Mercury First Quarter Highlights
include:
Mercury Systems, Inc. (NASDAQ:MRCY) (www.mrcy.com), reported
operating results for the first quarter of fiscal 2017, ended
September 30,
2016.
Management
Comments
“Mercury got off to a solid start to fiscal 2017,” said Mark
Aslett, Mercury’s President and Chief Executive Officer. “In
addition to a strong financial performance, we are pleased with our
progress on the integration plan for the businesses acquired from
Microsemi Corporation. The integration efforts are on schedule and
have yielded no surprises to date. With the momentum and the
operating leverage that will be delivered by our combined
operations, we remain confident in our ability to achieve the
financial performance called for by our increased annual guidance
and our new target business model for fiscal 2017,” Aslett
concluded.
First Quarter Fiscal 2017 Results
Total Company first quarter fiscal 2017 revenues were $87.6
million, compared to $58.4 million in the first quarter of last
year. Excluding the impact of the businesses acquired from
Microsemi Corporation in May 2016 (the “Acquired Business”),
revenues would have been $63.3 million, an increase of $4.9
million, or 8.4%, compared to the first quarter of fiscal 2016.
GAAP income for the first quarter of fiscal 2017 was $3.8
million, or $0.10 per share, which includes $3.6 million, or $0.05
per share, of stock-based compensation expense. This compares to
GAAP income of $2.9 million, or $0.08 per share, for the first
quarter of fiscal 2016, which included $2.7 million, or $0.05 per
share, of stock-based compensation expense.
First quarter fiscal 2017
adjusted EBITDA for the total Company was $18.2 million, compared
to $11.8 million for the first quarter of fiscal 2016. Adjusted
earnings per share (“adjusted EPS”) was $0.22 per share for the
first quarter of fiscal 2017, compared to $0.19 per share in the
first quarter of fiscal 2016.
Cash flows from operating activities in the first quarter of
fiscal 2017 were a net inflow of $10.3 million, compared to a net
inflow of $6.6 million in the first quarter of fiscal 2016. Free
cash flow, defined as cash flow from operating activities less
capital expenditures, was a net inflow of $4.2 million in the first
quarter of fiscal 2017, compared to a net inflow of $4.7 million in
the first quarter of fiscal 2016.
All per share information
is presented on a fully diluted basis.
Bookings
Total bookings for the first quarter of fiscal 2017 were $96.4
million, yielding a book-to-bill ratio of 1.10 for the
quarter.
Backlog
Mercury’s total backlog at September 30, 2016 was $296.4
million, a $78.4 million increase from a year ago. Of the
September 30, 2016 total backlog, $247.3 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
second quarter of fiscal 2017, revenues are forecasted to be in the
range of $91.0 million to $95.0 million. GAAP income for the second
quarter is expected to be approximately $2.7 million to $4.5
million, or $0.07 to $0.11 per share, assuming no restructuring,
acquisition, or financing related expenses in the period. Adjusted
EPS is expected to be in the range of $0.22 to $0.27 per share,
using an effective tax rate of approximately 35%. Adjusted EBITDA
for the second quarter of fiscal 2017 is expected to be in the
range of $18.1 million to $20.9 million.
For the full 2017 fiscal year, we currently estimate revenue of
$370.0 million to $380.0 million, and GAAP income of $19.8 million
to $22.4 million, or $0.50 to $0.56 per share. Adjusted EBITDA for
the full fiscal year is now expected to be approximately $83.0
million to $87.0 million, and adjusted EPS is now expected to be
approximately $1.03 to $1.09 per share, using an effective tax rate
of approximately 35%. We anticipate revenue growth for the
year being delivered by both the acquired and the organic
businesses. Recent
Highlights
September – Mercury Systems announced it received $11.7 million
in follow-on orders from a leading defense prime contractor to
provide radar subsystems and related digital processing
technologies for a missile defense application. The orders were
booked in the Company's fiscal 2017 first quarter and are expected
to be shipped over the next several quarters.
