Good day, and welcome everyone to the Mercury Computer Systems, Inc. second quarter fiscal 2010 earnings results conference call. Today’s call is being recorded. At this time for opening remarks and introductions, I would like to turn the call over to the company’s Senior Vice President and Chief Financial Officer, Mr. Bob Hult; please go ahead, sir.

Good evening 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 release, you can find it on our website, 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 fiscal year 2010 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. I would 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, impairment of long lived assets, stock-based compensation costs and restructuring expense. A reconciliation of adjusted EBITDA to GAAP net income from continuing operations is 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.

Thanks, Bob. Good afternoon, everyone, and thanks for joining us. I will begin with an update on our business for the second quarter. Bob will review the financials and discuss our guidance for the third quarter and then we will open it up to your questions. This was another quarter of very solid progress for Mercury. On our Q1 call, I noted that we expected a large missile defense radar order to push from Q2 to Q3. I’m pleased to report that the receipt of this $28 million order during the quarter led to a very strong bookings performance. Defense bookings combining ACS and Mercury Federal grew year-over-year by 43% to $47.8 million. Total revenue for the second quarter exceeded the high end of our guidance range by more than $3 million. We reported GAAP earnings of $0.10 per share compared with guidance ever a $0.04 to $0.08 loss. Our adjusted EBIDTA margin increased from 8% in Q2 of ‘09 to 13% this quarter and operating cash flow grew to $5.2 million. Total bookings for the second quarter were up 37% from Q2 of fiscal 2009 and 15% sequentially to $56.1 million. This included the missile defense booking I just mentioned which was the largest single purchase order in Mercury’s history. Although we have the PO in hand, the timing of deliveries for this booking is still being determined with our customer. This uncertainty will be reflected in our guidance, which Bob will cover in his prepared remarks. Our book-to-bill in defense for the second quarter of fiscal 2010 was $1.37 up from $0.93 in the sequential first quarter and $0.99 in Q2 of fiscal 2009. Year-over-year, our total backlog is up 47% to $110.4 million, and our defense backlog increased to 55%. In addition, as we expected, our 12…

Thank you, Mark. As a reminder, I’ll be discussing our results on a GAAP basis. Please note that commencing with FY 2010, our non-GAAP measure for reporting financial performance is adjusted EBIDTA. We believe that GAAP combined with adjusted EBIDTA is consistent with practices in the defense industry. In addition, now that we’ve divested all of our non-core businesses and treated them as discontinued operations, the numbers, I will be discussing relate only to continuing operations. Total revenue for the second quarter of fiscal 2010 was $45.2 million, well above the high end of our guidance range of $40 million to $42 million. This compares with $45.1 million in revenue for the second quarter of fiscal 2009. Please note that in Q1 of fiscal 2010, Mercury elected to adopt a new EITF 08-1 revenue arrangements with multiple deliverables. Although, Mercury was not required to adopt this guidance until Q1 of fiscal 2011, we elected to early adopt as the company feels that this guidance allows for the recognition of revenue for an arrangement with multiple deliverables to more closely mirror the economics of the arrangement. As a result of this adoption, in Q1 of fiscal 2010, Mercury recognized $2 million that would have been deferred under the previous guidance, EITF 00-21 for multiple element arrangements. In Q2 of fiscal 2010, we recognized a net $2.2 million for a year-to-date incremental revenue amount of $4.2 million. GAAP income from continuing operations for the second quarter of fiscal 2010 was $2.4 million or $0.10 per diluted share on approximately 22.9 million shares outstanding. The upside from our Q2 guidance of negative $0.08 to negative $0.04 per share was driven by two factors. Higher revenues and higher gross margins primarily driven by reduced other costs of other goods sold. For last year’s second…

(Operator Instructions) Your first question comes from Mark Jordan - Noble Financial.

I’d like to talk a little bit about the revenues and see if I understand what you’re talking about here. Given the full year model and we should be in sort of $42 million range in Q3, that would imply about $60 million in the fourth quarter. Given the $28 million contract, if you were to say your normalized run rate is about 45, that would imply about $15 million sort of extraordinary benefit in the fourth quarter. So should we assume that roughly about half of that contract in essence you’re estimating ships here in the current fiscal year, primarily right now in the fourth quarter?

