Press Releases

Third Quarter Highlights include:

Record revenue, up 63% over prior year
GAAP net income, GAAP EPS, and record adjusted EBITDA exceed estimates

ANDOVER, Mass., April 25, 2017 (GLOBE NEWSWIRE) -- Mercury Systems, Inc. (NASDAQ:MRCY) (www.mrcy.com), reported operating results for the third quarter of fiscal 2017, ended March 31, 2017.

Management Comments
"The third quarter was another significant milestone toward achieving our objectives for fiscal 2017," said Mark Aslett, Mercury's President and Chief Executive Officer. "During the quarter we delivered a very strong financial performance with record revenues while our profitability exceeded estimates.  Year-over-year revenues and GAAP net income both grew more than 60%.  Additionally, on February 1, 2017 we raised net proceeds of $215.7 million through a very successful stock offering, replenishing our capacity to invest in future growth both organically and through continued acquisitions.  Finally, on April 3, 2017 we closed the acquisition of Delta Microwave, adding new capabilities, scale and breadth to Mercury's existing RF, microwave and millimeter wave portfolio, while further expanding our addressable market," Aslett concluded.

Third Quarter Fiscal 2017 Results
Total Company third quarter fiscal 2017 revenues were $107.3 million, compared to $65.9 million in the third quarter of last fiscal year.  These results include approximately $6.4 million of revenue attributable to the CES business, which was acquired in the second quarter of fiscal 2017. 

GAAP net income for the third quarter of fiscal 2017 was $7.0 million, or $0.16 per share, compared to $4.4 million, or $0.13 per share for the third quarter of fiscal 2016.  Adjusted earnings per share ("adjusted EPS") were $0.29 per share for the third quarter of fiscal 2017, compared to $0.25 per share in the third quarter of fiscal 2016.  All per share information is presented on a fully diluted basis and fiscal 2017 includes the effect of our recent stock offering.

Third quarter fiscal 2017 adjusted EBITDA for the Company was $25.0 million, compared to $14.6 million for the third quarter of fiscal 2016.  The third quarter fiscal 2017 adjusted EBITDA includes approximately $1.5 million associated with the CES business.

Cash flows from operating activities in the third quarter of fiscal 2017 were a net inflow of $24.9 million, compared to a net inflow of $4.4 million in the third quarter of fiscal 2016.  Free cash flow, defined as cash flow from operating activities less capital expenditures, was a net inflow of $11.9 million in the third quarter of fiscal 2017, compared to a net inflow of $2.6 million in the third quarter of fiscal 2016. 

Bookings
Total bookings for the third quarter of fiscal 2017 were $106.5 million, yielding a book-to-bill ratio of 1.0 for the quarter and representing a 32% increase compared to $80.8 million in bookings for the third quarter of fiscal 2016.  

Backlog
Mercury's total backlog at March 31, 2017 was $318.0 million, a $98.3 million increase from a year ago.  Of the March 31, 2017 total backlog, $270.7 million represents orders expected to be shipped over 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 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 fourth quarter of fiscal 2017, revenues are forecasted to be in the range of approximately $112 million to $116 million.  GAAP net income for the fourth quarter is expected to be approximately $6.5 million to $7.7 million, assuming no restructuring, acquisition, or additional financing related expenses in the period.  GAAP EPS and adjusted EPS are expected to be in the range of $0.14 to $0.16 and $0.26 to $0.29 per share, respectively, assuming an effective tax rate of 35% and a 47.3 million diluted weighted average share count.  Adjusted EBITDA for the fourth quarter of fiscal 2017 is expected to be in the range of $24.8 million to $26.7 million. 

For the full fiscal year 2017, before adding the impact of Delta Microwave, we now expect revenue to be between $400 million and $404 million, up from our prior expectation of $377 million to $384 million.  Including Delta Microwave, total revenue for fiscal 2017 is now expected to be approximately $405 million to $409 million, with total GAAP net income of $22.6 million to $23.8 million, or $0.52 to $0.55 per share. Total adjusted EBITDA for the full fiscal year is now expected to be approximately $91.0 million to $92.9 million, representing approximately 22.5% to 22.7% of revenue.  Adjusted EPS for fiscal 2017 is expected to be approximately $1.08 to $1.11 per share, assuming an effective tax rate of 35% and a 43.1 million diluted weighted average share count. 

