Good day, everyone and welcome to the Mercury Systems’ Third Quarter Fiscal 2014 Earnings 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, Kevin Bisson. Please go ahead, sir.

Good afternoon everyone 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 we issued earlier this afternoon, you can find it on our web site at www.mrcy.com. We would like to remind you that remarks that we 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, potential 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 programs, as well as the timing and amounts 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 and technological advances in delivering technological innovations, changes in the 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 and restructurings 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…

Thanks Kevin, good afternoon everyone and thank you joining us. I will begin today’s call with a business update. Kevin will review the financials and guidance and then we will open it up for your questions. Mercury delivered results in Q3 at or above the high end of our guidance, was record defense bookings. Total revenue was $55.5 million versus our guidance of $50 million to $56 million. Our GAAP loss from continuing operations was $0.02 per share, this was favorable to our guidance for loss of $0.15 for $0.09 and much improved both sequentially and year-over-year excluding one-time items. Adjusted EBITDA was 14% of revenue up 52% sequentially and up 47% year-over-year and well above the high end of our guidance. Cash flow from operations also exceeded our forecast for the quarter. Total revenues in our defense business was $51.1 million essentially flat with Q2 and up 1.7 million or 3% from the third quarter last year. International defense revenues for the third quarter including FMS were 18% of total defense revenue, compared with 17% in Q2. From a program perspective Aegis, Gorgon Stare and Predator/Reaper were major revenue contributors this quarter ours was a classified airborne radar program. Radar revenue grew 28% from Q3 last year and is up 45% year-to-date compared with the same period in fiscal ’13. Radar is the largest source of revenue in our Mercury Commercial Electronic segment so MCE is continuing to rebound strongly after a difficult fiscal ’13. Our low industry conditions remain challenging our major highlight this quarter was bookings which totaled $76.1 million up 51% sequentially and 57% year-over-year. Total defense bookings increased 56% sequentially to a company record $74.6 million. Our book-to-bill is 1.4 compared with an 0.9 in Q3 last year. Our book-to-bill in defense improved to 1.5…

Thank you Mark and good afternoon again everyone. Turning to our financial results, revenue for the third quarter of fiscal 2014 of $55.5 million was $1.4 million higher than revenue of $54.1 million in the third quarter last year and was at the upper end of our stated guidance of $50 million to $56 million. The company generated a GAAP net loss of $0.02 per share in this year’s third quarter compared to GAAP EPS of $0.03 per share in the third quarter of fiscal 2013. This quarter’s loss per share was significantly more favorable than the company’s financial guidance of a net loss of $0.09 to $0.15 per share a quarter. Fiscal 2014’s third quarter financial results included restructuring charges related to the company’s acquisition integration plan announced in January while last year’s third quarter was also benefited from the retroactive reinstatement of the federal R&D tax credit. Excluding the impact of both of these items the company generated EPS of $0.05 per share in this year’s third quarter compared to a net loss of $0.02 per share in the third quarter of last year. Adjusted EBITDA for the third quarter of fiscal 2014 of $7.7 million was $2.5 million or 47% higher than adjusted EBITDA of $5.2 million for the third quarter of last year and substantially exceeded our stated guidance of $1 million to $4.1 million. The company generated free cash flow of $1.1 million in this year’s third quarter and ended the third quarter with $45.7 million of cash and cash equivalents and with no debt. Reviewing third quarter financial performance in more detail beginning with bookings; total bookings were $76.1 million which were $27.5 million or 57% higher than total bookings of $48.6 million for the third quarter of last year. Third quarter bookings performance…

(Operator Instructions). Our first question comes from Tyler Hojo of Sidoti & Company. Your line is open. Tyler Hojo - Sidoti & Company: I guess just first thing I am trying to understand, is when we look at kind of the reduction in the high end of the full year revenue guidance range. Just trying to get my mind around that in contacts with the fact that you came in towards the higher end or at the high end of your third quarter guidance, you had strongest bookings period in both defense and overall in third quarter than we’ve seen and a couple of years, and you’re expecting Q4 bookings to be strong. Can you help me with that?

Sure, basically one thing Tyler is although we actually received the bookings for the first increment of Block 2 LRIP phase 2 the actual revenue associated with that is now in the first half of our fiscal ’15. So it’s basically one moving part. Tyler Hojo - Sidoti & Company: I see, okay. All right. Well, that makes it easy. And then just in regards to bookings for 4Q I think you kid of couch that as being another strong quarter. What’s your definition of that, is that book-to-bill north of 1 and if so kind of what from a program level drives that?

