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Globecomm Systems Inc. (GCOM)

F2Q09 Earnings Call

February 9, 2009 3:00 pm ET

Executives

Matthew Byron – Corporate Vice President, Investor Relations

David Hershberg – Chairman, President and Chief Executive Officer

Andrew Melfi – Vice President and Chief Financial Officer

Analysts

Jim McIlree – Collins Stewart

Stephen Ferranti – Stephens Inc.

Richard Ryan – Dougherty & Company

Mark Jordan – Noble Financial

Rich Valera – Needham & Company

Presentation

Operator

Welcome to today’s Globecomm Systems fiscal 2009 second quarter earnings conference call. Today’s call is being recorded. For opening remarks and introductions I would like to turn the call over to Mr. Matthew Byron, Corporate Vice President. Please go ahead, sir.

Matthew Byron

Welcome to the Globecomm Systems fiscal 2009 second quarter earnings conference call. Joining me today from the company are Chairman, CEO and President, David Hershberg, and our Chief Financial Officer, Andrew Melfi.

Due to logistical travel issues with the company executives, we were forced to adjust the timing of this call and the earnings release as compared to historical timeframes. Earlier today Globecomm issued its fiscal 2009 second quarter earnings press release. In the event you have not received or seen a copy of the release, it is posted on the Globecomm Systems website at www.globecommsystems.com, or you can contact me directly at 631-457-1301 and I will get a copy to you.

Comments made during this conference call may contain projections or other forward-looking statements regarding future events or the future financial performances of Globecomm systems. These statements are only projections and reflect the current beliefs and expectations of the company. Actual events or results may differ materially. With that said, it is routine for internal projections and expectations to change as quarters progress. All forward-looking statements are based on information available to the company hereof and the company assumes no obligation to update such statements.

Please refer to the documents the company files from time to time with the SEC, specifically the company's annual report on Form 10-K, its quarterly reports on Form 10-Q, its current reports on Form 8-K and the Safe Harbor language contained in the company's press releases.

These documents contain and identify important factors that could cause the company's actual results to differ materially from those contained in its projections of forward-looking statements, which the company urges all investors to consider. Globecomm undertakes no obligation to publicly release the revisions to such forward-looking statements that may be made to reflect the events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.

Please note this call is being recorded on Monday, February 9, 2009, contains time sensitive information, and will be available as a webcast replay for at least nine months on the Investor Relations section of the Globecomm Systems website and as a phone replay at 888-203-1112 for domestic callers, or 719-457-0820 for international callers with an access code of 6410227.

At this point, I'd like to turn the call over to our CEO, David Hershberg. David?

David Hershberg

Welcome to our fiscal 2009 second quarter conference call. Earlier today we issued our fiscal 2009 second quarter financial earnings press release. While the impact of the current economic downturn had disrupted our ability to predict the timing of infrastructure orders, we are extremely encouraged by the stability and predictability of our service segment resulting in continued profitability and continued anticipated second half earnings to be greater than our first half.

In the second quarter, we announced multiple infrastructure contracts, which we have been waiting a while to book, resulting in a near record bookings quarter and record backlog. Our backlog does consist of some contracts over multiple years and longer term and does not have some of the product business that we have been waiting for. However, we do expect that we will be in position to book some of that business shortly.

Unfortunately, many of the contracts will not result in revenues until our fiscal 2010 start in July. With that said, we are witnessing uncertainty and push out of certain infrastructure contracts in the government marketplace and also in the enterprise marketplace. We are not seeing any cancellations at this point, and we have taken steps to reduce cost in areas that we can control while continuing to invest in sales and marketing.

We believe that the investment in these areas will ultimately make the company more successful when the environment stabilizes. One example of a return on our investment in sales and marketing was the early announcement of the receipt of an initial order and launch of our Broadband Maritime Solution and partnership with Mach6.

We see the maritime market as a natural long-term fit for Globecomm. Emerging platforms and ocean satellite coverage makes broadband connectivity to the over 50,000 active sites a reality. We see the market from narrowband to broadband happening over time similar to adoption rates seen in the U.S. over the last ten years.

Globecomm, with our partner Mach6, is well positioned to capitalize on this trend and has been successfully demonstrating the sea trials of our platform. The booking problem that has most significantly affected our current bottom line has been the U.S. government holding off of awarding certain contract releases for products that we supply.

Last fiscal year approximately 50% of our government business was booked in Q1, which provided revenue in fiscal 2008. This year we had significantly less than last year. These products provide higher margin than our system integration infrastructure products. We can also turn these products in a shorter length of time than our system projects. We are looking forward to booking some of this business in the near future.

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