Call ST: 17:00
Call ET: 17:55
Mercury Computer Systems Inc. (MRCY)
F2Q 2013 Earnings Call
January 29, 2013 5:00 p.m. ET
Kevin M. Bisson – FO & SVP
Mark Aslett – President & CEO
Peter Arment – Sterne Agee
Tyler Hojo – Sidoti & Company
Brian Ruttenbur – CRT Capital
Michael Ciarmoli – KeyBanc Capital Markets
Howard Rubel – Jefferies
Jonathan Ho – William Blair
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Thanks Brian, good afternoon and thank you for joining us. With me today is our President and Chief Executive Officer, Mark Aslett. If you have not received a copy of the earnings press release you can find it at our website at www.mrcy.com.
We’d like to remind you that remarks that we may make during this call about future expectations, trends and plans for the company and its business constitute forward-looking statements as that term is defined in the Private Securities Litigation Reform Act of 1995. You can identify these statements by the use of the words may, will, could, should, would, plans, expects, anticipates, continue, estimate, project, intend, likely, forecast, probable and similar expressions.
These forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those projected or anticipated. Such risks and uncertainties include but are not limited to continued funding of defense program, the timing of such funding, general economic and business conditions including unforeseen weakness in the company’s markets, effects of continued geopolitical unrest and regional conflicts, competition, changes in technology and methods of marketing, delays in completing engineering and manufacturing programs, changes in customer order patterns, changes in product mix, continued success in technological advances and delivering technological innovations, changes in U.S. government’s interpretation of federal procurement rules and regulations, market acceptance of the company’s products, shortages in components, production delays due to performance quality issues with outsourced components, inability to fully realize the expected benefits from acquisitions, divestitures and restructuring or delays in realizing such benefits, challenges in integrating acquired businesses and achieving anticipated synergies, changes to export regulations, increases in tax rates, changes to Generally Accepted Accounting Principles, difficulties in retaining key employees and customers, unanticipated costs under fixed price service and systems integration engagements and various other factors beyond our control.
These risks and uncertainties also include such additional risk factors as are discussed in the company’s filings with the U.S. Securities and Exchange Commission including its Annual Report on Form 10-K for the fiscal year ended June 30, 2012. The company caution readers not to place undue reliance upon any such forward-looking statements which speak only as of the date made. The company undertakes no obligation to update any forward-looking statements to reflect events or circumstances after the date on which such statement is made.
I’d also like to mention that in addition to reporting financial results in accordance with Generally Accepted Accounting Principles or GAAP, during our call, we will discuss several non-GAAP financial measures, specifically adjusted EBITDA and free cash flow.
Adjusted EBITDA excludes interest income and expense, income taxes, depreciation, amortization of acquired intangible assets, restructuring expense, impairment of long-lived assets, acquisition costs and other related expenses, fair-value adjustments from purchase accounting and stock-based compensation costs. Free cash flow excludes capital expenditures from cash flows from operating activities.
Reconciliation of adjusted EBITDA to GAAP net income and free cash flow to GAAP cash flows from operations are included in the press release we issued this afternoon.
I’m now pleased to turn the call over to Mercury’s President and CEO, Mark Aslett. Mark?
Thanks Kevin. Good afternoon, everyone, and thank you for joining us. I’ll begin today’s call with a business update, Kevin will review the financials and guidance and then we’ll open it up for your questions.
Our focus right now is to maximize the result in a difficult environment and Q2 was successful from that perspective. Total revenue for the quarter of $49.8 million exceeded the high end of our guidance range. Our GAAP loss narrowed to $4.8 million or 0.16 per share versus our guidance loss of $0.17 to $0.24 per share.
Adjusted EBIDTA came in slightly above the high-end of our guidance and we were cash flow positive for the quarter.
Probably the highlight of the quarter is that bookings were up substantially from Q1 resulting in a total book-to-bill of 1.3. That said, condition to the defense industry remain challenging and promise to remain so for the foreseeable future.
We faced two key issues in the short-term, first is the increased likelihood that the current CR will be extended for the full government fiscal year, and second, there is the possibility that the recently modified sequence will actually take effect.
At the Mercury level, our biggest risks remain poor visibility, potential delays to expected orders and increased uncertainty on the timing of associated revenue, delays the timing of new program starts and programs transitioning between phases, slow foreign military sales, risks that bonds from the DOD investment accounts are reprogrammed and the risks overall to the timing and level of program funding.
In turn, these risks are and could continue to impact the number of value added design wins as well as result in lower bookings, revenues, profits and cash flow for at least the remainder of our fiscal 2013.