Sure. Yes, we do kind of expect another strong bookings quarter as I say it’s in my prepared remarks. The major drive of bookings that we anticipate right now is in relation to Patriot. So, I don’t know where you have the opportunity of listening to Raytheon’s call but there is certainly a lot more activity going on in Patriot both FMS and as we’ve talked about in the past probably the largest opportunity that we see is with the U.S. Army and we’re expecting some of that in the fourth quarter. So Patriot by far is the largest in bookings that we’re pursuing in Q4. Tyler Hojo - Sidoti & Company: Okay, got it. And I guess just a little maybe a point of clarification in the press release you talked about kind of looking I think bolt on acquisitions as kind of the growth strategy and certainly that’s consistent with what you all have kind of indicated before but I am just curious if when you look at the portfolio today do you see whole when these customers kind of come through your facility are there capabilities that they kind of view as lacking just curious on how you view it just from a strategic standpoint?

Sure. I think from an M&A perspective I think the strategy is somewhat set I think played out cost and services are becoming end to end provider of advanced and processing subsystems and most of our position is as you know been in the RF and microwave domain and our strategy is playing it very well. There are certainly some technologies that we could add to that although I think we’ve got a great breakfast capability not just from a technology perspective but also from a manufacturing perspective which is absolutely critical because it’s really the ability to be able to manufacturing volume that is probably one of our customers’ biggest concerns and I think we’ve addressed that and we’ve certainly I think becoming a better alternative for our customers versus their alternative suppliers. The other way of viewing I think the opportunity from an M&A perspective is really one of scaling the platform that we’ve created. So the reason that we’re very focused on basically the integration plans that I think we’re executing against extremely well is to integrate the office that we have but from an IT and from a process perspective but also to consolidate the facilities into the two AMCs that we’ve created. So what that affords us from an opportunity perspective is that we could potentially go and acquire additional RF and microwave companies and integration those into the platform that we’ve created meaning that those any potential future acquisition not domain should be highly accretive from an EBITDA perspective. So that’s kind of the way which we’re thinking about it.

Thank you. Our next question comes from the line of Howard Rubel of Jefferies. Your line is open. Howard Rubel - Jefferies & Company: Thank you very much. Mark it sounds like what you’ve done is changed the focus a bit from trying to take outsourcing to instead take share from your competitors. Is that a fair way to think about some of the focus change?

No, I don’t think we’ve changed our focus Howard I think the opportunity is both of the things that you mentioned the outsourcing is alive and well that MOU that I mentioned that we signed last week I think is a good example of work that is previously being done in house been outsourced to a company like Mercury this invested significantly in terms of its RF and microwave development but probably more importantly the production capability. Seaward is a great example of us been able to take share again in the RF and microwave industry both from the high end of the industry where our customers are viewing existing supply as maybe being less flexible than a kind of a mid tier player like Mercury or on the lower end where you’ve got companies that can really develop the technology but they represent a huge risk this programs transitioning to production. So I think we’ve got opportunities in both outsourcing as well as taking share and that’s what we’re focused on Howard. Howard Rubel - Jefferies & Company: But could you help me a little bit I mean if you talk about some specifics in terms of share takeaways is there anything that you could quantify at Mark?

Yes. So I think if you look at as we described in our Investor Day there were three opportunities major opportunities for us to expand our content on the Seaward program and basically we just delivered the first engineering prototypes to our customer Lockheed associated with the first one and so we should start to see some opportunities from a revenue perspective in Seaward block 2 as we move into fiscal ’15. The second opportunity is again we’ll deliver the engineering prototypes of that product probably this quarter both of those were actually taking business away from a position of a pretty large company that was really failing to deliver and I think we’ve done that both from a technology as well as from a economic perspective. And then the third one we basically graph share from a small company who although they were great at developing the prototype just hadn’t really got the way with all to basically scale into production is Seaward block 2 moves into that full rate production phase next year. So there is couple of great examples I think the three examples that I stated are well over 150 million in terms of potential so we feel pretty good about our ability to take share in RF and microwave. Howard Rubel - Jefferies & Company: And then last there is the elephant in the room question I mean I know there is lots of ways that you can answer this so giving you a moment to think about it I mean the press reports indicate that the company has been actively trying to sell itself. How do you react to that?

So pretty much like every other publicly traded company it’s our policy not to comment on the industry rumors but if you got another question about business or our results I’d be happy to take that. Howard Rubel - Jefferies & Company: No I think your answer to the first one is very well I appreciate them. Thank you.

