|Edgar Online, Inc.|
The discussion below contains certain forward-looking statements related to statements concerning future revenues and future business plans. Actual results may vary from those contained in such forward-looking statements.
Overview of Fiscal 2012 Results of Operations
• Systems - the Systems segment consists of our MultiComputer Division which
designs, commercially develops and manufactures signal processing computer
platforms that are used primarily in military applications and the process
control and data acquisition ("PCDA") proprietary hardware business of our
• Service and System Integration - the Service and System Integration segment
includes the computer systems' maintenance and integration services and
third-party computer hardware and software products businesses of our Modcomp
subsidiary. Highlights include:
• Revenue increased by approximately
the year ended
September 30, 2011. • For the year ended September 30, 2012, we had an operating profit of
million for the year ended
September 30, 2011, for an increase of approximately $4.2 million.
• For the year ended
million, which includes
$1.7 millionof tax benefit versus net income of approximately $0.4 millionfor the year ended September 30, 2011, for an increase of approximately $6.2 million.
• Net cash provided by operating activities was approximately
the year ended
$1.5 millionfor the year ended September 30, 2011. The increase in revenues of $11.2 millionreferred to above resulted from significant growth in revenues from both our Systems and our Service and System Integration segments. Revenues in the Systems segment increased from $7.8 millionfor fiscal 2011 to $11.1 millionfor fiscal 2012 for an increase of approximately $3.3 million, while, in our Service and System Integration segment revenues increased by approximately $7.8 millionfrom $65.8 millionthe year ended September 30, 2011to $73.7 millionfor the year ended September 30, 2012. The revenue increase in the Systems segment was largely driven by higher royalty revenues which were $6.4 millionfor fiscal 2012 versus $1.7 millionin fiscal 2011. Royalty revenues are particularly significant because there is no cost of sales associated with royalty revenues, hence the profit margin is 100% on this revenue. This $4.7 millionincrease in royalty revenue was partially offset by lower product revenue in fiscal 2012 versus fiscal 2011 which decreased product revenue by $1.4 million. In the Service and System Integration segment we experienced significant growth in both product and service revenues. Product revenues for the segment increased by $6.3 millionwhich was a 13% increase from $49.1 millionin fiscal 2011 to $55.4 millionin fiscal 2012. Service revenue in the segment increased by $1.6 millionwhich was a 9% increase from $16.7 millionin fiscal 2011 to $18.3 millionin fiscal 2012. The product revenue increase was derived in large part from our German operation, where product sales increased by $4.1 million. This increase was due substantially to a significant contract with a large European telecommunications customer, pursuant to which we were engaged as a significant supplier for their global IT security infrastructure build out. The increase in services revenue in the segment was derived entirely from our German operation and was also as a result of this telecommunications customer. In assessing the outlook for fiscal 2013, anticipating that we will not realize significant royalty revenue, we must assume a less optimistic view for the Systems segment for next year in comparison to the robust operating results we realized for fiscal 2012. In addition, based on the risks associated with the economic environment within the defense market, we plan to manage the Systems segment assuming relatively weak demand for fiscal 2013. In the Service and System Integration segment, we will continue to have a cautiously optimistic outlook for fiscal 2013, in terms of revenue, where much will depend upon the level of overall growth in the private sector economy both domestically and in our European markets. We plan to focus our attention and resources in the Service and System Integration segment on higher-margin business and away from low margin business as we move forward. While this may put pressure on sales growth in fiscal 2013, we believe this strategy will achieve profitable growth for the long term. 17
The following table details our results of operations in dollars and as a percentage of sales for the years ended