Mercury Systems (MRCY) 28 Apr 202020 Q3 Earnings call transcript

Good day, everyone, and welcome to the Mercury Systems Third Quarter Fiscal 2020 Conference Call. Today's call is being recorded.

At this time for opening remarks and introductions, I'd like to turn the call over to the company's Executive Vice President and Chief Financial Officer, Mr. Mike Ruppert. Please go ahead, sir.

you us. thank and afternoon for joining Good

On and Chief with me our President today is Executive the phone Officer, Mark Aslett.

received earlier the section under can will be not release investor slide presentation website relations you've a to and the The & of Events If I Mark earnings at we www.mrcy.com. issued website it is this of find you referring the that afternoon, Presentations. on our copy press posted on

in two the slide to turn Please presentation.

would I includes started, anticipated Before to information remind Mercury's presentation get we future and today's that like business forward-looking regarding you financial performance. prospects including statements, plans, financial outlook, objectives,

should future our the with considered statements forward-looking in are performance the in on materially. or cautionary These filings, the in included statement slide factors and COVID-XX. uncertainties Mercury's related statements and that the differ release risks SEC actual subject earnings including to be results risk risk cautionary factor could press cause to conjunction to statements two, forward-looking and new All

that acquired specifically reconciliation to also accounting results accepted financial earnings accordance press free also during in like release. income, EBITDA, financial reporting flow, earnings to share, presentation the in an slide per generally in and included adjusted adjusted or appendix of metrics as non-GAAP measures, call several organic addition revenue. we with discuss GAAP, revenue is our will adjusted principles cash I'd non-GAAP and A these to today's mention

Mercury's Please to turn over now I'll Aslett. turn slide call President and Mark to CEO, the three.

staying you everyone safe for and are family We afternoon us. thanks hope Good Mike. and Thanks and healthy. your joining

your will up with financials a the then guidance I'll begin to we'll and review open call update. and business Mike it questions. today's

say lines are I’d thank workers the the this on to front healthcare fighting pandemic. that you like all courageous to First,

very at Our to of difficult prayers this thoughts go out them all time. and

will the incredible overcoming they facing. employees, like to we are our that to we're and thankful I’d results the Second, challenges deeply sheer their demonstrated express how in

coronavirus Mercury charges crisis a rose to these pandemic we to very team the actions. up guide three our COVID and on. set and defined goals Well was declared before making decision early a

Number one our was of and employees. safety the livelihoods protect to health,

operational and continue business; on our and customers the and commitment mitigate shareholders. risks third, to reduce our to financial in and deliver Second, both

became is Finally, mission which to when industrial critical day we security the nation. our Mercury every goal, ongoing defense does essential, a base continue added the fourth support work the of to designated

setting with priorities crisis these purpose, operating our used model culture our and a our to transitioned goals as a we touchdown We've along values daily for as mode.

I and employees in think enormous mitigated taking to we and to speed risk the to difference how this action, an and made business. effectively in our reduced and communicating our

Homeland the of Security. Mercury defined critical exempted was state from infrastructure U.S. state as as mid-March by Department facilities In This local, federal our and classified mandates.

the at we of Also in as county mainly the impacted at level. normal at temporary Before national sites. orders from California by that Mercury those however were to reduced closures and an essential our resumed downs manufacturing stay-at-home vary state sites. We county. designate These was business operations that shut some

create our everyone facilities. adjusted things Meanwhile, we for workplace time conditions began who the at make working else same everyone inside of the from safer home in and company to significantly distancing could, physical and

team. strong revenue, on, year. income, Turning organic still an strong growth Total new very record and we outstanding an cash a for It to up design with X.X book-to-bill, so all bookings, last records entire record in slide while EPS was going flow, versus wins with came in quarter fee QX our of EPS a quarter. and net above backlog, also the new very adjusted-EBITDA, terms end ended guidance, high quarter four, all-in-all delivering hitting adjusted strong XX% a a the of that effort the was by all

we the risks downside are the we execute. We the especially strength to have place, a face, ahead, scenarios. of to the hiring. good around plans of well our ability Mercury endure supply range and chain, facilities aware we as liquidity We believe possible Looking about strategy continued as has that feel and our the in and manufacturing our

feedback five, be employees of do care highlights, the to down we may hourly working most we we've to the to other Moving vulnerable we same take what in developed. to has slide continue as our amazing sites do deemed to proud crisis the of and been on were been crisis employees I'm truly The be California facilities who in as we those continues. at received this very leaned impacted people. our pay that shut for Touching We’ll temporarily. able that

our We've increased pay the wage policy. Xx leave sick overtime regular and to enhanced

hourly this our we to addition, experiencing made and In need fund emergency Through fund, burdens created payments a which if immediate million hardship. be. relief will financial employees we increase $X

also as gave managers to We approve advance additional discretion necessary.