September – Mercury announced it received a $4.1 million
follow-on order from a leading defense prime contractor for high
performance microwave subsystems for an electronic warfare
application. The order was booked in the Company's fiscal 2017
first quarter and is expected to be shipped over the next several
quarters.
September – Mercury announced it received a $4.4 million
follow-on order from a leading defense prime contractor for
high-performance digital signal processing subsystems for a manned
airborne sonar application. The order was booked in the Company's
fiscal 2016 fourth quarter and is expected to be shipped over the
next several quarters.
August – Mercury announced it received a $5 million follow-on
order from a leading defense contractor for advanced digital signal
processing modules for a naval signals intelligence (SIGINT)
application. The order was booked in the Company's fiscal 2016
fourth quarter and is expected to be shipped over the next several
quarters.
August – Mercury announced it received a $2 million follow-on
order from a U.S. government facility for advanced digital
transceivers for an electronic warfare (EW) application. The order
was booked in the Company's fiscal 2016 fourth quarter and is
expected to be shipped by its fiscal 2017 third quarter.
August – Mercury announced that Christopher C. Cambria joined
the Company as its Senior Vice President, General Counsel, and
Secretary, reporting to Mercury's President and Chief Executive
Officer, Mark Aslett. Mr. Cambria leads the overall direction and
management of legal and regulatory matters at Mercury, including
support for mergers and acquisitions and corporate finance
transactions.
July – Mercury announced it received a $5 million order from a
leading defense prime contractor for high-performance signal
processing subsystems for a radar application. The order was booked
in the Company's fiscal 2016 fourth quarter and is expected to be
shipped over the next several quarters.
July – Mercury announced it received $2.1 million in orders from
a leading defense prime contractor for a communications processor
upgrade for a missile defense application. The orders were booked
in the Company's fiscal 2016 fourth quarter and are expected to be
shipped by its fiscal 2017 third quarter.
Conference Call Information
Mercury will host a conference call and simultaneous webcast on
Tuesday, October 25, 2016, at 5:00 p.m. ET to discuss the first
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 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 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 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.
MERCURY SYSTEMS, INC.
|
UNAUDITED CONSOLIDATED BALANCE
SHEETS |
(In thousands) |
September 30, |
|
June 30, |
|
2016 |
2016 |
|
|
|
|
Assets |
|
|
|
Current assets: |
|
|
|
Cash and
cash equivalents |
$ |
77,314 |
|
|
$ |
81,691 |
|
Accounts
receivable, net |
|
62,158 |
|
|
|
73,427 |
|
Unbilled
receivables and costs in excess of billings |
|
23,574 |
|
|
|
22,467 |
|
Inventory |
|
58,443 |
|
|
|
58,284 |
|
Prepaid
income taxes |
|
2,804 |
|
|
|
3,401 |
|
Prepaid
expenses and other current assets |
|
7,665 |
|
|
|
6,122 |
|
Total
current assets |
|
231,958 |
|
|
|
245,392 |
|
|
|
|
|
Restricted cash |
|
- |
|
|
|
264 |
|
Property and equipment,
net |
|
31,376 |
|
|
|
28,337 |
|
Goodwill |
|
344,525 |
|
|
|
344,027 |
|
Intangible assets,
net |
|
112,071 |
|
|
|
116,673 |
|
Other non-current
assets |
|
2,231 |
|
|
|
1,803 |
|
Total
assets |
$ |
722,161 |
|
|
$ |
736,496 |
|
|
|
|
|
Liabilities and
Shareholders’ Equity |
|
|
|
Current liabilities: |
|
|
|
Accounts
payable |
$ |
19,283 |
|
|
$ |
26,723 |
|
Accrued
expenses |
|
8,970 |
|
|
|
10,273 |
|
Accrued
compensation |
|
14,355 |
|
|
|
13,283 |
|
Deferred
revenues and customer advances |
|
3,566 |
|
|
|
7,365 |
|
Current
portion of long-term debt |
|
10,000 |
|
|
|
10,000 |
|
Total
current liabilities |
|
56,174 |
|
|
|
67,644 |
|
|
|
|
|
Deferred income taxes |
|
9,575 |
|
|
|
11,842 |
|
Income taxes payable |
|
700 |
|
|
|
700 |
|
