ANDOVER, Mass., July 31, 2018 (GLOBE NEWSWIRE) -- Mercury Systems, Inc. (NASDAQ: MRCY, www.mrcy.com), reported operating results for its fiscal 2018 fourth quarter and year ended June 30, 2018. The Company also announced the acquisition of Germane Systems for $45 million.
Management Comments
“The business performed extremely well in the fourth quarter of fiscal 2018,” said Mark Aslett, Mercury’s President and Chief Executive Officer. “We delivered very strong financial performance with bookings, backlog, revenue, adjusted EBITDA, operating and free cash flow all reaching record levels. In addition, we are pleased to announce the acquisition of Germane Systems which, coupled with the Themis Computer acquisition, creates a $100+ million C2I rugged server business. We continue to execute against our strategy to increase top line growth organically and through acquisitions as well as achieve financial synergies through insourced manufacturing and thoughtful integration of acquired businesses.”
Fourth Quarter Fiscal 2018 Results
Total Company fourth quarter fiscal 2018 revenues were $152.9 million, compared to $115.6 million in the fourth quarter of fiscal 2017. The fourth quarter fiscal 2018 results included an aggregate of approximately $18.5 million of revenue attributable to the Richland Technologies and Themis Computer acquired businesses.
Total Company GAAP net income for the fourth quarter of fiscal 2018 was $10.1 million or $0.21 per share, compared to $8.8 million, or $0.19 per share, for the fourth quarter of fiscal 2017. Adjusted earnings per share (“adjusted EPS”) was $0.47 per share for the fourth quarter of fiscal 2018, compared to $0.32 per share in the fourth quarter of fiscal 2017.
Fourth quarter fiscal 2018 adjusted EBITDA for the total Company was $37.7 million, compared to $27.8 million for the fourth quarter of fiscal 2017.
Cash flows from operating activities in the fourth quarter of fiscal 2018 were a net inflow of $25.6 million, compared to a net inflow of $9.7 million in the fourth quarter of fiscal 2017. Free cash flow, defined as cash flows from operating activities less capital expenditures, was a net inflow of $21.6 million in the fourth quarter of fiscal 2018, compared to a net inflow of $3.7 million in the fourth quarter of fiscal 2017.
All per share information is presented on a fully diluted basis.
Full Year Fiscal 2018 Results
Full year fiscal 2018 total Company revenues were $493.2 million, compared to $408.6 million for full year fiscal 2017. The fiscal 2018 revenue includes organic revenue of $433.4 million, an increase of 7% from fiscal 2017. Organic revenue represents total company revenue excluding net revenue from acquisitions for the first four full quarters since the entities’ acquisition date (which excludes any intercompany transactions). After the completion of four fiscal quarters, acquired businesses are treated as organic for current and comparable historical periods.
Total GAAP net income for fiscal 2018 was $40.9 million, or $0.86 per share, compared to GAAP net income of $24.9 million, or $0.58 per share, for the prior year. Adjusted EPS was $1.42 per share for fiscal 2018, compared to $1.15 per share in fiscal 2017.
Fiscal 2018 adjusted EBITDA for the total Company was $115.4 million, compared to $93.9 million in fiscal 2017.
Cash flows from operating activities for fiscal 2018 were a net inflow of $43.3 million, compared to a net inflow of $59.1 million for fiscal 2017. Free cash flow was a net inflow of $28.2 million in fiscal 2018, compared to a net inflow of $26.3 million in fiscal 2017.
Bookings and Backlog
Total bookings for the fourth quarter of fiscal 2018 were $171.7 million, yielding a book-to-bill ratio of 1.12 for the quarter. Total bookings for all of fiscal 2018 were $563.5 million, yielding a book-to-bill ratio of 1.14 for the full year.
Mercury’s total backlog at June 30, 2018 was $447.1 million, a $90.1 million increase from a year ago. Of the June 30, 2018 total backlog, $328.5 million represents orders expected to be shipped within the next 12 months.
Acquisition of Germane Systems
The Company also announced the acquisition of Germane Systems, LC ("Germane"). Based in Chantilly, VA, Germane is an industry leader in the design, development and manufacturing of rugged servers, computers and storage systems for command, control and information ("C2I") applications. Their quality solutions are used in harsh environments serving critical U.S. and international defense programs. Mercury acquired Germane for an all cash purchase price of $45 million, subject to net working capital and net debt adjustments. The acquisition and associated transaction expenses were funded through Mercury’s existing revolving credit facility. The acquisition is expected to be accretive to fiscal 2019 adjusted EPS.
"The combination of Germane with the previously acquired Themis Computer will enhance Mercury’s market penetration in the C4I market and provide additional capabilities for our customers. Germane is a strong, progressive business with an outstanding team, and we’re pleased to welcome them to the Mercury family,” Aslett concluded.
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 2019. 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 the Fourth Quarter and Fiscal 2018 Earnings Release Presentation 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 2019, inclusive of the acquisition of Germane Systems, revenues are forecasted to be in the range of $135 million to $141 million. GAAP net income for the first quarter is expected to be approximately $4.9 million to $7.0 million, or $0.10 to $0.15 per share, assuming no restructuring, acquisition, or non-recurring financing related expenses in the period, an effective tax rate of approximately 27%, excluding discrete items, and approximately 47.8 million weighted average diluted shares outstanding. Adjusted EBITDA for the first quarter of fiscal 2019 is expected to be in the range of $27.0 million to $30.0 million. Adjusted EPS is expected to be in the range of $0.32 to $0.36 per share.