of our as their buffer only programs for These they with stock the creating worry. for about wait are shareholders, helping of as a customers needs. not family they for about to is lower well but payments helped two results kinds up impact, deal caring in. employees gainfully and and and jobs values insurance kick secondary still culture employed, financial many to another. other purpose, burden unemployment members and related Mercury’s while Mercury’s issues other financial have The on helping are and delivering now relief fund second federal one recently, learned stay-at-home. we food paid More employees Initially wave to met lost although and supplies,

providing year the may is to guidance result adjusted we our confidence revenue the our from fiscal previous on today, well as Mercury's challenges EBITDA unchanged employees lie and our which ahead. overcome as The are top reflects the of end, that business, guidance in

revenue digit growth As in revenue growth. double expect organic of detail, to we Mike XX% will including discuss EBITDA, year fourth include and quarter in adjusted to XX% the another

business not six, coronavirus nation's has remain have conditions our The robust. new the Turning to the environment threat diminished not and defense priorities slide changed.

impact to crisis expect a on don't we material term have near COVID spending. forward the defense Looking

majority is business customers to mission-critical end largely are The based. U.S. our which Mercury’s and users, of

maintaining commitments. are on dialogue hard with to deliver engineering our operations working and a are our and them teams We

said, improve as of in then That approvals remotely. business flow. COVID wide become everyone some working order QX. in crisis did transitioning activity have order slowdowns the brief impact more some as affected has work-from-home. began in resulted well. customers delays industry somewhat we've these issues to new and as The suspension travel attuned seen saw This Since We to some

well in QX. topline Mercury backdrop, very on performed this the Against

continues remains to as targeting right drive participating secure the servers The modernization continue are market. believe well we EW in in that wave radar, of We Demand business. the weapon in and mission rugged the space, as CXI and parts in computing, avionics healthy. systems, and growth to occurring processing of

Mercury’s customers continue the strong via outsourcing in flight delayering Supply activity the by bookings the trends government level. and to chain primes; increased the to design-win we the by discussed and driven be and in suppliers, QX at major the the subsystem past. that three quality primes

worth the are technologies continued now, investments their These we’ve domestic to in proving the organic trusted in processes, people, our and support years now. For manufacturing invested business. growth

on that national supply foreign forward, we and even more believe Going chains be important will they manufacturing. given dependence our

drive in services our business changed. not deliver to our and growth customers fundamentals products to the and our continue have We that

We've supply U.S. which been chain, is closely monitoring our predominantly based.

pandemic’s low. however made inventory the the well as we mid-term. and QX supply risk and raw far as mitigate pre-ordered some During both Thus to relatively our suppliers chain in impact been forward buys materials the has short on

supply we're The chain facing are key issues two-fold. that

The supplies first are more commercial vulnerable. suppliers so heavily to sector. is that to financially This exposed the aerospace the maybe applies those

airspace by defense. COVID has impacted more being commercial significantly than know, you As

is U.S. The for disruptions, risk other related that shutdowns the is components sourced supply Mercury. COVID could the flight major to manufacturing supply of chain that affect temporary potential

are operational risks. We facing other also

first being the manufacturing for The own Mercury’s COVID facilities. related disruptions within potential

We to around in flattening that time in distancing the having sites. affects are and closely monitoring the is peak social curve infection manufacturing our communities the

facilities. to employees, said, elevated. physical as risk well as distancing a occurring done risk reduce increase our to with does in remain and tremendous and of communicate That the event inside one We've amount this educate

the The to hiring talent. other of new relates risk

metric good but set to in not has prolonged could to determine for Mercury’s of we that and QX time. period fiscal if based time outcomes affected a scenarios to we’ve ability the the quarter currently upon right our planning to be backlog, changed ‘XX. that hiring about hire timely COVID much, The the for run, the deliver hard a our in ability and are we feel manner record our objectives overachieving Although goals continues now, the crisis third and against

by growth driven overall are As optimistic long forecast outlined not opportunities just term we stage, Mercury’s the At I our for in spending. growth, on this discussed. seven, have low for about trends we single digit changed baseline continued defense slide