Mark, we’re not being specific in terms of the actual amount. Because as we said on the call, in the prepared remarks, we do anticipate a portion of that $28 million being shipped for revenue in the second half of the year.

It is not my thought process of maybe half of that’s realized to boost you to that 60 is not an unreasonable guesstimate on my part?

We’re going to ship a portion of this to revenue in the second half of the year.

Your thought process is correct. No question there. You do the math.

Just from a duration standpoint if in fact, that one contract tends to inflate quarters as it’s executed, should we assume that that’s all shipped, the incremental amounts will be shipped in the first and second quarters of next year?

The $28 million will play out over the remaining part of FY10 and also FY11. That said, we do expect to get additional bookings associated with this program over the coming quarters. So this is not the only booking that we’ll see.

Can you talk a little bit about sort of the M&A marketplace, you clearly just say on a net basis you’ve got about $68.7 million worth of cash, or near cash when the UBS transaction settles out. Plus you have the $100 million shelf. How realistic is it and really where are you looking in terms of acquisitions that would be something that we should count upon say in the next 12 months?

Let’s start with what we’re looking for and hopefully we’ve been pretty consistent there in terms of the major emphasis. First of all, we’re looking to strengthen our ISR domain expertise particularly in Mercury Federal. We believe that the migration from boards to systems with more domain specific content in the ISR space will be important differentiator over time. Secondly, we are looking to grow the core defense business by improving the timing in our access to these next generation ISR programs and platforms, and thirdly, it is about increasing our overall footprint from a production content perspective going forward. So we really got three goals in mind. I think that we are still at a relatively early stage in terms of the acquisition process. We are out there talking to companies and I think there are companies that fit within the three goals that I have just outlined.

Can you talk a little bit about the commercial marketplace and some of our semiconductor customers? We have tended to see an improvement in some of the fortunes for some of the semiconductor manufacturers here over the last six months or so. I was wondering what signs that you have seen that gives you a sense of support or hope that you are going to see improved business levels out of your two primary semiconductor customers in the second half of fiscal 2010?

Let’s start with really what happened with semiconductor in Q2. Year-over-year, semi bookings at $4.7 million were up 48%. They were down slightly 3% on a sequential basis. For H1, on a year-over-year basis, semi bookings at $9.6 million were up 27%. I think we already are starting to see a little bit of pick up. Clearly our customers are feeling more confident in terms of seeing increased demand. However, that said, we have got two different customers at two different stages in their new product introduction cycles. In addition to that, the two customers that we have are actually in different parts of the semi-cap space which could cause a timing difference in terms of the demand pick up to Mercury. I think the last point on that is we are current -- one of our customers in particular is seeing more growth in their existing product line which is much more price sensitive versus the newly introduced high end system of which we are a part. So I think overall, the customer base is definitely feeling better about what they are seeing but we have got some differences in terms of the two customers themselves.

Your next question comes from Steve Levenson - Stifel.

A couple questions on programs that you were talking about, one is Gorgon Stare. I don’t know if you can say how fast those units are supposed to go out. I am also curious as to if you are selling directly to the prime or are you selling to one of the subs?

Gorgon Stare is a next generation wide area motion imagery capability that is likely to be deployed in Afghanistan during 2010. We haven’t been specific in terms of the number of systems that’s likely to be deployed, but we do believe it's going to be an important capability that’s going to reduce the time to information for our troops on the ground in a very, very different scenario from a environment perspective than what we saw over in Iraq. In terms of who we are selling to, we are selling to a QRC prime. It is one of the primes that specialize in rapidly bringing new capabilities into theater. Mercury was chosen as the best of breed image signal and sensor processing company. So we are actually doing the entire signal processing for that new platform.

Is that customer a 10% customer now?

No, it’s not, no.

Are there, or maybe I should ask how many 10% customers there were this quarter?

