Press Releases

First Quarter Highlights Include:
Revenue up 21% over prior year
Backlog sets new record
Revenue, EPS, adjusted EPS and adjusted EBITDA exceed consensus estimates

ANDOVER, Mass., Oct. 24, 2017 (GLOBE NEWSWIRE) -- Mercury Systems, Inc. (NASDAQ:MRCY) (www.mrcy.com), reported operating results for the first quarter of fiscal 2018, ended September 30, 2017.

Management Comments
"The first quarter of fiscal 2018 marked a solid start to the year for Mercury," said Mark Aslett, Mercury's President and Chief Executive Officer. "We continued to deliver strong revenue growth and profitability both in our organic and acquired businesses, validating once again our ongoing strategy.  Our newly added capabilities and ability to generate and capture business synergies should expand our market opportunities and potential for future growth.  The strong performance of the business in Q1, coupled with a robust pipeline of new business pursuits is allowing us to increase our full fiscal year 2018 guidance," Aslett concluded.

First Quarter Fiscal 2018 Results
Total Company first quarter fiscal 2018 revenues were $106.1 million, compared to $87.6 million in the first quarter of fiscal 2017.  The first quarter fiscal 2018 results include an aggregate of approximately $12.6 million of revenue attributable to the CES, Delta Microwave and Richland Technologies acquired businesses.

GAAP net income for the first quarter of fiscal 2018 was $18.0 million, or $0.38 per share, compared to $3.8 million, or $0.10 per share, for the first quarter of fiscal 2017.  Adjusted earnings per share ("adjusted EPS") were $0.37 per share for the first quarter of fiscal 2018, compared to $0.22 per share in the first quarter of fiscal 2017. The GAAP results include discrete tax benefits of $7.9 million associated with stock-based compensation deductions and $4.1 million derived from net operating loss carry-forwards associated with previously acquired businesses.

First quarter fiscal 2018 adjusted EBITDA for the Company was $25.0 million, compared to $18.2 million for the first quarter of fiscal 2017.

Cash flows from operating activities in the first quarter of fiscal 2018 were a net inflow of $8.0 million, compared to a net inflow of $10.3 million in the first quarter of fiscal 2017.  Free cash flow, defined as cash flow from operating activities less capital expenditures, was a net inflow of $4.4 million in the first quarter of fiscal 2018, compared to a net inflow of $4.2 million in the first quarter of fiscal 2017.

All per share information is presented on a fully diluted basis.

Bookings
Total bookings for the first quarter of fiscal 2018 were $107.2 million, yielding a book-to-bill ratio of 1.01 for the quarter.

Backlog
Mercury's total backlog at September 30, 2017 was $360.7 million, a $64.3 million increase from a year ago.  Of the September 30, 2017 total backlog, $281.7 million represents orders expected to be shipped within the next 12 months.

Business Outlook  
This section presents our current expectations and estimates, given current visibility, on our business outlook for the current fiscal quarter and fiscal year 2018. It is possible that actual performance will differ materially from the estimates given, either on the upside or on the downside. Investors should consider all of the risks with respect to these estimates, including those listed in the Safe Harbor Statement below and in our periodic filings with the U.S. Securities and Exchange Commission, and make themselves aware of how these risks may impact our actual performance.

For the second quarter of fiscal 2018, revenues are forecasted to be in the range of $112.5 million to $116.5 million. GAAP net income for the second quarter is expected to be approximately $6.1 million to $7.1 million, or $0.13 to $0.15 per share, assuming no restructuring, acquisition, or non-recurring financing related expenses in the period, an effective tax rate of approximately 35%, and approximately 47.5 million weighted average diluted shares outstanding.  Adjusted EPS is expected to be in the range of $0.28 to $0.30 per share. Adjusted EBITDA for the second quarter of fiscal 2018 is expected to be in the range of $25.3 million to $26.8 million.