That risk ‘XX is said, prolonged election. there potential government factors to are to consider. fiscal two for related the in CR a the One

stimulus, the as fiscal spending, The for over to second massive those discretionary is out to exists including the potential continue see dollars that, we crowd long defense term.

organic we have that this are While at of average, growth a goal far supplement revenue organic and recognizing focused strength we growth M&A. on the with sheet uncertainties, the these rate delivering the exceeds still industry to balance

the the and term. looking and seeing Once and we potential than the pricing right more have risk an determining on markets effectively to asset focus and we through accretive market and given M&A the both perspective, From crisis, aligned challenges Sensor anticipate shut conducting the M&A is for that now in diligence. continue Systems values, with we focus the get strategically That deals to said, associated long Effector opportunities before. short are Mission be CXI

They has continued partner for deliver to shareholders. may and for employees a and the great sound, sell to culture companies done this environment. has Certain a motivated for values, and has customers in be that’s right fiscally look things

of one are those companies. We

crisis choice, an As than already stronger emerge very Mercury this and acquirer an and were we will we before from strong. believe of employer

is sound workforce. an Our talented and performing exceptionally and dedicated we’ve business sheet is balance and got well the

areas. growth be strategy When organically generate value plans the strategy; the strong it to in for namely, significant on position integration. to deliver We this our will M&A activity and execute our organic continue will, execute while to five resumes, believe business and we supplementing shareholders growing believe our disciplined we’ll strong long as term a we continue that to margins with in M&A over full and

high low digits averaging our over with and single First, to at revenues organically double this growth high time to grow to organic supplement level of XX% acquisitions.

The and systems, to in as to in manufacturing business well technologies, new our people. our invest as invest is continuing assets facilities, second

well performance operating Third insourcing, driving as across stronger is as manufacturing locations. manufacturing our

in leverage than the business. grow faster continue organic allow are seeking operating while to strong This revenues in we to will investing expenses. operating growth, Fourth, maintaining us

the revenue And integrating finally, synergies. generate synergies for to the our plant combined These produce returns with we are cost fully of and we businesses shareholders. attractive should areas acquire other

has worked well years. This the past five for Mercury over very strategy

ability to we're our will the Given this execute, success. record of confident extend market

We've clear and reduce a everything to working can risks picture with the mitigate have we to we're those We where are the been a that committed strong diligent doing in we year to and of quarter. think finish greatest. risks fourth

turn call to Mike. like to I’d the that, Mike. over With

results environment they you, to financial Mark to were outstanding and and quarter. adapt leverage for new echoing I'll strong QX. able to record Thanks begin comments to the and we Thank appreciation efforts, their again afternoon to did my deliver position our work extending good everyone. employees Mark's Mercury's in by the this

As protect risk, to commitments to both we reduce safety fulfill employees. to our of to and quickly chain worked Mark we supply our We said, mitigate manufacturing livelihoods and the customers. continue and health, our and acted

we customers, some them during deliveries product our accelerated our their support to order helping de-risk the of quarter, In businesses.

We quickly on potential identify COVID-XX position. to assess also and our financial impacts acted

closures period our Early we of orders flow. implemented. extended response, shutdowns cash saw the time result a at of prolonged that the site we was impact for the on as on, multiple of In looking being were risk government ran potential various stay-at-home biggest an for scenarios

$XXX liquidity between cash-on-hand entered closure period extremely ample over QX wide, liquidity examined, our with underfunded million fund with we time. that million determined scenarios manufacturing including capital company continue the and have for we of an revolver. extended $XXX an our In all the structure We to to robust of business Mercury of potential would

to essential an as shutdowns government a we our occurred, we not designated believe do as positioned simultaneously they continue strategy, occur. result of COVID-XX. well are been extended think have we've to nor likely orders are Overall, business, managing Since to our risk execute to facilities related of while we

the for detail are in we maintaining does the later previous year bottom fiscal end are our elevated, more in of fourth presentation. that While I'll the the provide remain around our this top-end quarter. now and risk guidance guidance the raising we

