TeleCommunication Systems, Inc. (TSYS) Q2 2012 Earnings Call July 26, 2012 05:00 pm ET Executives Maurice Tose - Chief Executive Officer and President Board Chairman Bruce White - Senior Vice President, General Counsel and Corporate Secretary Tom Brandt - Senior Vice President and Chief Financial Officer Member, Board of Directors Analysts Scott Sutherland - Wedbush Securities Mark Jordan - Noble Financial Mike Latimore - Northland Capital Presentation Operator
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Also, during this call, we may refer to measures of income that are not computed in accordance with generally accepted accounting principles. To the extent we refer to non-GAAP data, we have provided a reconciliation in our press release and on our website. Maurice?Maurice Tose Thank you, Bruce. Our second quarter 2012 earnings release was issued about 4:15 today, and a full text copy of our press release has been distributed via e-mail and is also available on our website. We are pleased to report growth in second quarter revenue driven by total comp solutions for federal government customers and commercial 9-1-1 services for network operators and state and local governments. We continue to see increasing federal needs for our C4ISR secure communication solutions and skilled field support for continuous mission-critical service. Our government business has a robust pipeline of high value contract opportunities, of which several award notices are expected in the second half of this year. As I indicated in our press release, TCS is now a company with depth of expert technical resources for secure, highly reliable wireless communication. We have nearly 500 SATCOM and network security professionals and about 400 cellular infrastructure and application engineers and specialist, and more than 200 personnel engaged in the network technology that enables public safety communications. These are scarce and valuable resources for enabling secure and reliable communications for government and enterprise. An example is the emerging opportunity into many facets of secure cellular and the efforts of these engineers are expanding our proprietary intellectual property. On July 6 th, we announced the acquisition of microDATA GIS, a leading next-generation 9-1-1, or next-gen provider. We believe that state and local governments are in the early innings of upgrading their existing 9-1-1 systems from circuit switch to IP-based networks, internet protocol-based networks. The SEC has predicted total non-recurring next-gen spending of $1.2 billion over 10 years, and an additional $1.5 billion for in fact recurring connectivity posting in operation and maintenance expenses. microDATA's next-gen 9-1-1 roadmap compliments TCS. In addition to complementing TCS's emergency services, internet protocol network or ESInet products, microDATA brings TCS products for customer premise equipment, or CPE, which includes computer aided dispatch integration dashboards, call management products and call handling software and geographic information systems software. Together with TCS's technology, scale and leadership serving the public safety community, we expect to be a formidable competitor in the rapidly growing next-gen 9-1-1 market.
Turning now to highlights of the second quarter, our Government segment's revenue was up $20 million, or 38% compared to the same quarter of last year, including a $22 million increase in pass-through contract revenues.Government segment first half revenue was $130.3 million, up 38% growth over first half 2011, while gross profit was $25.8 million, up 7%. Government services revenue for the quarter was $33 million, up 2% from a year ago and contributed $8.4 million of gross profit, down from $11 million last year due to pricing compression on some contracts. TCS was recently awarded a Multi-Million Dollar subcontract to provide managed network service in support of telemedicine applications. Our federal civilian pipeline has grown to over $170 million with growth in IT professional services network integration and in-building wireless solutions. Our in-building wireless solutions deployed at Walter Reed National Military Medical facilities, Aberdeen Proving Grounds and U.S. hospital at Fort Belvoir, enhanced telemedicine capabilities for the doctors and nurses providing critical, real-time medial information. Incremental funding of $8 million was received in Q2 to provide integrated, global logistic support for U.S. Marine Corps wireless point-to-point linked solutions in theater, and in mid-July we were awarded an $11 million contract for additional technical assistance on this contract. This growth is a testament to the value of our mature field support and technical training personnel provide. Read the rest of this transcript for free on seekingalpha.com