Long-term debt |
|
180,246 |
|
|
|
182,275 |
|
Other non-current
liabilities |
|
927 |
|
|
|
991 |
|
Total
liabilities |
|
247,622 |
|
|
|
263,452 |
|
|
|
|
|
Shareholders’ equity: |
|
|
|
Common
stock |
|
391 |
|
|
|
387 |
|
Additional
paid-in capital |
|
355,164 |
|
|
|
357,500 |
|
Retained
earnings |
|
118,029 |
|
|
|
114,210 |
|
Accumulated
other comprehensive income |
|
955 |
|
|
|
947 |
|
Total
shareholders’ equity |
|
474,539 |
|
|
|
473,044 |
|
Total
liabilities and shareholders’ equity |
$ |
722,161 |
|
|
$ |
736,496 |
|
|
MERCURY SYSTEMS, INC. |
UNAUDITED CONSOLIDATED STATEMENTS OF
OPERATIONS (In thousands, except per share data) |
|
|
|
|
|
Three Months Ended |
September 30, |
|
|
2016 |
|
|
|
2015 |
|
Net revenues |
$ |
87,649 |
|
|
$ |
58,409 |
|
Cost of revenues (1) |
|
48,205 |
|
|
|
30,107 |
|
Gross
margin |
|
39,444 |
|
|
|
28,302 |
|
|
|
|
|
Operating expenses: |
|
|
|
Selling,
general and administrative (1) |
|
17,544 |
|
|
|
12,126 |
|
Research and
development (1) |
|
12,838 |
|
|
|
8,866 |
|
Amortization
of intangible assets |
|
4,602 |
|
|
|
1,713 |
|
Restructuring and other charges |
|
297 |
|
|
|
338 |
|
Acquisition
costs and other related expenses
|
|
421 |
|
|
|
2,128 |
|
Total
operating expenses |
|
35,702 |
|
|
|
25,171 |
|
|
|
|
|
Income from
operations |
|
3,742 |
|
|
|
3,131 |
|
|
|
|
|
Interest income |
|
40 |
|
|
|
24 |
|
Interest expense |
|
(1,822 |
) |
|
|
(2 |
) |
Other income, net |
|
600 |
|
|
|
71 |
|
|
|
|
|
Income before income
taxes |
|
2,560 |
|
|
|
3,224 |
|
Tax (benefit)
provision |
|
(1,259 |
) |
|
|
368 |
|
Net income |
$ |
3,819 |
|
|
$ |
2,856 |
|
|
|
|
|
Basic net earnings per
share: |
$ |
0.10 |
|
|
$ |
0.09 |
|
|
|
|
|
Diluted net earnings per
share: |
$ |
0.10 |
|
|
$ |
0.08 |
|
|
|
|
|
Weighted-average shares
outstanding: |
|
|
|
Basic |
|
38,865 |
|
|
|
32,778 |
|
Diluted |
|
39,865 |
|
|
|
33,616 |
|
|
|
|
|
|
|
|
|
(1) Includes
stock-based compensation expense, allocated as follows: |
Cost of
revenues |
$ |
75 |
|
|
$ |
149 |
|
Selling,
general and administrative |
$ |
3,039 |
|
|
$ |
2,128 |
|
Research and
development |
$ |
518 |
|
|
$ |
425 |
|
MERCURY SYSTEMS,
INC. |
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH
FLOWS |
(In
thousands) |
|
Three Months Ended |
|
September 30, |
|
|
2016 |
|
|
|
2015 |
|
Cash flows from
operating activities: |
|
|
|
Net
income |
$ |
3,819 |
|
|
$ |
2,856 |
|
Depreciation and
amortization |
|
7,320 |
|
|
|
3,301 |
|
Other non-cash
items, net |
|
1,446 |
|
|
|
2,169 |
|
Changes in
operating assets and liabilities |
|
(2,302 |
) |
|
|
(1,744 |
) |
|
|
|
|
Net cash provided by operating activities |
|
10,283 |
|
|
|
6,582 |
|
|
|
|
|
Cash flows from
investing activities: |
|
|
|
Purchases of
property and equipment |
|
(6,050 |
) |
|
|
(1,867 |
) |
Increase in
other investing activities |
|
(111 |
) |
|
|
(185 |
) |
|
|
|
|
Net cash used in investing activities |
|
(6,161 |
) |
|
|
(2,052 |
) |
|
|
|
|
Cash flows from
financing activities: |
|
|
|
Proceeds from
employee stock plans |
|
80 |
|
|
|
629 |
|
Payments of term
debt |
|
(2,500 |
) |
|
|
- |
|
Payments for
retirement of common stock |
|
(6,128 |
) |
|
|
(3,708 |
) |
|
|
|
|
Net cash used in financing activities |
|
(8,548 |
) |
|
|
(3,079 |
) |
|
|
|
|
Effect of exchange rate
changes on cash and cash equivalents |
|
49 |
|
|
|
36 |
|
|
|
|
|
Net (decrease) increase
in cash and cash equivalents |
|
(4,377 |
) |
|
|
1,487 |
|
|
|
|
|
Cash and cash
equivalents at beginning of period |
|
81,691 |
|
|
|
77,586 |
|
|
|
|
|
Cash and cash
equivalents at end of period |
$ |
77,314 |
|
|
$ |
79,073 |
|
|
UNAUDITED SUPPLEMENTAL INFORMATION
RECONCILIATION OF GAAP TO NON-GAAP MEASURES |
(In thousands) |
|
|
|
|
Adjusted EBITDA, a non-GAAP measure for reporting financial
performance, excludes the impact of certain items and, therefore,
has not been calculated in accordance with GAAP. Management
believes that exclusion of these items assists in providing a more
complete understanding of the Company’s underlying 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. The