Turning third million, for QX X.X our now ratio. to year-over-year a bookings to total record $XXX slide increased quarter eight and results, a XX% book-to-bill driving

As not QX new have some as impact Mark our see we've we transitioned a slowdown did impact in the those did to pandemic. our ending issues of result so on a from not bookings QX or home, backlog. in COVID-XX In business working mentioned, a far customer’s activity but as ongoing seen and material

In QX increased I $XXX including out-performance XX% by $XXX timing of top the of million revenue million, early record guidance to a mentioned. driven revenue, million. year-over-year customer of $XXX to that our deliveries was exceeding the This end primarily

$XX.X exceeded well higher to $XX to no our XX% to COVID-XX. assuming due for driven material as was gross Adjusted EBITDA up This QX revenue QX full of primarily million higher increased and result of XX% year, as to guidance expect revenue, $XX and for XX% record year-over-year impact manufacturing of margin Organic we million, a increased growth a program fiscal XX% as the currently organic million. in throughput. mix by

and approximately QX totaling our Adjusted compares compensation social COVID maintain adjusted supplies again XX.X%, quarter. $XXX,XXX In to These the for the costs of EBITDA and with conditions guidance included services incremental It we an related margin and reflecting for and include and increased inside benefits program employees. safe quarter. also primarily of our to was healthy add-back expenses, definition for mix EBITDA enhanced facilities. expanded This our XX.X% to distancing incremental support for related to throughput.

COVID-XX. $XXX and a of impacts for faced we a no financial as had Mercury’s revolver. us Entering balance the deal million of associated sheet million, This QX cash great quarters. $XXX presents nine Slide negative five last gave with cash potential debt unfunded Mercury and flexibility equivalents

local pandemic’s was some chance that Mercury's at a facilities. In the point close and state financial governments on impact March, it looked market and the was there uncertain like could

As $XXX a We’ll abundance are an of eye of the million the million down of from and towards financials, COVID-XX on continue result markets our $XXX paying an conditions we when decided favorable. the draw to the out revolver to evaluate impact with caution. the

the from million. the remaining the finished taping of available. still After the funded revolver, $XXX cash portion of had with and cash and equivalents million revolver Mercury million debt We QX have we of $XXX $XXX

a So we liquidity extremely remain continued uncertainty, positioned standpoint. from despite well

chain. During disruptions mitigate also to QX advance we purchase in inventory decided order to potential to the supply

While the our was materials the our of were not impact at ordered, We immaterial to they by balance were see QX. impact there expect QX of end so do an end some to the quarter, to delivered inventory inventory.

employee cash which to the a XX% XX, to free $XX.X COVID-XX our primarily slide flow EBITDA, related relief free QX cash Turning flow representing above for million, on was expenses, QX We of adjusted of fund. saw impact to expectations. a was flow result cash slightly as $XXX,XXX

COVID We QX. in expect expenses to related see additional

to expenditures expected lower of were delivered as scheduled into CapEx COVID-XX, million or compared QX QX $XX.X due than last or to revenue, $XX.X equipment was slightly we QX. delayed in in to quarter. was X.X% Capital be X.X% million some

XX%. We expect including custom QX we adjusted flow Year-to-date percentage cash build-out of in to is the EBITDA CapEx increase continue invest free to in our as is microelectronics a business, Phoenix. in our

in expecting a of capital as are by an we result QX driven For expenditures inventory lower increased and investment percentage COVID-XX. a

flow year a percentage free For to be of expect the to approximately EBITDA continue we cash as XX%.

‘XX the full guidance financial to turn of XX. our fiscal on slide starting year now I'll with

although guidance the are material elevated we outlook The of our customer of shutdowns none no to due major for in providing any extended no uncertainties to-date. disruptions, ‘XX As chain supply remains no occurred year change which COVID-XX. our remains we full assumes risk have around of facilities strong, fiscal discussed, behavior, and

they our guidance the in to occur. temporary our due major assumes room to incorporate disruptions no does disruptions for some event While range COVID-XX, guidance were

guidance year fiscal consistent we to million our from $XXX reflects outlook $XXX representing million, and to to growth fiscal full XX% our revenue is expect ‘XX. XX% previous growth. for the of For organic with of This now XX% XX%

income Total $XX.X to be EPS in of expected the per GAAP to share. to results. of $X.XX $X.XX per Adjusted compared $XX.X XX% $X.XX be is fiscal is to increase to net $X.XX share, to ‘XX ‘XX XX% for an range or million expected million to fiscal

