Press Releases

Highlights include:

Bookings up 42% over prior year, yielding record backlog of $220 million
Revenue increases 11% over prior year
Adjusted EBITDA up 27% year-over-year to $14.6 million
Adjusted EBITDA and Adjusted EPS exceed estimates
Company raises earnings guidance for fiscal 2016

CHELMSFORD, Mass., April 26, 2016 (GLOBE NEWSWIRE) -- Mercury Systems, Inc. (NASDAQ:MRCY) (www.mrcy.com), reported operating results for the third quarter of fiscal 2016, ended March 31, 2016.

Management Comments
"The third quarter was another significant milestone toward achieving our objectives for the fiscal year," stated Mark Aslett, Mercury's President and Chief Executive Officer.  "Revenue growth continued to outpace the industry, increasing 11% year-over-year, while our adjusted EBITDA grew even faster at 27%.  In addition, bookings of $80.8 million yielded record backlog of $220 million.  Mercury's strong revenue performance, coupled with our operating leverage, continued to enhance our adjusted EBITDA performance, positioning Mercury for a strong finish to our fiscal 2016. We currently expect to close the pending acquisition of the embedded security, RF and microwave solutions, and custom microelectronics operations of Microsemi Corporation within approximately one week," Aslett concluded.

Third Quarter Fiscal 2016 Results
Third quarter fiscal 2016 revenues were $65.9 million, an increase of $6.3 million, or 11%, compared to the third quarter of fiscal 2015.  GAAP income from continuing operations for the third quarter of fiscal 2016 was $4.5 million, or $0.13 per share, compared to GAAP income from continuing operations of $4.7 million, or $0.14 per share, for the prior year's third quarter. The third quarter of fiscal 2016 included $1.7 million, or $0.03 per share of acquisition and financing costs. Adjusted earnings per share ("adjusted EPS") was $0.25 per share for the third quarter of fiscal 2016, compared to $0.22 per share in the third quarter fiscal 2015.  All per share information is presented on a fully diluted basis and does not reflect the impact of the 5.175 million common shares issued by the Company in the follow-on underwritten public offering, which closed on April 13, 2016.

Third quarter fiscal 2016 adjusted EBITDA was $14.6 million, an increase of 27% from $11.5 million in the third quarter of fiscal 2015. 

Total GAAP net income for the third quarter of fiscal 2016 was $4.5 million, or $0.13 per share, compared to total GAAP net income of $3.7 million, or $0.11 per share, for the prior year's third quarter.  The third quarter of fiscal 2015 included a loss, net of income taxes, of ($1.0) million, or ($0.03) per share, from discontinued operations.

Cash flows from operating activities in the third quarter of fiscal 2016 were a net inflow of $4.3 million, compared to a net inflow of $9.1 million in the third quarter of fiscal 2015.  Free cash flow, defined as cash flow from operating activities less capital expenditures, was a net inflow of $2.6 million in the third quarter of fiscal 2016, compared to a net inflow of $7.8 million in the third quarter of fiscal 2015. 

The Company's reported financial results are from continuing operations for all periods referenced in this release unless otherwise noted.  

Bookings and Backlog
Bookings for the third quarter of fiscal 2016 were $80.8 million, yielding a book-to-bill of 1.2 for the quarter.  Mercury's total backlog at March 31, 2016 was $219.7 million, an increase of $29.8 million from a year ago.  Of the March 31, 2016 total backlog, $172.0 million represents orders expected to be shipped over the next 12 months. 

Revenues by Reporting Segment
Mercury Commercial Electronics (MCE) — Revenues for the third quarter of fiscal 2016 from MCE were $57.5 million, representing an increase of $4.7 million, or 9.0%, from the third quarter of fiscal 2015.  The increase in revenues compared to last year's third quarter related primarily to higher SEWIP program revenues. 

Mercury Defense Systems (MDS) — Revenues for the third quarter of fiscal 2016 from MDS were $8.6 million, an increase of $1.9 million, or 28.2%, from the third quarter of fiscal 2015, primarily due to strength in the Filthy Buzzard program.

The revenues by reporting segment are adjusted for ($0.2) million and $0.1 million of revenues included in our consolidated results in the third quarter of fiscal 2016 and fiscal 2015, respectively.  This revenue is attributable to development programs where the revenue is recognized in both segments under contract accounting, and reflects the reconciliation to our consolidated results.