adjustments to calculate this non-GAAP financial measure, and the
basis for such adjustments, are outlined below: |
|
|
|
|
Interest income and expense. The Company receives
interest income on investments and incurs interest expense on
loans, capital leases and other financing arrangements.
Additionally, the Company incurs non-cash interest expenses
associated with obtaining its credit facilities. These
amounts may vary from period to period due to changes in cash and
debt balances and interest rates driven by general market
conditions or other circumstances outside of the normal course of
Mercury’s operations. |
|
|
|
|
Income taxes. The Company’s GAAP tax expense can
fluctuate materially from period to period due to tax adjustments
that are not directly related to underlying operating performance
or to the current period of operations. |
|
|
|
|
Depreciation. The Company incurs depreciation expense
related to capital assets purchased to support the ongoing
operations of the business. These assets are recorded at cost
or fair value and are depreciated using the straight-line method
over the useful life of the asset. Purchases of such assets
may vary significantly from period to period and without any direct
correlation to underlying operating performance. |
|
|
|
|
Amortization of intangible assets. The Company incurs
amortization of intangibles related to various acquisitions it has
made and license agreements. These intangible assets are
valued at the time of acquisition, are amortized over a period of
several years after acquisition and generally cannot be changed or
influenced by management after acquisition. |
|
|
|
|
Restructuring and other charges. The Company incurs
restructuring and other charges in connection with management’s
decisions to undertake certain actions to realign operating
expenses through workforce reductions and the closure of certain
Company facilities, businesses and product lines. Management
believes this item is non-routine and may not be indicative of
ongoing operating results. |
|
|
|
|
Impairment of long-lived assets. The Company incurs
impairment charges of long-lived assets based on events that may or
may not be within the control of management. Management
believes these items are outside the normal operations of the
Company's business and are not indicative of ongoing operating
results. |
|
|
|
|
Acquisition and financing costs. The Company incurs
transaction costs related to acquisition and potential acquisition
opportunities, such as legal and accounting fees and
expenses. Although we may incur such third-party costs and
other related charges and adjustments, it is not indicative that
any transaction will be consummated. Additionally, the
Company incurs unused revolver and bank fees associated with
maintaining its credit facilities. Management believes these
items are outside the normal operations of the Company’s business
and are not indicative of ongoing operating results. |
|
|
|
|
Fair value adjustments from purchase accounting. As a
result of applying purchase accounting rules to acquired assets and
liabilities, certain fair value adjustments are recorded in the
opening balance sheet of acquired companies. These
adjustments are then reflected in the Company’s income statements
in periods subsequent to the acquisition. In addition, the
impact of any changes to originally recorded contingent
consideration amounts are reflected in the income statements in the
period of the change. Management believes these items are outside
the normal operations of the Company and are not indicative of
ongoing operating results. |
|
|
|
|
Litigation and settlement income and expense. The Company
periodically receives income and incurs expenses related to pending
claims and litigation and associated legal fees and potential case
settlements and/or judgments. Although we may incur such
costs and other related charges and adjustments, it is not
indicative of any particular outcome until the matter is fully
resolved. Management believes these items are outside the normal