XX% This Our fiscal fiscal is XX.X% of increase $XXX ‘XX revenue. to for million of is guidance XX% $XXX adjusted EBITDA approximately million or ‘XX. to from an

adjusted of of Finally expect for flow approximately X% cash we to and X% CapEx free to approximately XX% EBITDA. ‘XX fiscal be to be revenue

This fourth de-risked our quarter. have disruptions as QX, the It our guidance coupled they with Mercury’s actions now for that some to mentioned, I turn to COVID-XX I'll incorporates XX. to in quarter our also extent. occur reflects out-performance response belief temporary slide room on guidance QX in should during

be the the million, million Doing the last actual to million per is net adjusted of $X.XX results share. EBITDA based $XX.X QX GAAP math revenue. million expected QX of to million, first increase million to be three compared on range quarters, for forecasting and $XX.X $XX.X $XXX.X per to XX% to we XX.X% an with in of year. to revenue XX% is $XX.X be EPS QX $X.XX income to $X.XX expected XX.X% for finally, to $XXX.X to QX representing are expected is approximately our Adjusted share $X.XX or to

time us execute well, on position to record flow highlight uncertainty, not capital strategy. at trends Mercury’s phenomenal company's record aligned and Turning only that. industry employee a the bookings and to our fundamental results The we remains QX testament revenue team cash summary, to also with slide have our believe Mercury. our this in in business XX are but structure of and to our continue in strong We

the time the Meanwhile, come to of of and goals unprecedented continue our of out Mark long this making margin for and with actions. strategic outlined as and And that will term a strategy our on we're uncertainty, confident as executing continue during to supplemented our touchdown we change, ability four organic creation in of serve value M&A. challenge decision period expansion growth,

take proceed be Q&A you questions. with Operator, With the we'll can happy that, to now. your

Pete sir. question go Global. from you, I Please the from ahead. Alembic Instructions]. comes first show [Operator Thank our Skibitski

in you But the the very Yeah, do them quarter both bookings hi sense a Guys, actions perspective of that public to on guys, any to from bookings try out that you a a wondering if I big in I helping strong and there. having at know OEMs very have all accelerate problems subcontractors quarter. help, of think just payments nice about I I and take not quarter, been seen the to actually bookings talked because then changing progress we’ve some the think subcontracts. obviously about help lot out you

if thought do could wondering and some things better maybe of not been quarter actions? little just So these even bit I this you you have in a take

I so don't Pete. believe

we terms transitioning them in go quarter, too beyond much period didn’t customer work-from-home. of see during the really of to change behavior You the we once know

So payments I Mercury on don't believe took know our an the bookings. performance actions of that terms impact paid accelerate had to DoD you in

fourth bookings for in expectation any Okay, quarter? the

fourth another think now Right the going be quarter we that to quarter. strong is

Okay, great. Thanks guys.

you. Thank

comes from Kahyaoglu question from Sheila Jefferies. go Please ahead. next Our

Good and afternoon, you the time. Mike. Thank for Mark

primes so about are the open it you sort Does this you pressure of some does around noted wins guys to a first smaller COVID, talk So coming more. up? suppliers, can business but risks some just maybe put question, my opportunities. bit some you new What on

good a Sheila. It’s Sure. question

in the you're probably transition of there, period that do supplies. to term in the Yeah, different it you to it’s short we hard talking know about. I think time

balance do all-is-well share the it's believe are. over from we some up maybe term, a result mid opportunities do I you like of to more that from I However take going know the sheet open to perspective continuing and or capability potentially Mercury in that think from long to a companies positioned

very positioned, think well I also our forward, as model that is you right. look business

opportunities I I access affordably, the to think as know, our capability that So I need, we very this environment continue levels – to on think more that very well think is know or will R&D we're plays high you from also quickly is capability need in going technologies spending know to the and perspective we're I believe and capabilities discussion well and around more get be and it you fact is there customers that a positioned. I capacity will more it well think you when

on because be focus result to So more we money we that are there's opportunities that the of do is think but going a we have where flowing, think as to that's the I going continue to areas what’s happened. been,

dialogue on double And as defense remarks you're you. candid about in in your Thank you away to of think and risks guess year. longer prepared terms term, digits fiscal might very we do from track some take this How ‘XX funding. gave stimulus I grow beyond?