There are -- we had one 10% customer this quarter, Steve, and it was a large prime. We were across multiple programs with them, all large programs.

One other question, there’s been some news out that the U.K. is going to retire its Nimrods and pickup some even older RC-135 Rivet Joint, which I imagine will need a lot of upgrades. Do you expect to be involved there or is that something that’s going to use mostly U.K. hardware?

We are on the River Joint platform and we’ve actually, we think we’re well positioned for some of the signals intelligence upgrades to the River Joint platform going forward. And commenting specifically on the Nimrods, I haven’t seen the article, Steve.

Your next question comes from Tyler Hojo - Sidoti & Co. Tyler Hojo - Sidoti & Co.: Just to go back to the commercial ACS, good color in terms of the prepared remarks, but just trying to get a better understanding of how that tracks. I mean, obviously, you are up almost $4 million sequentially in that business and I don’t know if this was the right read through. Are you anticipating perhaps a little bit of a dip back down or how should we look at that?

No, I don’t think we’re anticipating a dip back down. I think what I’m saying is that the rate of increase in the semiconductor space will differ on a per customer basis, dependent because of the fact that we got customers at a different stage in their new product introduction cycle and also because of the fact that the two customers that we sell into are actually in different parts of the semi-cap space. So, there’s an expectation that say the radical inspection space will probably see some increases prior to the lithography growing. So that’s kind of what I was trying to get at. I think there’s some concern out there that I have read, and also sort of listening to some of the other company’s earnings calls regarding the potential for a double dip scenario, but we haven’t heard directly anything from our customers at this point in relation to that. Tyler Hojo - Sidoti & Co.: Was I correct in understanding that the sequential increase this quarter was largely driven from something outside of semi?

So semi-bookings were actually down 3% sequentially. Tyler Hojo - Sidoti & Co.: Just on the services and systems integration piece, good progress there again on a sequential base, just wondering, what your expectations for that are in terms of the back half of the year?

We expect to see continued growth in that part of our business going forward. Tyler Hojo - Sidoti & Co.: In terms of Merc Fed, was that segment profitable this quarter?

Actually, Merc Fed was profitable in Q2. Tyler Hojo - Sidoti & Co.: Last question, if you do not get any of the AGS orders in the third quarter of your fiscal year, would you still expect to be free cash flow positive?

Yes.

Your next question comes from Jonathan Ho - William Blair.

Just a couple of quick questions, first, with regard to sort of the implied contribution in the fourth quarter, how do we think about modeling out the potential margins in the fourth quarter, given sort of the size of the increase in the revenue and the potential leverage that is in the model?

So Jonathan, you’re trying to do guidance out one quarter, the way we [ph] prefer to do it. I think you’ve seen the target business model that we have put out there and the progress we’ve made moving towards it. I don’t know if there is anything else to say with regard specifically to Q4.

I mean, is there any sort of hint there, because I mean with that type of an increase in revenue, I would expect the operating income and EBIDTA margins to move up substantially. Is that a fair characterization?

Sure. I mean if you go back to the math that Mark Jordan did, suggesting what Q4 revenues would have to be to hit the 195 for the full year. You can work from that, but please use the target business model. We called out a 54% plus margin on a longer term basis. We’ve been operating above that in recent quarters. We certainly expect that to continue. We’ve noted that there’s a lot of operating leverage available to the company going forward. So we don’t expect operating expenses to move at a rate that is anywhere commensurate with the kind of revenue growth we would see in that particular quarter. Am I zoning it in for you here?

Can you talk about the risk that the order falls out of 2010 on a fiscal basis into 2011 or are you pretty sure you’re going to at least see a portion of that in Q4?

I think first of all, we’re thrilled obviously to be in receipt of this large PO, I mean it’s the largest PO in Mercury’s history. Let me talk a little bit about the program. It’s the Navy’s most important program. It’s the centerpiece of the new administration’s BMD strategy and Mercury’s just delivered a brand new signal processing system that’s performing very, very well in the trials. The likelihood of us not being able to ship a portion of that order for revenue in the second half is very low. We believe it’s a matter of timing at this point.