operations of the Company’s business and are not indicative of
ongoing operating results. The Company periodically receives
warranty claims from customers and makes warranty claims towards
its vendors and supply chain. Management believes the expenses and
gains associated with these recurring warranty items are within the
normal operations and operating cycle of the Company's business.
Therefore, management deems no adjustments are necessary unless
under extraordinary circumstances. |
|
|
|
|
Stock-based compensation expense. The Company incurs expense
related to stock-based compensation included in its GAAP
presentation of cost of revenues, selling, general and
administrative expense and research and development expense.
Although stock-based compensation is an expense of the Company and
viewed as a form of compensation, these expenses vary in amount
from period to period, and are affected by market forces that are
difficult to predict and are not within the control of management,
such as the market price and volatility of the Company’s shares,
risk-free interest rates and the expected term and forfeiture rates
of the awards. Management believes that exclusion of these
expenses allows comparisons of operating results to those of other
companies, both public, private or foreign, that disclose non-GAAP
financial measures that exclude stock-based compensation. |
|
|
|
|
Mercury uses adjusted EBITDA as an important indicator of the
operating performance of its business. Management excludes
the above-described items from its internal forecasts and models
when establishing internal operating budgets, supplementing the
financial results and forecasts reported to the Company’s board of
directors, determining the portion of bonus compensation for
executive officers and other key employees based on operating
performance, evaluating short-term and long-term operating trends
in the Company’s operations, and allocating resources to various
initiatives and operational requirements. The Company
believes that adjusted EBITDA permits a comparative assessment of
its operating performance, relative to its performance based on its
GAAP results, while isolating the effects of charges that may vary
from period to period without any correlation to underlying
operating performance. The Company believes that these
non-GAAP financial adjustments are useful to investors because they
allow investors to evaluate the effectiveness of the methodology
and information used by management in its financial and operational
decision-making. The Company believes that trends in its
adjusted EBITDA are valuable indicators of its operating
performance. |
|
|
|
|
Adjusted EBITDA is a non-GAAP financial measure and should not
be considered in isolation or as a substitute for financial
information provided in accordance with GAAP. This non-GAAP
financial measure may not be computed in the same manner as
similarly titled measures used by other companies. The
Company expects to continue to incur expenses similar to the
adjusted EBITDA financial adjustments described above, and
investors should not infer from the Company’s presentation of this
non-GAAP financial measure that these costs are unusual, infrequent
or non-recurring. |
|
|
|
|
The following table reconciles the most directly comparable
GAAP financial measure to the non-GAAP financial measure. |
|
|
|
|
|
Three Months Ended |
|
September 30, |
|
|
2016 |
|
|
|
2015 |
|
Net income |
$ |
3,819 |
|
|
$ |
2,856 |
|
Interest
expense (income), net |
|
1,782 |
|
|
|
(22 |
) |
Income
taxes |
|
(1,259 |
) |
|
|
368 |
|
Depreciation |
|
2,718 |
|
|
|
1,588 |
|
Amortization of intangible assets |
|
4,602 |
|
|
|
1,713 |
|
Restructuring and other charges |
|
297 |
|
|
|
338 |
|
Impairment of long-lived assets |
|
- |
|
|
|
- |
|
Acquisition and financing costs |
|
553 |
|
|
|
2,298 |
|
Fair
value adjustments from purchase accounting |
|
2,077 |
|
|
|
- |
|
Litigation and settlement (income) expense, net |
|
- |
|
|
|
- |
|
Stock-based compensation expense |
|
3,632 |
|
|
|
2,702 |
|
Adjusted EBITDA |
$ |
18,221 |