Thank you. Our next question comes from the line of Peter Arment of Sterne, Agee. Your line is open.

Good afternoon. Mark question on when do you expect Seaward block 3 how that competition to move forward and how are you viewing that?

So Seaward block 3 we believe that the ward is likely going to be made late summer early fall it does look like it’s moved out probably three months. Beyond Seward block 3 we think probably the award for the derivative at Seaward block 2 which is to the smaller platforms could also be made over the summer months. And then I think finally as we talked about before Seaward block 2 itself and it does move into full rate production next year and then beyond the opportunity that we have providing our existing content we’ve also got the opportunity to the content expansion that I just described and is a part of Howard’s question. So Seaward next year becomes a really important program for us.

So Mark when you look at that program and how your bookings are trending particularly I guess I see now the strong bookings quarter this quarter and the fourth quarter it seems to imply may be I am still in for clarifications your comments are that fiscal ’15 looks like 10% revenue growth looks pretty achievable, are we interpreting that correct?

Yes, certainly our goal for next fiscal year and I think if you look at we had a record bookings performance in Q3 driven by Gorgon Stares, Seaward, F-15 and Aegis and we also got some Patriot bookings also which as you know is being relatively lied over the five-12 months but that’s clearly is trying to pickup we do anticipate another strong bookings quarter in Q4 which in essence positions us extremely well as we head into next year and we really got three major program that I think are going to be important for us in fiscal ’15. Clearly Seaward is one, Aegis is another, and Patriot is really the third, and we’ve got a list of about 10 but those are three big movers.

Okay. And then just a follow up just on the adjusted EBITDA target margin I believe long range has been 18% to 22% we won’t get the full benefit of that just because the savings don’t really fully on a run rate basis don’t officially get completed until January, correct?

Yes. So that is true the integration plan we’re targeting finalize or finishing that in the January time frame but the actions that we’ve taken to-date are basically afford us 70% of the savings so we designed the plan to be very front end loaded and I think we’re executing extremely well against that hence our ability to basically pull in the plan itself by six months.

Thank you. Our next question comes from the line of Jonathan Ho from William Blair. Your line is open.

Can you talk a little bit about some of the challenges that you’re seeing out in the defense environment I think you’ve sided that a couple of times but just wanted to hear from you what maybe is a little bit more difficult out there?

Sure. I think overall I mean we’re certainly pleased with some of the recent developments in particular we’ve got a FY Defense Appropriations Bill I think the Ryan Murray by far budget add basically traded sequester of budget cuts that at least took the sequester off the table for ’14 and ’15. And finally the president submitted his budget request. So I think they’re all positive the charges I think still relate to just the timing that’s in order and funding flows and it’s still moving pretty slowly and I think the recent SEWIP Block 2 LRIP Phase 2 was a good example of that, although we got the booking the revenues -- certain revenue associated with that program basically move that to fiscal ’14 into the first half of our fiscal ’15. We’re very pleased with the bookings performance, but it’s still challenging Jonathon.

Got it. And just in terms of sort of specific detail. I mean I know you guys referenced the fact that you are able to complete the cost savings six months ahead of time. But can you maybe just give us a bit more specific as to what got done earlier and why sort of the tail end of the cost savings will still sort of take until the end of 2015.

So as we said before we basically laid out a plan that was 18 months is now 12 months. A lot of the activities relate around facilities consolidation plan that will again relate to the new AMC that we have in Hudson and New Hampshire. So to date we basically moved in the former Micronetics components business and the subsystems business that will local in the New Hampshire region. We also closed one of the smaller Micronetics facilities that was based in Monroe, Connecticut. And we got a number of other facilities consolidation activities that’s going to take place. So it basically boils down to how quickly can we move those facilities into the New Hampshire AMC and get the systems and the businesses back up and running and not consolidate facility. So I think the reason that we were able to pull things in, is that we’re actually executing extremely well. And we feel pretty confident as a result of the activities to date that we can basically bring forward the last remaining facility into the Hudson AMC kind of in the late calendar year building next calendar year.

Thank you. Our next question comes from line of Mark Jordan from Noble Financial. Your line is open.

Question relative the pricing environment that you see moving forward. Obviously you have been able to document the 16 million of cost reductions. Do you believe that you’ll be able to regain all of those benefits all of that 16 million will drop to the bottom line or do you think as you move to say gain share and grow the business that you will have to be more aggressive on pricing and net-net in fact some percentage of those cost efficiencies.

