.

Ross MacMillan - Jefferies & Company

I see. So that was why hardware is effectively outgrowing software because of the fact that you are deferring more of the software revenue?

Tom Giannopoulos

Yeah, yes.

Ross MacMillan - Jefferies & Company

And can I ask just on the SaaS revenue itself. I know we got the number for the growth rate. Could you help us out with the ballpark absolute SaaS revenue number?

Cynthia Russo

Yeah, the SaaS revenue -- SaaS and hosting for the quarter was $19.5 million.

Ross MacMillan - Jefferies & Company

19.5, that’s great. And then I also had a question on the IBM sales of its POS business. You know IBM got out of the PC a few years ago, I think they did so because they felt that there were some changes in the market, structural challenges to growing that business. And here they are coming out of the POS business. I am just curious to get your sense for whether you think there is any motivation on the same basis, and more broadly, what sort of evidence are you seeing today of independent restaurants or other retailers using non-traditional POS systems and perhaps deploying tablets and so forth into their workforce.

Tom Giannopoulos

Well, it’s a lot of tough questions there. But let me start by saying, IBM I think left the POS business and so forth back then 20 years ago whatever. Because the market was not large enough for them. Okay. I mean we are talking about 1990, we are talking about maybe a billion dollar market, size wise. And to them that was not significant and also they weren’t really effective and competitive, so they left that scene the same way that NCR did. But that created an opportunity for MICROS because MICROS was a small company and when you are talking about billion dollar market, that’s a large market for a small company. So that’s why I think we were successful.

In regards to the iPads and so forth that you are talking about, we are aware of it. We have products developed already. They are in pilot form. You can see them in X number of restaurants in the Baltimore area and we will show a number of them at the NRA show in Chicago in May.

Operator

Thank you, sir. And our next question comes from the line of Gil Luria from Wedbush Securities. Please proceed.

Gil Luria - Wedbush Securities

Thank you. Close enough. First question is about Torex. I mean it sounds like the main reason you bought them was to extend your retail capability internationally. But I have to say you guys have been very patient with your acquisitions over the years. This is a relatively big one for you. What is it that got you excited about Torex beyond just the ability to go internationally with the retail business.

Thomas Patz

Gil, I think you actually hit the nail on the head. They do have, as noted before, a very very large footprint in all of Europe. And as noted our footprint is very very small. So we see some terrific cross-selling and cross-marketing opportunity not only introduction our product, MICROS retail products into Europe and elsewhere, but also introducing their products here into North America. And some of those products, for example, merchandizing products we have historically lacked and warehouse management software products which we have historically lacked here in North America. So we were excited about the folks at Torex. We have been following them for years. We always thought for years it would be a terrific complementary fit by virtue of the fact that both from a technology standpoint and from a geography standpoint there is very very little overlap.

And we still have a lot of confidence in the retail technology space. We actually it will enjoy impressive growth over the next few years.

Gil Luria - Wedbush Securities

Got it. And then my second question is about contactless and contact-chip card, EMV and NFC and the adoption. You guys with a big presence in Europe in the restaurant and hotel space have already seen the deployment of those technologies. As Visa, MasterCard put us on the path of implementing them in the U.S., how do you see that as adoption playing out. There’s a software line in 2015.? Do you expect the adoption of EMV and NFC to happen before that? And how was that going to impact your product development in this timeframe.

Peter Rogers

Well, I will take that. Well, we are conscious of that. Whether 2015, that’s clearly out of our control. But what a lot of people don’t realize that EMV stands for Europay, MasterCard, VISA. It’s the security standard that’s been in effect in Europe. Just recently introduced in the Canada and of course Visa, MasterCard are trying to push it in. We actually support EMV. It really does address some real security issues that exist with point of sales systems and other related retail platforms. So that is actually positive. It will cause, assuming that it comes through 2015, all the customers really have to upgrade their software to most recent version.

From our perspective that may drive some additional license revenue, installation revenue, and cost as we get rid of small platforms. So that technology change is favorable and it does address a significant security issue that is about there today. So we are positive, we just didn’t have it better. But we have been dealing with this for ten years. So it’s additive but it’s not what I call a sea change to our business.