|
|
$ |
11,841 |
|
|
|
|
|
Free cash flow, a non-GAAP measure for reporting cash flow, is
defined as cash provided by operating activities less capital
expenditures and, therefore, has not been calculated in accordance
with GAAP. Management believes free cash flow provides investors
with an important perspective on cash available for investment and
acquisitions after making capital investments required to support
ongoing business operations and long-term value creation. The
Company believes that trends in its free cash flow are valuable
indicators of its operating performance and liquidity. |
|
|
|
|
Free cash flow is a non-GAAP financial measure and should not
be considered in isolation or as a substitute for financial
information provided in accordance with GAAP. This non-GAAP
financial measure may not be computed in the same manner as
similarly titled measures used by other companies. The
Company expects to continue to incur expenditures similar to the
free cash flow financial adjustment described above, and investors
should not infer from the Company’s presentation of this non-GAAP
financial measure that these expenditures reflect all of the
Company's obligations which require cash. |
|
|
|
|
The following table reconciles the most directly comparable
GAAP financial measure to the non-GAAP financial measure. |
|
|
|
|
|
Three Months Ended |
|
September 30, |
|
|
2016 |
|
|
|
2015 |
|
Cash flows from
operations |
$ |
10,283 |
|
|
$ |
6,582 |
|
Capital
expenditures |
|
(6,050 |
) |
|
|
(1,867 |
) |
Free cash flow |
$ |
4,233 |
|
|
$ |
4,715 |
|
|
UNAUDITED SUPPLEMENTAL INFORMATION
RECONCILIATION OF GAAP TO NON-GAAP MEASURES |
|
(In thousands, except
per share data) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted income and adjusted earnings per share ("adjusted
EPS") are non-GAAP measures for reporting financial performance,
exclude the impact of certain items and, therefore, have not been
calculated in accordance with GAAP. Management believes that
exclusion of these items assists in providing a more complete
understanding of the Company’s underlying results and trends and
allows for comparability with our peer company index and industry.
These non-GAAP financial measures may not be computed in the same
manner as similarly titled measures used by other companies. The
Company uses these measures along with the corresponding GAAP
financial measures to manage the Company’s business and to evaluate
its performance compared to prior periods and the marketplace. The
Company defines adjusted income as income before amortization
of intangible assets, restructuring and other charges, impairment
of long-lived assets, acquisition and financing costs, fair value
adjustments from purchase accounting, litigation and settlement
income and expense, stock-based compensation expense, and the tax
impact of those items. Adjusted EPS expresses adjusted income on a
per share basis using weighted average diluted shares
outstanding. |
|
The
following table reconciles the most directly comparable GAAP
financial measures to the non-GAAP financial measures. |
|
|
|
Three Months Ended September 30, |
|
2016 |
|
2015 |
Net income and earnings
per share |
$ |
3,819 |
|
|
$ |
0.10 |
|
|
$ |
2,856 |
|
|
$ |
0.08 |
|
Amortization of intangible assets |
|
4,602 |
|
|
|
|
|
1,713 |
|
|
|
Restructuring and other charges |
|
297 |
|
|
|
|
|
338 |
|
|
|
Impairment of long-lived assets |
|
- |
|
|
|
|
|
- |
|
|
|
Acquisition and financing costs |
|
553 |
|
|
|
|
|
2,298 |
|
|
|
Fair
value adjustments from purchase accounting |
|
2,077 |
|
|
|
|
|
- |
|
|
|
Litigation and settlement (income) expense, net |
|
- |
|
|
|
|
|
- |
|
|
|
Stock-based compensation expense |
|
3,632 |
|
|
|
|
|
2,702 |
|
|
|
Impact to
income taxes |
|
(6,085 |
) |
|
|
|
|
(3,466 |
) |
|
|
Adjusted income and
adjusted earnings per share |
$ |
8,895 |
|
|
$ |
0.22 |
|
|
$ |
6,441 |
|
|
$ |
0.19 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
weighted-average shares outstanding: |
|
|
|
39,865 |
|
|
|
|
|
33,616 |
|
|
|
|
|
|
|
|
|
MERCURY SYSTEMS, INC.
