Press Releases

Mercury Fourth Quarter Highlights include:

Revenue, GAAP EPS, adjusted EPS and adjusted EBITDA all exceed estimates
Organic book-to-bill ratio of 1.1 yields record backlog of $225 million
Total Company book-to-bill ratio of over 1.2 yields total backlog of $288 million
Total Company revenue increases 33% over prior year, including a 7% organic increase
Completed acquisition of the embedded security, RF and microwave, and custom microelectronics businesses from Microsemi Corporation

CHELMSFORD, Mass., Aug. 02, 2016 (GLOBE NEWSWIRE) -- Mercury Systems, Inc. (NASDAQ:MRCY) (www.mrcy.com), reported operating results for its fiscal 2016 fourth quarter and year ended June 30, 2016.
       
Management Comments
"The fourth quarter of fiscal 2016 was marked by several major accomplishments for Mercury," stated Mark Aslett, Mercury's President and Chief Executive Officer. "During the quarter we completed the largest acquisition in the Company's history, and also completed two significant financing transactions — one involving equity and the other debt - to facilitate the acquisition as well as support future strategic initiatives.  Despite our increased focus on these significant activities during the quarter, the Company once again delivered strong growth in both revenue and profitability, and we finished the year with a record backlog.  In all, we are extremely pleased with the way the year closed out and our prospects as we look forward," said Aslett.

Fourth Quarter Fiscal 2016 Results
Total Company fourth quarter fiscal 2016 revenues were $85.4 million, compared to $64.1 million in the fourth quarter of last year.  Excluding the impact of the businesses acquired from Microsemi Corporation in May (the "Acquired Business,") revenues would have been $68.8 million, an increase of $4.7 million, or 7.3%, compared to the fourth quarter of fiscal 2015.

Total GAAP income from continuing operations for the fourth quarter was $8.5 million, or $0.22 per share, which includes $1.9 million or $0.05 per share of litigation and settlement income.  During the fourth quarter of fiscal 2016, the Company adopted an accounting standard update related to the treatment of share based compensation, which included a tax benefit of $1.1 million, or $0.03 per share for the quarter. Excluding the impact of the Acquired Business, income from continuing operations for the fourth quarter fiscal 2016 would have been $9.1 million, or $0.23 per share, with no fair value adjustments from purchase accounting. This compared to GAAP income from continuing operations of $6.1 million, or $0.18 per share for the fourth quarter of fiscal 2015. There was no impact of discontinued operations for the fourth quarter of fiscal 2016, compared to a GAAP loss from discontinued operations of ($0.2) million, or ($0.00) per share, for the prior year's fourth quarter. 

Adjusted earnings per share ("adjusted EPS") was $0.29 per share for the fourth quarter of fiscal 2016, compared to $0.26 per share in the fourth quarter fiscal 2015.  Excluding the impact of the Acquired Business, adjusted EPS for the fourth quarter of fiscal 2016 would have been $0.25 per share.

Fourth quarter fiscal 2016 adjusted EBITDA for the total Company was $18.3 million, and excluding the impact of the Acquired Business would have been $13.6 million.  This compared to $14.2 million for the fourth quarter of fiscal 2015.

Cash flows from operating activities in the fourth quarter of fiscal 2016 were a net inflow of $15.1 million, compared to a net inflow of $12.7 million in the fourth quarter of fiscal 2015.  Free cash flow, defined as cash flow from operating activities less capital expenditures, was a net inflow of $12.2 million in the fourth quarter of fiscal 2016, compared to a net inflow of $10.2 million in the fourth quarter of fiscal 2015. 

The Company's reported financial results are from continuing operations for all periods referenced in this release unless otherwise noted.  All per share information is presented on a fully diluted basis and includes the impact of the 5.175 million common shares issued by the Company in the follow-on underwritten public offering that closed on April 13, 2016.

Full Year Fiscal 2016 Results
Full year fiscal 2016 total Company revenues were $270.2 million.  Excluding the Acquired Business, revenues for the year would have been $253.5 million, an increase of $18.7 million, or approximately 8%, over fiscal 2015.  