Recent Highlights
March — Mercury Systems announced the Ensemble® HDS9624 Secure Rack Server to address the need for rack servers with system security features that can be forward deployed or sold to allies under Foreign Military Sales (FMS) or Direct Commercial Sales (DCS) programs. In addition to the unique security features, Mercury's new product line is the only rack server that includes both ruggedization and a fully trusted supply chain for both hardware and software.

March — Mercury announced volume production of its newest high density secure memory device, embedding 8GB of double data rate third-generation synchronous dynamic random-access memory (DDR3 SDRAM) in a military-hardened ball grid array (BGA) package. Available in both x64 and x72 architectures, Mercury's latest product is the defense industry's highest capacity ruggedized memory device.

March — Mercury announced it received a follow-on five year sole source basic ordering agreement (BOA) from the U.S. Navy to deliver advanced Digital RF Memory (DRFM) subsystems supporting jamming in a multi-threat environment. Valued at up to $152 million, the order was received in the Company's fiscal 2017 third quarter and provides for research and development, production, engineering services and ongoing support. Work will be performed at the Company's Cypress, Calif. facility with a period of performance from March 2017 through February 2022.

March — Mercury announced the Defense industry's first double data rate fourth-generation synchronous dynamic random-access memory (DDR4) high density secure memory device. Replacing up to eighteen industrial or commercial DDR4 devices with a single military-hardened component, Mercury delivers space savings up to 75% in a ball grid array (BGA) package with data transfer speeds up to 3200 Mb/s.

February — Mercury announced it received a 2016 Enterprise Supplier Recognition Award from Northrop Grumman. Presented at a ceremony during Northrop Grumman's recent Global Partner Forum, the award recognizes Mercury for competitive advantage and enterprise-level supply chain excellence that add value to Northrop's programs.

February — Mercury announced the launch of its Mercury Mission Systems (MMS) product line to address the immediate needs for safety-critical solutions for mission computing, avionics and platform management in the defense and commercial aerospace markets. MMS products feature not only the highest level of design assurance but also a full set of supporting software that reduces integration time and effort. The product line includes solutions from the former CES Creative Electronic Systems, S.A. located in Geneva, Switzerland, acquired by Mercury on November 4, 2016.

February — Mercury announced it that its Chelmsford, Mass. facility recently received the Category 1A Trusted Supplier accreditation for design capability from the U.S. Defense Department's Defense Microelectronics Activity (DMEA). This expands upon the previously received Category 1A accreditation for broker, packaging, assembly, and test at Mercury's Phoenix, Ariz. facility, and is part of Mercury's overall strategy to be the leading commercial provider of trusted and secure sensor and mission processing subsystems.

February — Mercury announced it received a $4.1 million follow-on order from a leading defense prime contractor for wideband millimeter wave transceivers for a homeland security high-resolution imaging application. The order was booked in the Company's fiscal 2017 third quarter and is expected to be shipped over the next several quarters.

January — Addressing the need for tighter in-vehicle security, Mercury announced the CANGuard™ security suite, a unique software solution designed to protect automotive vehicle data networks. The Company also announced that it has entered into a licensing agreement with a leading automotive electronics manufacturer to enable the integration of CANGuard software into existing vehicle control units as well as future units.

January — Mercury announced that it priced its previously announced underwritten public offering at $33.00 per share and increased the size of the offering to 6,000,000 shares of its common stock. The offering included a 30-day option for the underwriters to purchase up to an additional 900,000 shares of common stock at the same per share price, which was exercised. The offering closed on February 1, 2017.

January — Mercury announced it received a $2.4 million follow-on order from a leading defense prime contractor to supply frequency conversion modules for an Electronic Warfare (EW) service life extension program. The order was booked in the Company's fiscal 2017 second quarter and is expected to be shipped over the next several quarters.

January — Mercury announced it recently received $6.9 million in orders relating to a sensor processing application for fighter aircraft. The orders were booked in the Company's fiscal 2017 second quarter.

January — Mercury announced it received a $24.4 million follow-on order from a leading defense prime contractor for integrated radio frequency (RF) and digital subsystems for an electronic warfare (EW) application. The order, which includes an option to purchase additional units, was booked in the Company's fiscal 2017 second 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, April 25, 2017, at 5:00 p.m. ET to discuss the third quarter fiscal 2017 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. 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 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 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, 2016. 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, Ensemble and CANGuard 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