Gil Luria - Wedbush Securities

Got it. And then in terms of mobile, what are the -- if you wouldn’t mind giving us all a bit of preview of what you are going to exhibit in May and some of the things you are doing? Which of these technologies is most exciting to -- I mean you have a deal with a company called Tabbedout that allows you to check out your table without any pieces of equipment. Is this more of the direction that you are going to go, integrating those kinds of solutions like Tabbedout a level up, or are you going to build more of the solutions that require the retailers or the restaurant have a mobile device.

Peter Rogers

Okay. Well, Tabbedout relationships goes back a year ago. Very nice company out of Boston, Texas. We introduced that to the general marketplace for North America. We have one of our four significant restaurant chains adopting that. So we are probably going to use the base for the knowledge to the pop the first inning with payment by phone here in the States. We did do an announcement several weeks ago, introducing the Google Wallet. So we put them into the restaurant under our retail platform. And really all our new products are mobile enabled in terms of payment of ordering online. And as Tom said, we will have the restaurant tablet implementation available two weeks at the restaurants show in Chicago, back of the National Retail Federation.

So early this year in January we introduced our iPad implementation on the retail side. So we fully embrace mobile computing on all our platforms and you start to see our R&D reflect some of that additional investment. So it’s really fundamental not only here but abroad, we have to make our products that go to people who order online be it in terms of hotel reservations, restaurant reservations. We will launch our restaurant reservation product formally in Chicago as well as ordering. We just did the announcement a couple of weeks ago with (inaudible). They are using our online ordering. So we are fully embraced to make it easy for customers to deal with our customers online.

Operator

Thank you. And our next question is from the line of [Alan Winthel]. Mr. Winthel, please proceed?

Unidentified Speaker

Have you guys taken any book beyond June 30 into the, I guess the second half of the calendar ’12. And I know you guys say it’s tough around the world but it looks like a better holiday season, I mean I guess this past year’s wasn’t that bad for retailers but travel looks like it’s up a little bit, meaning more business meetings or going around in hotels or some. And the earnings looks like they are coming up as the quarters go by for the hospitality industry. Does that mean we really shouldn’t look for any more than 9% revenue growth in the quarters beyond June 30 this year? I mean do you (inaudible)?

Peter Rogers

Alan, I am going to put formal guidance with the August call. I think what the current uncertainty, and as I said, the uncertainty caused one of our major chains to be very reluctant to major upgrade. But small restaurants and hotels, they may make that. I think from a modeling on base MICROS, of 10% revenue growth is the good base. But we will give formal guidance and of course as Tom had said, at the August we will then, assuming the Torex is closed by then we will add in what the effects is going to be on a fiscal year basis. But to give you a high level, I think at this point given the uncertainty of the 10% revenue growth and EPS growth in fiscal ’13 over ’15 excluding the addition of Torex. Well, that’s how we can say at this point.

Unidentified Speaker

So the IBM moving ahead of the market and you know I think that something -- I am talking for six months from now that can really bolster your business because I see IBM hardware, if it’s not MICROS, I mean that’s your IBM or sometimes I see Toshiba out there. I am talking in hotels, restaurants or supermarkets. And I don’t know, I can't see how you guys can't be in there when IBM has just not going to be there?

Thomas Patz

We think it’s positive. It just happened, we don’t have any calibration. Toshiba play was strong in other parts of the world not really a presence here in North America. As Tom Giannopoulos said that’s what we thought for us grew but it’s hard to put a numeric calibration on that.

Operator

Thank you. And our next question comes from the line of Keith Housum with Northcoast Research. Please proceed, sir?

Keith Housum - Northcoast Research

Thanks gentlemen for taking my call. I appreciate that. I’m just -- and I will follow up with Torex if I may. Is that business that you are acquiring there, is that both hardware and software or is it predominantly software and services.

Tom Giannopoulos

A combination. There financial model in terms of size of the component of hardware the component of services and the component of software is fairly similar to ours. About 70% of services, about 20% of hardware and about 10% of software.