Total GAAP income from continuing operations for fiscal 2016 was $19.7 million, or $0.56 per share, which includes $1.9 million or $0.05 per share of litigation and settlement income.  As previously mentioned, the Company adopted an accounting standard update related to the treatment of share based compensation, which included a tax benefit of $1.1 million, or $0.03 per share for the year. Excluding the impact of the Acquired Business, income from continuing operations for fiscal 2016 would have been $20.3 million, or $0.58 per share, with no fair value adjustments from purchase accounting, compared to GAAP income from continuing operations of $14.4 million, or $0.44 per share, for the prior year.  Adjusted EPS was $0.96 per share for fiscal 2016, compared to $0.82 per share in fiscal 2015.  

Fiscal 2016 adjusted EBITDA for the Company was $57.3 million, and excluding the Acquired Business would have been $52.6 million, an increase of 18.3% from $44.4 million in fiscal 2015. 

Cash flows from operating activities in fiscal 2016 were a net inflow of $36.9 million, compared to a net inflow of $32.2 million in fiscal 2015.  Free cash flow, defined as cash flow from operating activities less capital expenditures, was a net inflow of $29.1 million in fiscal 2016, compared to a net inflow of $26.2 million in fiscal 2015.

Bookings
Total bookings for the fourth quarter of fiscal 2016 were $104.2 million, yielding a book-to-bill ratio of 1.22 for the quarter. Total bookings for fiscal 2016 were $298.7 million, yielding a book-to-bill ratio of 1.11.  Excluding the impact of the Acquired Business, bookings for the fourth quarter of fiscal 2016 would have been $73.9 million, yielding a book-to-bill ratio of 1.07 for the quarter and representing a 10% decrease compared to $82.5 million in bookings for the fourth quarter of fiscal 2015. Excluding the impact of the Acquired Business, full year bookings for fiscal 2016 were $268.4 million, or roughly flat compared to $268.6 million in fiscal 2015, yielding a book-to-bill ratio of 1.06.

Backlog
Mercury's total backlog at June 30, 2016 was $287.7 million, a $79.7 million increase from a year ago.  Of the June 30, 2016 total backlog, $239.2 million represents orders expected to be shipped over the next 12 months.  Excluding the impact of the Acquired Business, Mercury's total backlog would have been $224.9 million, a $16.9 million increase from a year ago.

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 2017. 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 first quarter of fiscal 2017, revenues are forecasted to be in the range of $82.0 million to $87.0 million.  Income from continuing operations for the first quarter is expected to be approximately $1.0 million to $2.3 million, or $0.02 to $0.06 per share, assuming no restructuring, acquisition, or financing related expenses in the period. Adjusted EPS is expected to be in the range of $0.19 to $0.23 per share, using an effective tax rate of approximately 35%.  Adjusted EBITDA for the first quarter of fiscal 2017 is expected to be in the range of $17.0 million to $19.0 million.  We currently estimate revenue for the full fiscal year of $368.0 million to $376.0 million, and income from continuing operations of $15.5 million to $18.1 million, or $0.39 to $0.45 per share. Adjusted EBITDA for the full fiscal year is expected to be approximately $82.0 million to $86.0 million, and adjusted EPS of approximately $0.96 to $1.02 per share.  We currently anticipate that approximately 70% of the Company's total combined revenue for the year will be attributable to the organic business prior to the impact of the Acquired Business.

Recent Highlights
June — Mercury Systems announced it received a $7.9 million follow-on order from a leading defense prime contractor for integrated microwave assemblies (IMAs) for an unmanned electronic warfare (EW) jamming application. The order was booked in the Company's fiscal 2016 fourth quarter and is expected to be shipped over the next several quarters.

June — Mercury announced it received the 3-Star Supplier Excellence Award from Raytheon's Integrated Defense Systems business unit. The award recognizes the Company's Camarillo, Calif. and San Jose, Calif. facilities for outstanding delivery and quality performance.

June — Mercury announced it received a $2.4 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 application. The order was booked in the Company's fiscal 2016 fourth quarter and is expected to be shipped over the next several quarters.

June — Mercury announced it received a $2.8 million follow-on order from a leading defense prime contractor for high-performance digital signal processing subsystems for an unmanned airborne intelligence, surveillance and reconnaissance (ISR) application. The order was booked in the Company's fiscal 2016 fourth quarter and is expected to be shipped by its fiscal 2017 third quarter.