For the full fiscal year 2019, inclusive of the acquisition of Germane Systems, we currently expect revenue of $602.0 million to $624.0 million, and GAAP net income of $36.1 million to $44.5 million, or $0.75 to $0.93 per share, assuming no restructuring, acquisition, or non-recurring financing related expenses in the period, an effective tax rate of approximately 27%, excluding discrete items, and approximately 47.9 million weighted average diluted shares outstanding. Adjusted EBITDA for the full fiscal year is expected to be approximately $130.5 million to $142.0 million, and adjusted EPS for the full fiscal year is expected to be approximately $1.58 to $1.76 per share.
Recent Highlights
June - Mercury Systems announced it received $5.9 million in orders from a leading defense prime contractor for the development of small form factor electronic warfare (EW) modules for a defense application. The orders were booked in the Company’s fiscal 2018 fourth quarter.
June - Mercury announced it received the 2018 Premier Supplier Excellence Award from Raytheon. This prestigious award recognizes the Company for demonstrating premier achievement in the area of partnership and for its operational excellence delivering advanced microelectronic solutions in support of Raytheon’s business needs.
June - Mercury announced that it received $3.2 million in follow-on orders from a leading defense prime contractor for custom-engineered digital microelectronics for a precision guided munitions application. The orders were booked in the Company’s fiscal 2018 fourth quarter and are expected to be shipped over the next several quarters.
June - Mercury announced it received a $2.1 million follow-on order for size, weight and power (SWaP)-optimized modules with pre-integrated, custom-engineered signal processing techniques from a leading aerospace and defense company. This order provides continuing support of engineering and manufacturing development (EMD) efforts for a lifecycle extension to a successful legacy electronic warfare system. The order was booked in the Company’s fiscal 2018 fourth quarter and is expected to be shipped over the next several quarters.
June - Mercury announced the expansion of its secure command, control and intelligence (C2I) and artificial intelligence (AI) processing solutions with configurations that feature up to four times as much system memory as previous generations. Mercury’s rugged, pre-engineered processing building blocks are available as 3U and 6U OpenVPX™ and AdvancedTCA®EnsembleSeries™ processing blades and rugged EnterpriseSeries™ rackmount ATX servers.
May - Mercury announced it received the 4-star Supplier Excellence Award from Raytheon’s Integrated Defense Systems business unit. This prominent award recognizes the Company’s facility in Oxnard, CA for operational excellence while delivering precision-engineered radio frequency (RF) and microwave solutions in support of Raytheon’s business objectives.
May - Mercury announced the EnsembleSeries DCM6111 6U VPX digital transceiver, the latest addition to its portfolio of digital processing solutions. The new transceiver seamlessly incorporates the Company’s BuiltSECURE™ technology, thereby enabling security architects to rapidly develop and deploy highly customized system security engineering (SSE) to detect and mitigate adversarial attacks.
May - Mercury announced it received a $2.4 million order from a leading defense prime contractor to provide radar subsystems and related digital processing technologies for a missile defense application. The order was booked in the Company’s fiscal 2018 third quarter.
May - Mercury announced it received a $3.8 million order from a leading electronics manufacturing services provider for millimeter wave transceiver subsystems integrated into a homeland security high-resolution imaging system. The order was booked in the Company’s fiscal 2018 third quarter and is expected to be shipped over the next several quarters.
May - Mercury announced it received a $10.8 million order from a leading defense prime contractor for rugged servers to be used in a military communications application. The order was booked in the Company's fiscal 2018 third quarter.
May - Mercury announced the beginning of customer engagements for its new TRRUST-Stor® secure solid state drive (SSD) optimized for embedded computing applications in forward-deployed defense environments. Available in host-accessible capacities up to 256 GB, the new device features triple-level cell (TLC) NAND flash memory operating in single-level cell (SLC) mode combined with advanced BuiltSECURE algorithms in a ruggedized, ultra-compact 22mm x 32mm ball-grid array (BGA) package.
April - Mercury and Green Hills Software® announced a close collaboration that has revolutionized the capabilities, performance and safety of next-generation flight display systems using multicore processor architectures. Mercury’s BuiltSAFE™ hardware and software portfolio delivers industry-leading SWaP for avionics computers and display systems, with a particular emphasis on mission systems, enhanced vision systems (EVS) and synthetic vision (SVS) systems for degraded visual environments (DVE).
April - Mercury announced it received a $16.1 million follow-on order from a leading defense prime contractor for integrated RF and digital subsystems for an advanced naval electronic support application. The order was booked late in the Company’s fiscal 2018 third quarter. Approximately half of the order has already been shipped in the Company's fiscal 2018 fourth quarter, and the balance is expected to be shipped over the next several quarters.
April - Mercury announced it received a $4.8 million 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 2018 third quarter and is expected to be shipped over the next several quarters.
April - Mercury announced it received a $5.7 million follow-on order from a leading defense prime contractor for ultra-compact, high-speed memory devices featuring BuiltSECURE technology. The devices will be integrated into the advanced electronically scanned array (AESA) radar system of a tactical airborne platform. The order was booked in the Company’s fiscal 2018 third quarter and is expected to be shipped over the next several quarters.
April - Mercury announced that it recently received Aerospace Standard 9100D (AS9100D) certification for its facilities located in Huntsville, AL, Cypress and Oxnard, CA, West Lafayette, IN, and Geneva, Switzerland. These recent certifications add to the existing AS9100C and/or ISO 9001 certifications the Company currently holds at its other sites.
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.