I mean we don’t see the pricing pressure to say, I mean I think we said though, I think we do offer our customers a better alternative particularly in the RF and the microwave domain. One as we talked about the third leg of our acquisition integration plan is to actually invest more of our own internal research and development funding, as oppose to basically asking for funding for our customers. That’s certainly helping proving the affordability and it’s one of the reasons that why we’re actually beginning to pick up more work and displace the competition. So I think that’s kind of what we see right now Mark.

Related question in terms of longer term gross margins, if we look at the third quarter you had a very favorable mix 45.3% gross margin, Q4 less favorable mix 41% to 43%, call it average of 42%. If you were to go out 18 months, what would be that sort of very favorable gross range potentially you would h versus the less favorable ones given the implementation of cost reductions?

Mark this is Kevin. I think we’ve said publically that a target business model was to achieve gross margins between 45% and 50% for the company in total. They’ll get pretty close to that this year, I think in my prepared remarks I indicated that fiscal ’14 we expect total gross margins to be about 44% for the year. So we’re getting close to well under that range. And I think what the cost reduction actions that Mark talked about earlier in combination with the fact that our digital signal processing business core business of the company continues to recover. I think we feel pretty confident; we’re going to get there fairly quickly in the near-term in terms of the 45% to 50% target.

If you look at through the first three quarters of fiscal ’14 Mark and our gross margin is 49% versus 43.4% last year. So I think it kind of comes back to that recovery in the core part of the business that continues.

(Operator Instructions). Our next question comes from the line of Michael Ciarmoli from KeyBanc Capital Markets. Your line is open.

Could you just comment on kind of the shorter cycle aspects of your business and maybe the bookings and revenues of those spares and repairs. I know you guys talked about those obviously being under pressure, they were kind of removed the forecast when you guys were really funding this on a base case. Can you just give us kind of some color on what’s happening with those pieces of revenue streams?

So that seems to have stabilized Mike I think if you look through the year we expect that other business to basically be up year-over-year.

That’s helpful. And then maybe can you talk about the question you talked a little bit around digital signal processing recovering. What is specifically driving that and how are you guys looking at that product category on a longer term view?

Sure, so I think in the short term it’s basically specific programs that are now producing that we didn’t produce during our fiscal ’13. So we’re clearly seeing from UAV related programs kick in, that’s driving higher processing. We mentioned F-35 that’s a pretty significant bump during fiscal ’14 compared with fiscal ’13. I think longer term and if you look at the opportunities on Mercury and tried to describe it in my prepared remarks. Is that we see substantial change occurring in the marketplace. And is basically around the needs to provide not only higher performance but also specialist capabilities within the processing domain that other companies don’t necessarily have. We see the opportunity basically taking up processing and actually to complete upgrade associated with the sensor itself. But what we also see is now the potential of taking up capability and absolutely moving to other parts of the platform architect from the processing perspective where we haven’t played historically. The good example of which would be mission computing, also combat systems and we’ve got a number of different activities underway right now, this basically would allow us to expand all existing programs the existing platforms. And these could be quite meaningful in terms of the size the potential deals. So it’s really leveraging the investments that we’ve made in terms of our processing product portfolio but expanding into new market areas.

Got it. And then just the last one, I mean it might be early for this but this whole Russia, Ukraine issue. Are you seeing any chance that that’s going to translate into additional for military defense sales. And as you guys kind of talk with customers and work with your larger partners there?

I think missile defense is clearly an area where there is going to be significant investment around the world, I think Raytheon talked about it a lot, there is 12 countries but they are currently using the Patriot system, and as a result of the new technology that was introduced as a result of the UAE upgrade which we’re a big part, it’s basically providing significant opportunities for upgrade to existing customers. As well as the potential for expansion beyond those 12. And so we know that the two that Raytheon are focused on both Qatar (ph) as well as Poland and I think we also mentioned Korea. There is definitely some short term opportunities related to foreign military sales with Patriot. Probably the largest opportunity that we see is the U.S army upgrade which could begin in earnest in Q4. Beyond that I think there is also opportunities for the Aegis system. We’re clearly involved in the domestic reduction and the upgrade of the domestic fleet and so that’s already in production for us. But we’ll also see that some of our foreign eyes are looking to gain access to the Aegis system as well. And we’re already doing both engineering work and expect production associated with some foreign countries as well. So I think we’re very well positioned as relates to missile defense, I think it’s going to be a long term opportunity for us.

Perfect, sounds good, thanks for taking the question.

It appears there are no further questions. Therefore I’d like to turn the call back over to you for closing remarks.

Well thank you all very much for listening. We look forward to seeing to you again next quarter. Take care.