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Mercury Systems Reports Third Quarter Fiscal 2016 Results, Raises Full Year Adjusted EBITDA Guidance

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-yearto $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. MRCY, +1.16% (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(TM) Ensemble(R) LDS6526 processing blade that seamlessly integrates the Intel(R) Xeon(R) 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(TM) 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...


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