For the full fiscal year 2018, we currently expect revenue of $457.0 million to $468.0 million, and GAAP net income of $37.8 million to $40.7 million, or $0.79 to $0.85 per share, assuming approximately 47.7 million weighted average diluted shares outstanding.  Adjusted EBITDA for the full fiscal year is expected to be approximately $105.0 million to $109.0 million, and adjusted EPS for the full fiscal year is expected to be approximately $1.29 to $1.35 per share.

Recent Highlights
September — Mercury Systems announced it received $11.5 million in follow-on orders from a leading defense prime contractor for BuiltSAFE™ computing modules to be used in Command, Control, Communications, Computers, and Intelligence (C4I) subsystems. The subsystems will be deployed in both manned and unmanned platforms as well as their associated ground stations. The orders were booked in the Company's fiscal 2018 first quarter and are expected to be shipped over the next several quarters.

September — Mercury announced it received a $5.3 million follow-on order from a leading defense prime contractor for high-performance GPS Selective Availability Anti-Spoofing Modules (SAASM) for a precision guided munitions program. The order was booked in the Company's fiscal 2018 first quarter and is expected to be shipped over the next several quarters.

September — Mercury announced the launch of its Diagnostic Support Tools (DST) software suite, which provides the capabilities required for customers to build a robust subsystem Built-In-Test (BIT) for system integrity during system boot and application execution. Compatible with Mercury's BuiltSECURE™ infrastructure, DST provides comprehensive, non-intrusive fault detection across processor boards, graphics cards, I/O modules, networks, backplanes, operating systems, and applications.

September — Mercury announced it received a $3.8 million order from a leading defense prime contractor for high-performance radio frequency (RF) and microwave modules integrated into an advanced electronic warfare system.  The order was booked in the Company's fiscal 2018 first quarter and is expected to be shipped over the next several quarters.

September — Mercury announced the availability of its BuiltSAFE™ GS Multi-Core Renderer. Part of the BuiltSAFE Graphics Suite, the software renderer runs on a multi-core CPU and is certifiable to DO-178C at the highest design assurance level (DAL A) as well as ASIL D for automotive safety.

September — Mercury announced that its ASURRE-Stor® portfolio of self-encrypting solid-state drives (SSD) received certification from the National Information Assurance Partnership (NIAP) for Common Criteria (CC) Full Disk Encryption FDE-EE and FDE-AA collaborative Protection Profiles (cPP). Launched in April of 2017, ASURRE-Stor SSDs are precision engineered to meet the stringent security and performance requirements defined in the National Security Agency's (NSA) Commercial Solutions for Classified (CSfC) program.

September — Mercury announced it received a $8.0 million order from a leading defense prime contractor for BuiltSECURE™ high density secure memory devices manufactured at its DMEA-trusted facility in Phoenix, Ariz. The high-speed memory devices will be integrated into active electronically scanned array (AESA) radar systems deployed on an advanced airborne military platform. The order was booked in the Company's fiscal 2018 first quarter and is expected to be shipped over the next several quarters.

September — Mercury announced it launched the MFCC-8558 BuiltSAFE™ single board computer (SBC) module. This new safety-certifiable SBC can boot in less than one second including the real-time operating system (RTOS) and graphics driver, making it 30 times faster than the prior generation. Together the fast boot and ability to be safety certified make this SBC ideal for critical systems in avionics, communications, mission processing, and command and control applications.

September — Mercury announced it received a $2.0 million follow-on order from a leading defense prime contractor for high-efficiency, SWaP-optimized GPS filter amplifiers for a munitions application. The order was booked in the Company's fiscal 2017 fourth quarter and is expected to be shipped over the next several quarters.

August — Mercury announced it recently received Aerospace Standard 9100 (AS9100) certification for its Mercury Defense Systems Advanced Design Centers located in Cypress, Calif., West Lafayette, Ind. and Huntsville, Ala., as well as its headquarters facility in Andover, Mass. These recent certifications add to the existing certifications the Company currently holds at many of its sites in the U.S. and Europe.