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 2016, which excludes the impact of our pending acquisition announced on March 23, 2016 and expected to close in the current quarter.  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 2016, on a standalone basis, revenues are forecasted to be in the range of $65.5 million to $68.5 million. Adjusted EPS is expected to be in the range of $0.20 to $0.22 per share, including approximately $1.8 million of amortization of intangible assets, $2.2 million of stock-based compensation expense and an effective tax rate of approximately 36%. Adjusted EBITDA for the fourth quarter of fiscal 2016 is expected to be in the range of $12.0 million to $13.5 million. This results in estimated revenue for the full fiscal year of $250.2 million to $253.2 million and adjusted EBITDA for the full fiscal year of approximately $51.0 million to $52.5 million.

The Company expects to provide combined guidance, including the businesses expected to be acquired from Microsemi, when it announces fourth quarter fiscal 2016 results.  

Recent Highlights
March — Mercury announced that it signed a definitive agreement with Microsemi Corporation to acquire the embedded security, RF and microwave, and custom microelectronics businesses of Microsemi.  For the twelve months ended September 27, 2015, these businesses had combined revenues of $99 million and pro forma standalone adjusted EBITDA of approximately 28%.  The businesses are primarily focused on the defense electronics market and employ a total of approximately 275 people based at facilities in Phoenix, Ariz., Camarillo, Calif., San Jose, Calif., and West Lafayette, Ind. The acquisition is expected to close during Mercury's fourth fiscal quarter, which ends June 30, 2016.

March — Mercury announced the rugged OpenVPX™ Ensemble® LDS6526 processing blade that seamlessly integrates the Intel® Xeon® Processor D-1500 system-on-a-chip (SoC) product family (formerly codenamed "Broadwell DE"), the versatility and performance boost of software-defined off-load processing with built-in, double-bandwidth sensor I/O capability into a powerful 6U form factor blade for streaming signal processing applications.

March — Mercury announced it received a $2.2 million follow-on order from a leading defense prime contractor for high-performance signal processing subsystems for a manned airborne radar application.  The order was booked in the Company's fiscal 2016 third quarter and is expected to be shipped over the next several quarters.

March — Mercury announced it received a $2.2 million order from a leading systems integrator to supply high-performance digital signal processing and radio frequency (RF) modules for a signals intelligence application.  The order was booked in the Company's fiscal 2016 third quarter and is expected to be shipped by the end of its fiscal 2016 fourth quarter.

February — Mercury announced that its headquarters facility in Chelmsford, Mass., as well as its facilities in Hudson, N.H., Manteca, Calif., and Cypress, Calif. each received "Superior" security ratings in recent vulnerability assessments conducted by the U.S. Department of Defense's Defense Security Service (DSS). For three of the four facilities, these represent multiple consecutive "Superior" ratings, the highest awarded to defense contractors by DSS. Currently, fewer than 10 percent of the approximately 13,500 facilities overseen by the DSS receive a Superior rating. Including these most recent ratings, Mercury has received an aggregate of twelve "Superior" ratings across numerous facilities.

January — Mercury announced it received a $3.7 million follow-on order from a leading defense prime contractor for high-performance digital signal processing modules for a manned airborne synthetic aperture radar (SAR) application.  The order was booked in the Company's fiscal 2016 second quarter and is expected to be shipped by its fiscal 2016 fourth quarter.

January — Mercury announced it received a $3 million follow-on order from a leading defense prime contractor for high performance microwave subsystems for an electronic warfare application.  The order was received in the Company's fiscal 2016 second quarter and is expected to be shipped over the next several quarters.

January — Mercury announced it received a $2 million follow-on order from a leading defense prime contractor for high-performance signal processing subsystems for a manned airborne radar application.  The order was booked in the Company's fiscal 2016 second quarter and is expected to be shipped over the next several quarters.

January — Mercury announced it received a $4 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 second quarter and is expected to be shipped over the next 11 months.

January — Mercury announced the Company's fluid management Liquid Flow-By™ cooling technology for embedded processing subsystems. With the ability to cool the most powerful and processing-dense devices available, Liquid Flow-By enables open system architecture (OSA) modules to operate unrestricted and reliably, regardless of the presence of a cooling air supply.

January — Mercury announced it had recently received $6.5 million in orders relating to a sensor processing application for fighter aircraft.  The orders were booked in the Company's fiscal 2016 second quarter.

Conference Call Information

Mercury will host a conference call and simultaneous webcast on Tuesday, April 26, 2016, at 5:00 p.m. ET to discuss the third 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 2016 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