‘XX going not the next to guide call. on are We on this call. that fiscal We’ll do

in We prepared now. remarks, as said for outlook adjusted the growth my haven't I right

in terms Our quite is single been time view it's some growth overall. digits the for of low that

well in to As growth defense actually more discussed, driver our our continue, is which as content. driver primary is is you subsystems not by really and of going think know budget growth as is predominant What transitioning customers, us more growth. our to of more the outsourcing we capturing we the the the

potential the well of potential term, are over spending; discretionary think crowding things the pretty yes, all long positioned exists out however, I we So the considered.

you. Thanks much. Thank so

you. Thank

go comes ahead. question Arment Please Peter next from from Baird. Our

Mike. Mark that to afternoon and good Yeah, just maybe follow-up on Mike, comment.

from was added seems this that it budget, is Just to you top is a growing about how or coming basis talked on organic you I of out but the certainly is that like out hundred I points know accelerating. in to trend mean know the much few of so obviously past parse XX% your outsourcing? you’ve way year, XX% a growth that there

to. available because you Yeah, of information research to pass that, again or I hard mean actually it's there's publicly amount point not can that always tremendous a

past is in were our growth you you the discussed and customers of this the months. outsourcing the current up and the year-over-year, and subsystems month in the is was of level subsystems know associated in we areas revenue up outsourcing XX quarter One XX% the revenue, our for last third over at the with XX% that is majority subsystems the have know

are know is of strategy outsourcing think we So as co-part that you you a is the know. – we trend the and continuing

no, for made that's short private on then prove just that this the Yeah, the I we activity certainly term, you sure. an you? some Obviously your pause And you comment deals your following-up to on but think advantage heard environment. prepared in about remarks. in M&A going equity in in world Do for doing understand the to disruptions on be about

this there's I get opportunities that once perspective. period we from to of more going believe out M&A an be

think were it over to to that not. on of accomplice the terms companies could deciding they pushed in the maybe know edge I certain fence of them be where you or sell

fiscally well thing that is If growing they continued and for the done and this values. right got cultures join to that do, company to great is want going and I a crisis, truly has during believe sound positioned growth, they're has

more So believe going I opportunities. be that do to there's

was we really the crisis in the active really you M&A mean a of the mid-quarter. perspective, of you interesting know was almost itself. things but terms saw And very very halt the it from to hold; I an a very, start grind quarter very quarter took know when

think we exactly going it's determine it’s to harder So back; when. come to

think good have our us raising balance mentioned the equity sheet are out financing. competitive and for do a to of of balance you the We we'll going sheet that. capital and opportunities coming this. I and structure incredibly to terms in think strong markets for I as advantage see do add private do some be just capital would and an I with Peter market And

the Thanks. comment. appreciate I

you. Thank

Our next ahead. comes Please from JPMorgan. from go question Seth Seifman

much Well, and results. very good thanks good and afternoon

the how build microelectronics. you like projects commentary. this that Just get that involve about and any term curious, those to with that know some the see you regard stuff you on facility know think near CapEx impact the guys have some including CapEx this the time of to you down; Do When way, and of projects having timing expansion we touched takes under in that. on movement out, efforts

we the quarter the because with third in respect our Seth delays deliveries, some slowdown of equipment in a So know you past know we I was you Phoenix think going set don’t largely the it that microelectronics overall obviously you step initiatives trusted are saw the and some just it’s in opportunity to pursuing. to the really COVID situation. – impact however when

receive first know We exciting, purchase at. or of actually where the the did you during contract order which given our pretty was we’re quarter stage award,

in picture, some don’t you think I it but the big we changes during see So did – delays the know QX.

growth Yeah, and and in revenue a for microelectronics ’XX. the and about, fiscal opportunity for a we Seth trusted fiscal talked we That’s as – that wasn’t item ’XX beyond.

the it So for the impact Mark to short just having see of don’t we delay CapEx. echo what said in terms an of,

And the little question might kind obvious, to Right, mean of answer just to maybe point but be I fine on it. a follow-up, then to right. this put

it expenses You was COVID in quarter know the think and know to employee you mostly related the out related called you and support. I your XXXK

measures distancing separating cost not your I facilities, that might March, time. of the period so us thinking they relatively for start-up kind that first since elevated since assume very it and also this offices are up, that actual I of the totally understand and that I’d where starting of mean be would about out makes throughout the all is like something why seems those be you're significant but happened sense, and implementing So costs the in it and maybe was it also are

would mean think do we going would you I the expect that? work, I when the – one, that have forward, also I all of implementation we instead mean significantly would of about the to months from how you three So be of but that done think guess so grow basic it about