August — Mercury announced volume production of the most recent addition to its portfolio of high-density secure memory devices. Optimized for significantly space-constrained defense and commercial avionics applications, Mercury's new product embeds 2GB of double data rate third-generation synchronous dynamic random-access memory (DDR3 SDRAM) in a highly compact, ruggedized ball grid array (BGA) package.

August — Mercury announced the planned availability of the Ensemble® 4000 Series SBC4510 VME single board computer (SBC) module with an Intel® Xeon® E3 v6 processor. The new SBC will enable technology insertion of modern high performance and system security engineering solutions into existing VME-based sensor processing systems.

August — Mercury announced it received an $8.5 million follow-on order against its recently announced $152.0 million 5 year sole source basic ordering agreement (BOA) to deliver advanced Digital RF Memory (DRFM) jammers to the U.S. Navy. The order was received in the Company's fiscal 2017 fourth quarter and is expected to be shipped over the next several quarters.

August — Mercury announced it received a $4.3 million follow-on order from a leading defense prime contractor to provide radar subsystems and related digital processing technologies for a missile defense application. The order was booked in the Company's fiscal 2017 fourth quarter.

July — Mercury announced it received a $5.0 million order from a leading defense prime contractor for airborne tactical mission computers in a maritime patrol aircraft.  This is a follow-on to previous orders for systems destined to different countries.  The order was booked in the Company's fiscal 2017 fourth quarter.

July — Mercury announced that Lisa S. Disbrow, recently retired Under Secretary of the U.S. Air Force, and Mary Louise (ML) Krakauer, former Executive Vice President and Chief Information Officer of Dell Corporation, were elected to the Board of Directors of Mercury Systems, Inc. With this election, the Board of Directors will consist of nine members, eight of which are independent directors.

July — Mercury announced it received a $5.5 million follow-on order from a leading defense prime contractor for compact, highly ruggedized, system-in-package (SiP) devices for an airborne weapons application. The order was booked in the Company's fiscal 2017 fourth quarter and is expected to be shipped over the next several quarters.

July — Mercury announced it received an $8.5 million follow-on order from a leading defense prime contractor for high density secure memory devices for integration into the computing systems of an advanced military avionics program. The order was booked in the Company's fiscal 2017 fourth quarter and is expected to be shipped over the next several quarters.

July — Mercury announced it received a $6.3 million order from a leading defense prime contractor for radar processing products. The order includes solutions for multiple surveillance programs and platforms ranging from high-altitude reconnaissance to maritime surveillance in both manned and unmanned aircraft. The order was booked in the Company's fiscal 2017 fourth quarter and will be shipped over the next several quarters.

July — Mercury announced it received a $10.5 million follow-on order from a leading defense prime contractor for high-performance microwave transceivers for precision guided munitions. The order was booked in the Company's fiscal 2017 fourth quarter and is expected to be shipped over the next several quarters.

July — Mercury announced it received the Premier Supplier Excellence Award from Raytheon. This prestigious award recognizes the Company's Phoenix, Ariz. Microelectronics Secure Solutions business unit for its operational excellence while delivering advanced microelectronic solutions in support of Raytheon's business needs. The award was presented by Raytheon executives to Mercury in a ceremony at the Company's Phoenix facility on July 13, 2017.

July — Mercury announced that it has extended its commercially-developed Ball Grid Array (BGA) packaging conversion technology to the new Intel® Xeon® Processor Scalable Family, previously codenamed "Skylake-SP". The technology enables conversion of the land grid array (LGA) package found on standard Intel Xeon server CPUs to the more rugged BGA package. The result is a truly rugged server-class processing option in an open system architecture that delivers 2-4x the performance of other product lines of Intel Xeon processors generally available in native BGA packages.

