Mercury Computer Systems, Inc. (MRCY)
F2Q09 (Qtr End 12/31/08) Earnings Call
January 27, 2009, 5:00 pm ET
Bob Hult - SVP and CFO
Mark Aslett - President and CEO
Mark Jordan - Noble Financial
Stephen Levenson - Stifel Nicolaus
Jonathan Ho - William Blair
Jim McIlree - Neuberger
Previous Statements by MRCY
» Mercury Computer Systems, Inc. F1Q10 (09/30/2009) Earnings Call Transcript
» Mercury Computer Systems, Inc. F4Q09 (Qtr End 08/04/09) Earnings Call Transcript
» Mercury Computer Systems, Inc. F3Q09 (Qtr End 03/31/09) Earnings Call Transcript
And at this time for opening remarks and introduction, I would like to turn the program over to the Senior Vice President and Chief Financial Officer, Mr. Bob Hult. Please go ahead sir.
Good afternoon and thank you for joining us. With me today are our President and Chief Executive Officer, Mark Aslett and our Vice President and Controller, Karl Noone.
If you have not received the copy of the earnings release, you can find it on our website at www.mc.com. We would 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 which involve risks and uncertainties that could cause actual results to differ materially from those projected or anticipated. Additional information regarding forward-looking statements and risk factors is included in the press release we issued this afternoon reporting the company’s second quarter results and in the company’s periodic reports filed with the SEC.
We caution listeners of today’s conference call not to place undue reliance upon any forward-looking statements which speak only as of the date of this call. We undertake no obligation to update any forward-looking statements.
In addition to reporting financial results in accordance with generally accepted accounting principles or GAAP. We will also be discussing non-GAAP financial measures adjusted to exclude certain charges which we will specifically identify.
Management believes these non-GAAP financial measures assist in providing a more complete understanding of the company's underlying operational results and trends and management uses these measures along with their corresponding GAAP financial measures to manage the company's business, to evaluate its performance compared to prior periods in the marketplace, and to establish operational goals. However, they are not meant to be considered in isolation or as a substitute for financial information provided in accordance with GAAP. A reconciliation of GAAP to non-GAAP financial results discussed in today's conference call is contained in the press release we issued this afternoon.
I am now pleased to turn the call over to Mercury's CEO, Mark Aslett.
Thanks Bob. Good afternoon everyone and thank you for joining us. I'll begin with an update on the business Bob, will then review the financials and discuss our guidance for the third quarter, and at that point we'll open it up for your questions.
Mercury performed well in the second quarter. We continue to execute on our plan to focus the business improve our profitability increase our cash flow and position ourselves for renewed growth.
Overall the business produced solid financial results Mercury's total revenue and non-GAAP earnings exceeded the high end of our guidance range. Reflecting both our settlement with UBS, as well as strong cash flow we ended the quarter with a cash balance of $198 million compared with $167 million at the end of Q1.
This obviously puts us in a good position to meet the put on our convertible debenture that we expect to occur in May of '09.
We also continue to improve the underlying operations of the business. Inventory was down, we reduced our receivables, lowed our DSO sequential and year-over-year and we were able to increase our cash flow. Overall, I think these results were indicative of the operational improvements we've made in the business over the last 12 months, and these areas will remain a focus for us going forward.
This is a design win led business, and winning new designs to grow revenues requires new products. Consequently, the progress we've made in operations is timely, because we are in the midst of a significant new product development cycle. We are literally seeing a bio wave of new products move to engineering as we speak.
Although it it's particularly important for us to be launching new products, it's equally important for us to improve our R&D leverage at the same time. The changes we made in our engineering methodology are enabling us to bring our new technology to market much more quickly, more cost-effectively and with high quality than ever before.
Tiny operations is one facet of our strategy to become a more focused and profitable business. Another facet is to rationalize and optimize the return for Mercury's portfolio of a profitable and non-core businesses, and we've been working hard to divest these businesses by the end of fiscal '09.
Last year we shutdown AUSG, our commercial Avionics and Unmanned Aerial Systems Group and complete the sale of ES/PS, a small legacy professional services unit within VI, which allowed us to consolidate VI's German facilities.
In the first quarter of '09, we sold the assets and IP of SolMap Pharmaceuticals, a bio technology venture. And now, following a very rigorous process. I am pleased to announce further progress on this strategy. Today we signed and closed to deal to sell the VI business to Pro Medicus, an Australian company in the Healthcare and Life Sciences space for a total gross purchase price prior to transaction costs at US $3 million.
Pro Medicus has acquired all of VI’s customer commitments and 48 of VI’s 64 employees. This sale removes the business that’s been generating our most significant operating losses which on a non-GAAP basis total $2.1 million in the second quarter and $13.2 million for our last fiscal year.