Yeah.

know major an infrastructure It's fortunately, for was of had we some in in based terms been video rapidly home, expense, place move, kind preparing important know part that a you to home. quite So infrastructure from what already I growth the us work nearly our could to have operate time. very to mean been a which collaboration which of from you enabled of XX% workforce put of in transition to place, initiative to

the funds the the the of were they see don't take other going hourly impacted that increase them and were spent and via really care Most of in out were then put family unemployment that rates spiked initial and to members and that being as pay know we're that about you expense. I on to the significant employees of as family, a think trying burden helping in phase our

of depends you one That temporary of of and a referred to be remarks Mike we employees. scenarios what the in risk know the to shutdown his into prepared kind back we’ll you it care think on that tapping of is risk to we continue fund various in then that the said, obviously so and all where is, go use that to know if emergency facilities, relief to saw take the happens

like right So anything Mike, on there. going would it if know you add depends happens. increase, it's you see now to but we to don't what that

March that of relief Seth XXX,XXX. I mean will about that mentioned the biggest have fact – was three employee in that was The terms good were and most Yeah, one question of you in cost. of within XXX,XXX expense months was of which it’s month this of portion a I QX. the we the fund, we XXXK mean

but like fund get to we our about million see. that hope we up money that hands we'll talked of employees, see to into $X so the would a QX, in pick and that, Mark it is As relief

thing we work-from-home associated other some with The expenses and social see is distancing. that

to really had expect well, as said, we forecast. in while Mark hard QX, as some it's that we mentioned those QX you As but in

thing costs, GAAP the our our hope spend little would employees what's because to can we anything that do and One adjusted net GAAP EPS, QX the our is point say results. we them. those do forecast incur as from income as expenses. not income would net don't you EPS right perspective if as perspective, at back much could discrete a dilutive fund we associated goal guidance, for is overall be I of look a out But do and I added with possible. we to From we be guide adjusted that'll an

the appreciate color. Thanks. I

Thank you.

from next ahead. from comes Please go Our Herbert question Ken Canaccord.

Hi, Mike. Mark and good afternoon

Ken. Hi

or or It some of just clear. be material due factor supply obviously Mark result of a owned delay at COVID, imply doesn’t sort guidance sounds your facilities, So your the doesn’t in wanted as any chain of to like correct? to

is correct. That

Mike temporary delays, as some but So remarks, said his absorb in major you nothing we know significance. of can prepared

suppliers maybe you bit risk you Okay, a potentially a it it it the little steps mean doesn’t mitigate sound a see could you and little you're and and working little – risk more big build where is necessarily. these inventory like sounds are helped with through mentioned I our like

chain. specifically it I look fair how is here, durations we should – material not terms either knows things sort now, supply impact be the more in of are your obviously where but to in you're say but on So any it it the of your is with mean who step expecting operations, down

Ken. correct that's believe I

prepared what think I the back it’s to think as see. So I kind said we of risks I three you really that in remarks, go

to supply on You focusing potential began actually We impact January. is know a chain. in our our supply the first chain

particularly and initial the other into focus morphed Asia. know then quickly It Europe very U.S. You then international, the was on

know we're the got, suppliers, so back quarters XX we we're spend with You with being know that is about it it online, parts and XX% who those tracking several we happening what's of need over impacted, exactly our are are for next round we've about all who you and daily. know the suppliers;

think a to plant. our you So risk amount, know you literally January we've I buy down done financial know to in tremendous beginning

say much than that area reacted second of terms well. of facilities own sooner the a we many customer I some companies as as company risk actions locations we’re we manufacturing that in our ahead our would and obviously The to and is of certainly took

aerospace employees early you know already a high to we we ceased literally employees and of then the was know on could that March know work-from-home very, to was manufacturing you you large are which You intensive. a industry, to by facilities, manufacturing just distancing place over effectively, we electronics impact aren’t work-from-home significant of its that last as nowhere those would nature in which in dense allow know that as the because for on transitioned facilities that very XX% we’re that travelling office compared in in the weekend, obviously the the doing the us very the our because XX, as such do and created infrastructure majority so have and anyway, day the people

tremendous not our continue their to employees all-manager as managers to all educate, improve the need but weekly distancing all on protect them the we and you our well all those do educate as to of of continue of and and of to we know see weekly them via and to call, with based what communicate livelihoods. facilities only text our on an videos we Then to communications health amount itself inside safety,