July — Mercury announced that it acquired Richland Technologies, LLC (RTL). Based in Duluth, Ga., RTL specializes in safety-critical and high integrity systems, software, and hardware development as well as safety-certification services for mission-critical applications. In addition, the Company is a leader in safety-certifiable embedded graphics software for commercial and military aerospace applications. The acquisition complements Mercury's acquisition of Creative Electronic Systems (CES) last November by providing additional capabilities in safety-critical markets as well as the opportunity to leverage RTL's U.S. presence and expertise. Together, the RTL and CES acquisitions position Mercury uniquely as a leading provider of secure and safety-critical processing subsystems for aerospace and defense customers. Mercury intends to maintain RTL's presence in Duluth, Ga.

Conference Call Information

Mercury will host a conference call and simultaneous webcast on Tuesday, October 24, 2017, at 5:00 p.m. ET to discuss the first quarter fiscal 2018 results and review its financial and business outlook going forward.

To join the conference call, dial (877) 303-6977 in the USA and Canada, or (760) 298-5079 in all other countries.  Please call five to ten minutes prior to the scheduled start time. The live audio webcast can be accessed from the 'Events and Presentations' page of Mercury's website at www.mrcy.com/investor.

A replay of the webcast will be available two hours after the call and archived on the same web page for six months.

Use of Non-GAAP Financial Measures
In addition to reporting financial results in accordance with generally accepted accounting principles, or GAAP, the Company provides adjusted EBITDA, adjusted income, adjusted earnings per share "adjusted EPS", and free cash flow, which are non-GAAP financial measures.  Adjusted EBITDA, adjusted income, and adjusted EPS exclude certain non-cash and other specified charges. The Company believes these non-GAAP financial measures are useful to help investors understand its past financial performance and prospects for the future.  However, these non-GAAP measures should not be considered in isolation or as a substitute for financial information provided in accordance with GAAP.  Management believes these non-GAAP measures assist in providing a more complete understanding of the Company's underlying operational results and trends, and management uses these measures along with the corresponding GAAP financial measures to manage the Company's business, to evaluate its performance compared to prior periods and the marketplace, and to establish operational goals.  A reconciliation of GAAP to non-GAAP financial results discussed in this press release is contained in the attached exhibits.

Mercury Systems — Innovation That Matters^™

Mercury Systems (NASDAQ:MRCY) is a leading commercial provider of secure sensor and mission processing subsystems. Optimized for customer and mission success, Mercury's solutions power a wide variety of critical defense and intelligence programs. Headquartered in Andover, Mass., Mercury is pioneering a next-generation defense electronics business model specifically designed to meet the industry's current and emerging technology needs. To learn more, visit www.mrcy.com.

Forward-Looking Safe Harbor Statement

This press release contains certain forward-looking statements, as that term is defined in the Private Securities Litigation Reform Act of 1995, including those relating to fiscal 2018 business performance and beyond and the Company's plans for growth and improvement in profitability and cash flow. 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, 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 in technological advances and delivering technological innovations, changes in, or in the U.S. Government's interpretation of, federal export control or 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 cyber-security regulations and requirements increases in tax rates, changes to generally accepted accounting principles, difficulties in retaining key employees and customers, unanticipated costs under fixed-price service and system integration engagements, and various other factors beyond our control. These risks and uncertainties also include such additional risk factors as are discussed in the Company's filings with the U.S. Securities and Exchange Commission, including its Annual Report on Form 10-K for the fiscal year ended June 30, 2017. The Company cautions readers not to place undue reliance upon any such forward-looking statements, which speak only as of the date made. The Company undertakes no obligation to update any forward-looking statement to reflect events or circumstances after the date on which such statement is made.

Mercury Systems, Innovation That Matters, BuiltSAFE and BuiltSECURE are trademarks, and ASURRE-Stor and Ensemble are registered trademarks of Mercury Systems, Inc. Other product and company names mentioned may be trademarks and/or registered trademarks of their respective holders.

Contact:
Gerry Haines, CFO
Mercury Systems, Inc.
978-967-1990