|
|
|
|
|
|
|
|
|
RECONCILIATION OF FORWARD-LOOKING GUIDANCE
RANGE |
|
|
|
|
|
|
|
|
Quarter Ending December 31, 2016 |
|
Year Ending June 30,
2017 |
|
|
|
|
|
|
|
|
(In thousands, except
per share data) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Company defines adjusted EBITDA as income before interest
income and expense, income taxes, depreciation, amortization of
intangible assets, restructuring and other charges, impairment of
long-lived assets, acquisition and financing costs,
fair value adjustments from purchase accounting, litigation and
settlement income and expense, and stock-based compensation
expense. |
|
|
|
|
|
|
|
|
|
|
The following table reconciles the adjusted EBITDA financial
measure to its most directly comparable GAAP measure: |
|
|
|
|
|
|
|
|
|
|
|
Three Months Ending |
|
Twelve Months Ending |
|
|
December 31, 2016 |
|
June 30, 2017 |
|
|
Range |
|
Range |
|
|
Low |
|
High |
|
Low |
|
High |
|
|
|
|
|
|
|
|
|
|
GAAP expectation --
Earnings per share |
$ |
0.07 |
|
|
$ |
0.11 |
|
|
$ |
0.50 |
|
|
$ |
0.56 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP expectation -- Net
income |
$ |
2,700 |
|
|
$ |
4,500 |
|
|
$ |
19,800 |
|
|
$ |
22,400 |
|
|
|
|
|
|
|
|
|
|
|
Adjust for: |
|
|
|
|
|
|
|
|
Interest
expense (income), net |
|
1,700 |
|
|
|
1,700 |
|
|
|
6,900 |
|
|
|
6,900 |
|
|
Income
taxes |
|
1,400 |
|
|
|
2,400 |
|
|
|
7,400 |
|
|
|
8,800 |
|
|
Depreciation |
|
3,000 |
|
|
|
3,000 |
|
|
|
12,700 |
|
|
|
12,700 |
|
|
Amortization of intangible assets |
|
4,600 |
|
|
|
4,600 |
|
|
|
17,800 |
|
|
|
17,800 |
|
|
Restructuring and other charges |
|
- |
|
|
|
- |
|
|
|
300 |
|
|
|
300 |
|
|
Impairment of long-lived assets |
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
Acquisition and financing costs |
|
100 |
|
|
|
100 |
|
|
|
900 |
|
|
|
900 |
|
|
Fair
value adjustments from purchase accounting |
|
700 |
|
|
|
700 |
|
|
|
2,800 |
|
|
|
2,800 |
|
|
Litigation and settlement (income) expense, net |
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
Stock-based compensation expense |
|
3,900 |
|
|
|
3,900 |
|
|
|
14,400 |
|
|
|
14,400 |
|
|
Adjusted EBITDA
expectation |
$ |
18,100 |
|
|
$ |
20,900 |
|
|
$ |
83,000 |
|
|
$ |
87,000 |
|
|
|
|
|
|
|
|
|
|
|
MERCURY SYSTEMS, INC.
