Press Releases

Highlights include:

Exceeds estimates for Revenue, Adjusted EBITDA, EPS and Adjusted EPS
Revenue increases 6% over prior year
Adjusted EBITDA of $12.6 million, up 18% year-over-year
Guidance raised for year
Strategic acquisition of Lewis Innovative Technologies

CHELMSFORD, Mass., Jan. 26, 2016 (GLOBE NEWSWIRE) -- Mercury Systems, Inc. (NASDAQ:MRCY) (www.mrcy.com), reported operating results for the second quarter of fiscal 2016, ended December 31, 2015.

Management Comments
"Our second fiscal quarter was once again marked by very strong execution," commented Mark Aslett, President and Chief Executive Officer.  "Thanks to solid gross margins driven by revenue mix, and continued cost discipline, our 6% increase in revenue resulted in an 18% increase in adjusted EBITDA year-over-year.  With the delivery of a strong first half and a recently approved defense budget, we remain on track to achieve our objectives for the year while we continue investing in the business to drive future growth. As a result, we are comfortable raising our guidance for the balance of the year," Aslett concluded.

Second Quarter Fiscal 2016 Results 
Second quarter fiscal 2016 revenues were $60.4 million, an increase of $3.3 million, or 6%, compared to the second quarter of fiscal 2015. GAAP income from continuing operations for the second quarter of fiscal 2016 was $4.8 million, or $0.14 per share, compared to GAAP income from continuing operations of $2.9 million, or $0.09 per share, for the prior year's second quarter.  Adjusted earnings per share ("adjusted EPS") was $0.23 per share, for the second quarter of fiscal 2016, compared to $0.20 per share in the second quarter fiscal 2015. All per share information is presented on a fully diluted basis.

Second quarter fiscal 2016 adjusted EBITDA was $12.6 million, an increase of 18% from the second quarter of fiscal 2015. 

Total GAAP net income for the second quarter of fiscal 2016 was $4.8 million, or $0.14 per share, compared to total GAAP net income of $0.3 million, or $0.01 per share, for the prior year's second quarter.  The second quarter of fiscal 2015 included a loss of ($2.6) million, or ($0.08) per share, from discontinued operations.

Cash flows from operating activities in the second quarter of fiscal 2016 were a net inflow of $11.9 million, compared to a net inflow of $8.2 million in the second quarter of fiscal 2015.  Free cash flow, defined as cash flow from operating activities less capital expenditures, was a net inflow of $10.6 million in the second quarter of fiscal 2016, compared to a net inflow of $7.0 million in the second 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 second quarter of fiscal 2016 were $45.2 million, yielding a book-to-bill of 0.75 for the quarter. Mercury's total backlog at December 31, 2015 was $204.8 million, an increase of $12.7 million from a year ago.  Of the December 31, 2015 total backlog, $151.6 million represents orders expected to be shipped over the next 12 months. 

Revenues by Reporting Segment
Mercury Commercial Electronics (MCE) — Revenues for the second quarter of fiscal 2016 from MCE were $53.0 million, representing an increase of $1.2 million, or 2.3%, from the second quarter of fiscal 2015.  The increase in revenues compared to last year's second quarter related primarily to higher SEWIP and DEWS program revenues. 

Mercury Defense Systems (MDS) — Revenues for the second quarter of fiscal 2016 from MDS were $7.9 million, an increase of $3.2 million, or 67%, from the second quarter of fiscal 2015, primarily due to strength in an airborne surveillance program.

The revenues by reporting segment are adjusted for ($0.5) million and $0.5 million of revenues included in our consolidated results in the second 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. 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 third quarter of fiscal 2016, revenues are currently forecasted to be in the range of $63 million to $67 million.  Adjusted EPS is expected to be in the range of $0.19 to $0.22 per share, and includes approximately $1.7 million of amortization of intangible assets, $2.3 million of stock-based compensation expense and an effective tax rate of approximately 36%. Adjusted EBITDA for the third quarter of fiscal 2016 is expected to be in the range of $11.3 million to $12.6 million.

Revenues for all of fiscal 2016 are currently expected to grow between 6% and 8%, while adjusted EBITDA for fiscal 2016 is expected to increase by 9% to 13% year-over-year based on revenue mix expectations in the second half of the year.        

Recent Highlights
December — Mercury Systems announced that it acquired Lewis Innovative Technologies, Inc. (LIT). A privately-held company based in Decatur, Ala., LIT is at the forefront of technology development necessary to protecting systems critical to national security while meeting strict DoD Program Protection Requirements. The Company intends to maintain LIT's presence in the Huntsville, Ala. tech corridor.

November — Mercury announced that its Mercury Defense Systems (MDS) subsidiary was awarded a firm-fixed-price, indefinite delivery/indefinite quantity (IDIQ) time and material contract worth up to $41.8 million to deliver 200 advanced miniaturized Digital RF Memory modulators (Mini DRFM) to the U.S. Navy. The contract was received in the Company's fiscal 2016 second quarter. The work will be performed at the Company's Cypress, Calif. facility and is expected to be completed in November 2020.

November — Mercury announced that its MDS subsidiary received a $1.8 million order from a leading international aerospace and defense company for radar environment simulation equipment. The order was booked in the Company's fiscal 2016 first quarter and is expected to be shipped over the next several quarters.

November — Mercury announced support for the expanded industrial-grade Intel Xeon Processor D-1500 Product Family with new embedded open systems architecture (OSA) form factors and configurations. The new configurations will feature broader processor core count and power options, greater ruggedness and extended reliability, providing even more server-class processing power at the tactical edge.

October — Mercury announced it received a $22.7 million follow-on order from a leading defense prime contractor for advanced radio frequency (RF) microwave tuners and intermediate frequency (IF) receivers for a naval electronic warfare (EW) application. The orders were booked in the Company's fiscal 2016 first quarter and are expected to be shipped over the next several quarters.

Conference Call Information

Mercury will host a conference call and simultaneous webcast on Tuesday, January 26, 2016, at 5:00 p.m. ET to discuss the second 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 the better alternative for affordable, secure and sensor processing subsystems designed and made in the USA. Optimized for program and mission success, Mercury's solutions power a wide variety of critical defense and intelligence applications on more than 300 programs such as Aegis, Patriot, SEWIP, F-35 and Gorgon Stare. Headquartered in Chelmsford, Massachusetts, Mercury Systems is a high-tech commercial company purpose-built to meet rapidly evolving next-generation defense electronics challenges. 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 and Innovation That Matters 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