Mercury Computer Systems, Inc. (MRCY)
F4Q10 (Qtr End 06/30/10) Earnings Call
August 03, 2010 05:00 am ET
Bob Hult - SVP, CFO and Treasurer
Mark Aslett - President and CEO
Jim McIlree - Merrill Lynch
Tyler Hojo - Sidoti & Company
Mark Jordan - Noble Financial
Kevin Ciabattoni - Boenning and Scattergood
Jonathan Ho - William Blair
Previous Statements by MRCY
» Mercury Computer Systems, Inc. F3Q10 (Qtr End 03/31/10) Earnings Call Transcript
» Mercury Computer Systems Inc. F2Q10 (Qtr Ended 12/31/09) Earnings Call Transcript
» Mercury Computer Systems, Inc. F1Q10 (09/30/2009) Earnings Call Transcript
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 the copy of the earnings press release, you can find it on our website at www.mc.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, should, plans, expects, anticipates, continue, estimate, project, intent and similar expressions. Such forward looking statements involve risks and uncertainties that could cause actual results to differ materially from those projected or anticipated.
These risks include, but are not limited to general economic and business conditions including un-foreseen weaknesses in the company’s markets. Effects have continued geo-political 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, continued funding of defense programs, the timings of such funding, changes in US 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 outsource components. Inability to fully realize the expected benefits from acquisitions and divestitures or delays in realizing such benefits. Challenges in the integrating and acquired businesses and achieving anticipated synergies and difficulties in maintaining key customers.
Additional information regarding forward looking statements and risk factors is included 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.
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 a non-GAAP financial measure, specifically adjusted EBIDTA.
Adjusted EBIDTA excludes interest income and expense, income taxes, depreciation, amortization of acquired intangible assets, restructuring expense, impairment of long lived assets, acquisition and other related expense and stock-based compensation costs.
A reconciliation of adjusted EBIDTA to GAAP net income from continuing operations is included in the press release we issued this afternoon.
I am now pleased to turn the call over to Mercury’s President and CEO, Mark Aslett.
Thanks Bob. Good afternoon everyone and thank you for joining us. I’ll begin with an update on our business for the fourth quarter. Bob will review the financials and discuss our guidance. And then we’ll open it up for your questions.
Q4 was the strong financial two year of solid progress for Mercury. On our call a year ago, we said the business was positioned to expand on both the top and bottom lines. We produced consistent growth in revenues from adjusted EBITDA since then.
Total revenue for the fourth quarter is $63.6 million, exceeded the high end of our guidance range by 3.6 million. Total defense revenue including ACS and Mercury Federal, increased 40% sequentially and by 20% year over year to $47.9 million. This growth was mainly driven by the $19 million Aegis missile defense order we shipped as planned in the quarter. This was also a strong quarter for commercial revenue, which grew 87% year-over-year to $15.8 million.
The work we’ve done to restructure, refocus and strengthen our defense business over the past two years, has significantly improved Mercury’s operating leverage. Our GAAP earnings from continuing operations in the fourth quarter of fiscal 2010, was $0.77 per diluted share, compared with guidance of $0.25 to $0.28 per share.
The major variances to guidance were approximately a $0.32 gain due to the partial release of a tax valuation allowance, as well as a $0.14 gain due to higher revenues and lower operating expenses.
Adjusted EBITDA for Q4, increased from $5.9 million a year ago to $12.4 million, compared with our guidance of 9.3 million to 9.9 million.
We ended fiscal 2010 with a positive book-to-bill of 1.03. Total backlog including both defense and commercial is up 6% year-over-year and our 12 months backlog is up 27% year-over-year. We expect this backlog to translate into solid year-over-year revenue growth in fiscal 2011.
Last quarter, I said that we expected weaker defense bookings in the second half of FY’10 which is the way in which things played out. For the full fiscal year defense bookings were down 18% year-over-year and our book-to-bill was [0.9]. Bookings in MFS came in lower due to shifts in the timing and funding of our largest single program in that business and as mentioned last quarter several deals were also delayed in ACS services and systems integration. I will talk more about both of these businesses in a minute.