|
|
RECONCILIATION OF FORWARD-LOOKING GUIDANCE
RANGE |
|
|
|
|
|
|
|
Quarter Ending December
31, 2016 |
|
|
|
|
|
|
|
|
Year Ending June 30,
2017 |
|
|
|
|
|
|
|
|
(In thousands, except
per share data) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Company defines adjusted income as income before
amortization of intangible assets, restructuring and other charges,
impairment of long-lived assets, acquisition and financing costs,
fair value adjustments from purchase accounting, litigation and
settlement income and expense, stock-based compensation expense,
and the tax impact of those items. Adjusted EPS expresses adjusted
income on a per share basis using weighted average diluted shares
outstanding. |
|
|
|
|
|
|
|
|
|
|
The following table reconciles the most directly comparable
GAAP financial measures to the non-GAAP financial measures. |
|
|
|
|
|
|
|
|
|
|
|
Three Months Ending December 31, 2016 |
|
|
Range |
|
|
Low |
|
High |
|
Net income and earnings
per share |
$ |
2,700 |
|
|
$ |
0.07 |
|
|
$ |
4,500 |
|
|
$ |
0.11 |
|
|
Amortization of intangible assets |
|
4,600 |
|
|
|
|
|
4,600 |
|
|
|
|
Restructuring and other charges |
|
- |
|
|
|
|
|
- |
|
|
|
|
Impairment of long-lived assets |
|
- |
|
|
|
|
|
- |
|
|
|
|
Acquisition and financing costs |
|
100 |
|
|
|
|
|
100 |
|
|
|
|
Fair
value adjustments from purchase accounting |
|
700 |
|
|
|
|
|
700 |
|
|
|
|
Litigation and settlement (income) expense, net |
|
- |
|
|
|
|
|
- |
|
|
|
|
Stock-based compensation expense |
|
3,900 |
|
|
|
|
|
3,900 |
|
|
|
|
Impact to
income taxes |
|
(3,260 |
) |
|
|
|
|
(3,260 |
) |
|
|
|
Adjusted income and
adjusted earnings per share |
$ |
8,740 |
|
|
$ |
0.22 |
|
|
$ |
10,540 |
|
|
$ |
0.27 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
weighted-average shares outstanding: |
|
|
|
39,737 |
|
|
|
|
|
39,737 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Twelve Months Ending June 30, 2017 |
|
|
Range |
|
|
Low |
|
High |
|
Net income and earnings
per share |
$ |
19,800 |
|
|
$ |
0.50 |
|
|
$ |
22,400 |
|
|
$ |
0.56 |
|
|
Amortization of intangible assets |
|
17,800 |
|
|
|
|
|
17,800 |
|
|
|
|
Restructuring and other charges |
|
300 |
|
|
|
|
|
300 |
|
|
|
|
Impairment of long-lived assets |
|
- |
|
|
|
|
|
- |
|
|
|
|
Acquisition and financing costs |
|
900 |
|
|
|
|
|
900 |
|
|
|
|
Fair
value adjustments from purchase accounting |
|
2,800 |
|
|
|
|
|
2,800 |
|
|
|
|
Litigation and settlement (income) expense, net |
|
- |
|
|
|
|
|
- |
|
|
|
|
Stock-based compensation expense |
|
14,400 |
|
|
|
|
|
14,400 |
|
|
|
|
Impact to
income taxes |
|
(14,900 |
) |
|
|
|
|
(14,900 |
) |
|
|
|
Adjusted income and
adjusted earnings per share |
$ |
41,100 |
|
|
$ |
1.03 |
|
|
$ |
43,700 |
|
|
$ |
1.09 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
weighted-average shares outstanding: |
|
|
|
39,914 |
|
|
|
|
|
39,914 |
|
|
|
|
|
|
|
|
|
|
|
Contact:
Gerry Haines, CFO
Mercury Systems, Inc.
978-967-1990
Mercury Systems (NASDAQ:MRCY)
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