You guys talked a little bit about 4G testing as being a driver on the commercial side. How do we think about that given the investments that are happening in the 4G networks today? Is this future growth opportunity, or is this a little bit more of a one off type situation?

No, I wouldn’t say it was one off. We do expect to see continued business from that, but it could be lumpy. We do see this future opportunity associated with it as 4G networks continue to be built out.

Your next question comes from Michael Ciarmoli - Boenning & Scattergood. Michael Ciarmoli - Boenning & Scattergood: Just if you can, Mark, if you can elaborate on your opportunities for the counter IED programs? What are you thinking there? It seems like you've been down, you said you've been down selected? What are you thinking in terms of timing and if you even can characterize what sort of revenue opportunities you’d be looking at there?

Yes, so we have been down selected by two primes on the next-generation program of record for counter IDs. In terms of the timing, I think understanding at this phase is that, we’d probably start to see revenues in 2011. From a sizing and magnitude perspective, not sure I want to go there at this point, other than to say that there are 26,000 crew vehicles out there. If they are upgraded, if they’re substantially upgraded, then the revenue associated with that program could be very, very large for us. Michael Ciarmoli - Boenning & Scattergood: You mentioned some of the design wins that you guys had in the quarter earlier. In terms of those wins, you’ve talked about I guess, the total revenue opportunity increasing seemingly year-over-year. Is that because you are grabbing more content on these design wins or are these just bigger programs and there’s more units? I’m trying to get a sense if you guys are executing on that plan of increasing your content per platform.

We absolutely are executing against the strategy of increasing our footprints and hence the amount of content on the platforms. We’re also looking to expand out beyond Mercury’s historic areas of strength. So the counter ID is a great example, right. Mercury is very strong in the airborne domain today. We haven’t done a lot on the ground, but if you look at two of our major design wins, one for Patriot and then another one for these counter-IED opportunities, they are both ground opportunities. So we’re actually expanding our addressable market by going after more opportunities also. Michael Ciarmoli - Boenning & Scattergood: Then just on the operating expenses, looking at kind of where you’ve been running here in terms of SG&A, what the rest of the year is going to look like, again versus your target model, which I think is in the low to mid 20s, is there a lot more that you guys have add here, or are you going to get to a point where you’ve got enough kind of quarterly spend where that top line can continue ramping and you’re not going to see the added SG&A?

Mike, simplistically, we don’t have to add much in the substantial sense to grow the top line. You will note for instance, our guidance for Q3, we’re talking about a very modest sequential increase, $1 million compared to the way Q2 executed and frankly, all of that in the primary is going into fuel, our engineering designs, getting more new products into market faster.

It’s really new product introduction.

Your final question comes from Mark Jordan - Noble Financial.

You said an interesting comment that the $28 million relates to major Navy missile defense contract. I guess that led me to the question, is this, or the Navy accelerating the rollout of the 4.0 or next generation, and if so, does this really, the $28 million represent nine to ten ships are only about half of the installed base. So that’s where your comments said that there should be a following on, which would be again upgrading of more ships in the fleet?

The $28 million is really a mix of new installations, upgrade to existing systems as well as spares. So it kind of covers the gambit. The new signal processing system that we just delivered is recently being tested in v4.01 of Aegis platform and the results of that signal processing system as well as new discrimination algorithms, I think it went very, very well. So I think overall, the schedule, all the upgrades that we know haven’t changed. They’re still looking to upgrade the same number of ships. That being said, we do think that Aegis has the potential of increases going forward, whether it would be due to more ships, FMS sales or Aegis grand.

My belief that 4.0 was scheduled to rollout to the fleet in 2012, so does this imply that it’s been successful, I guess that the Erie was involved in some of those tests off Hawaii that they may be accelerating the rollout of the next generation?

My understanding, and I probably need to go away and do a fact check, but my understanding is that it’s 2011.

As there are no other questions coming in the queue at this time, I’ll turn the call back over to Mr. Aslett.

Thank you very much for joining us this quarter and we look forward to speaking to you next. Thank you.