Keith Housum - Northcoast Research

So similar to MICROS business as a whole as opposed to the retail businesses. If I understand it correctly, the retail business of MICROS is primarily software in services as opposed to hardware. Correct?

Thomas Patz

That’s correct. And Torex has a bit more of hardware but again as holistically, it is comparable, very comparable to MICROS.

Keith Housum - Northcoast Research

Got it. I appreciate it. Thank you. And then one question in terms of trends throughout the quarter. Were sales pretty consistent during the quarter from what your expectation would be or were they perhaps stronger as you exited the quarter? Can you provide perhaps just a little bit color about how sales went throughout the quarter?

Tom Giannopoulos

Well, for the March quarter, they were consistent with what March quarters look like. Which is, it depends on weather and things like that. And so it was, March was a much stronger month let’s say than February and January but consistent with the previous looks.

Operator

Thank you. And our next question comes from the line of [Eric Clemens] with Raymond James. Please proceed, sir.

Unidentified Analyst

Thanks guys for taking the question. Just a follow up again on the Torex acquisition. If you could just provide us quantitatively and qualitatively on their growth they witnessed recently and then just how they kind of fared in ’08, ’09 timeframe?

Thomas Patz

Eric, the growth profile has been single digits but you have to realize about their history. Obviously they were a high flyer, ran into some issues in the 2007 timeframe. Two large, well established private equity groups came in and had to right size it and rationalize many of their products. And in the processing of throttling back their growth, they get converted into a profitable company. So our expectation is, once we can fully integrate them into our operations over the next 9 to 18 months, we will be able not only to make them more efficient but we will also be able to better position them for growth, once we again introduce some of our products into their channel.

Unidentified Analyst

Okay. Great. That’s really helpful. And then you guys have talked about acquisitions recently, more so in the security side. You said this is kind of a technology, but is there any sort of technology from Torex that is positioned more in the security side. And if not, is there still acquisition interest in that particular area as well?

Tom Giannopoulos

Yeah, there is nothing in Torex that is security, let's say basically related. But our goal still remains to look at what's out there. Unfortunately evaluations for security companies have gone substantially high and but we are still looking to that, what I would call the fourth vertical.

Operator

Thank you. And our last question comes from the line of [Leonardo Praspo with James Capital Markets] Please proceed, sir.

Unidentified Analyst

Good afternoon and thank you for taking my question. With regard to your acquisition of Torex, I was just wondering if you could give us any financial details. I mean is it a cash acquisition or how are you paying for it?

Thomas Patz

Leonardo, we are funding this completely with our own cash. We will not be dipping in the line of credit or borrowing from any other third party resources.

Unidentified Analyst

Okay. Thank you. And bigger picture. Given some of the developments overseas, particularly in Europe, I mean just wanted to I just wanted to hear your thoughts on if you’re just generally feeling better or worse with the business there? Particularly, obviously MICROS business overseas. That’s it, thank you.

Tom Giannopoulos

I mean, look the business there we have a large -- we do good business in Europe. Of course €200 million-€300 million. So it’s an important area. We all know that there has been problems. We all know that the GDP growths have been sliced downwards. But at the same time it’s a good opportunity. We can acquire somebody not so expensive and we can continue to grow because we are very strong both in -- I mean in all the areas, restaurants, hotels. And now we will be on retail. One of the original reasons that we said when we acquired Datavantage, retail business there in Cleveland, was that we wanted to expand their products internationally. But it was not such as an easy task because we didn’t have any infrastructure in place on the street, let's say. And they have a large healthy sales force and support organization and that will give us the opportunity to sell not only their own products internationally but our own products here as well. Which we weren’t able to do so successfully, let’s say with the infrastructure that we have had, we will get advantage.

Operator

Thank you, sir. And this was our last question. Mr. Giannopoulos, I will turn the call back to you for your closing comments.

Tom Giannopoulos

Thank you, everyone. And we will talk to you in August and we will go from there. Thank you.

Operator

And ladies and gentlemen that does conclude the conference call for today. We thank you for your participation and ask that you please disconnect your lines.

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