June — Mercury announced that its Hudson, N.H. Advanced Microelectronics Center (AMC) received the 2016 James S. Cogswell Outstanding Security Achievement Award from the U.S. Department of Defense's Defense Security Service (DSS). This award, which recognizes industrial security excellence, is the highest honor the DSS presents to cleared industry partners. Out of the approximately 13,500 cleared facilities nationwide, only 42 facilities received a Cogswell Award this year.

May — Mercury announced it received a $4.7 million contract from a U.S. government facility for advanced digital transceivers for an electronic warfare (EW) application. The order was booked in the Company's fiscal 2016 fourth quarter and is expected to be shipped over the next several quarters.

May — Mercury announced it received a $4.2 million follow-on order from a leading defense prime contractor for high-performance digital signal processing modules for an unmanned airborne synthetic aperture radar (SAR) application. The order was booked in the Company's fiscal 2016 fourth quarter and is expected to be shipped by its fiscal 2017 second quarter.

May — Mercury announced that it was selected to join Intel's FPGA technology-based Design Solutions Network (DSN) as a platinum-tier provider, giving Mercury customers enhanced access to a rich portfolio of FPGA and IP solutions that Intel acquired with Altera. Altera is now the Intel Programmable Solutions Group (PSG).

May — Mercury announced it received a $1.8 million order from a leading defense prime contractor for advanced radio frequency (RF) microwave tuners and intermediate frequency (IF) receivers for an electronic warfare (EW) application. The order was booked in the Company's fiscal 2016 third quarter and is expected to be shipped over the next several quarters.

May — Mercury announced the completion of its previously pending acquisition of the embedded security, RF and microwave, and custom microelectronics businesses from Microsemi Corporation.

April — Mercury announced it received a $3 million order from a leading defense prime contractor to provide radio frequency (RF) subsystems for a naval satellite communications application. The order was booked in the Company's fiscal 2016 third quarter and is expected to be shipped over the next several quarters.

April — Mercury announced that its Mercury Defense Systems subsidiary recently received a $4 million order from a leading international aerospace and defense company for radio frequency (RF) test systems for a missile defense application. The order was booked in the Company's fiscal 2016 third quarter and is expected to be shipped over the next several quarters.

April — Mercury announced it received $2.9 million in orders from a leading defense prime contractor to provide digital signal and image processing modules for an unmanned airborne ISR application. The orders were booked in the Company's fiscal 2016 third quarter and are expected to be shipped over the next several quarters.

April — Mercury announced that it priced its previously announced underwritten public offering of 4,500,000 shares of its common stock at $19.25 per share. The offering included a 30-day option for the underwriters to purchase up to an additional 675,000 shares of common stock at the same per share price, which was exercised in full. The offering closed on April 13, 2016.

April — Mercury announced it received a $15.4 million follow-on order from a key government agency to deliver a sophisticated radio frequency (RF) digital and processing subsystem solution for an advanced electronic warfare (EW) application. The order was received in the Company's fiscal 2016 third quarter and is expected to be shipped over the next several quarters.

April — Mercury announced it received a $28 million order from a leading defense prime contractor to supply high-performance digital signal processing subsystems for a ground-based ballistic missile defense radar processing application. The order was booked in the Company's fiscal 2016 third quarter and is expected to be shipped over the next several quarters.

Conference Call Information

Mercury will host a conference call and simultaneous webcast on Tuesday, August 2, 2016, at 5:00 p.m. ET to discuss the fourth quarter fiscal 2016 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 from continuing operations, adjusted earnings per share "adjusted EPS", and free cash flow, which are non-GAAP financial measures.  Adjusted EBITDA, adjusted income from continuing operations, and adjusted EPS exclude certain non-cash and other specified charges. Free cash flow is defined as cash flow from operating activities less capital expenditures.  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 processing subsystems designed and made in the USA. Optimized for customer and mission success, Mercury's solutions power a wide variety of critical defense and intelligence programs. Headquartered in Chelmsford, 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 2017 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 export regulations, 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, 2015. 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 and Liquid Flow-By are 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