And well. right exceptionally gone that's now

with confirmed our know open. is everyone you cases You to any and COVID had facilities all we haven't of remaining COVID, our continuing of facilities inside work know

keep but be can And possibly so you everything we're way, to that do continue to risk and it but going to business the we we we're believe very so. focused we've to on impacted, could trying the that know to done we reduce

The third we now hiring haven't one hiring any metrics. is I really changes our and right to seen as mentioned

we we’re got XXX open are position, hiring, growing. know so You still because still like we've

expect to We to continue grow.

but know change people, uncertainty, haven’t. we hiring just now could those hiring still are but We see time, the right you we metrics given over

and the we we working see of be would are those all So kind risks that hard. them three the

Great! Thanks the Mark. color. I appreciate

Thank you.

from ahead. comes Michael SunTrust. question next from Ciarmoli Our go Please

Thanks the quarter! for healthy. safe Nice and question. guys. evening taking Glad everybody good to Hey, hear is

what know might mean buffer materialize. and not have you of specifically supply talking I some risk was you stay on initial questioning, chain? you built seeing you have to building enough products inventory Mark, strain most supply up Ken about are the of you asking, hand? know in the you additional that comfortable think Do inventory types or line on delays. to some where absorb that you chain maybe are Where just

you about the what to through want do been we’ve talk go doing. Mike Yes, inventory and I’ll kind of

Yeah sure.

on to identify in in where went advance that XX% was was, that suppliers and possible. even our if weren't worked we impact QX located our Mark went the to suppliers. and our the we Europe, about group. this out top then talked inventory look of was the spend. critical on we we that we inventory Mike What early something talked top to in top in of purchase We through of Asia, were So our early, in that And buy went or we forward. materials supplier mentioned supply and terms chain We and and analyzed critical they specifically about

From that impact didn't a on material have perspective financial a QX.

QX. but dates much put well to working As prepared QX, expect fiscal as do some we're you promised part in that see of I mentioned can. in roll Those first know and we the we into the orders we in in ‘XX – my expedite as remarks, some that to as have

are to and on I day key the to overall say critical at deliver; single we doing critical but risk, purchasing the having ops continuing suppliers suppliers; are would an point every mitigate everything we that eye are suppliers can track But the talking to deliveries. we're and chain our all we're to our this supply keeping team team our

doing advance those haven't we we yet, purchases. seen and but mitigate to So make we can everything anything are

is options, very, [Cross what just we boils down very is where it lead what and different of parts over there we a So say, those what suppliers. there out quarters are and that's number Talk] really looking to component obviously focused at the as I the working on going to with times next are look right, kind of was limited and those sourcing several

is we’ve early, daily that very it so that effectively, that the just then looking on and need. part So some get some for alternatives, in are basis. on we done material of we we’ve we literally supplies a pulling In instances or parts

So amazing not reducing to risk the think really done obviously it’s forecast, job, our team but purchasing financial the an has I zero.

inventory? the appreciate Yeah, specific seeing you to all specific and know buy excess any you color. specifically I pressure wondering I seeing parts the no components? you risk are and you and that was the what I are parts board, mean around on circuit switches, just graphics guys, what had components guys kind capability, that you’ve know of what are most you actually

going into but XXX not on basis. different to suppliers parts XX can specifics, I'm I we're get Yeah, that daily you a tell from different working the there’s

over we all So it are Mike.

like bookings? quarter guess might slide a they think seeing you competitive there that you to in you of that envision have social line mean know know of certainly the of of if a any in how pipeline terms I out or I takeoffs to you you risk bookings you could what you due of the I anyway know quarter. that awards? strong know in go-forward be just, then does and the pipeline? select, Do talked fourth tell midst Okay, in another delayed programs about whether it potential not look be on has you? distancing, What it's an QX, are site there but in Do the impact the know is having sounds the your like much down of

couldn’t you mean tell are focused, team they we doesn’t going that can it active. are change now, I very that sales Not the forward, it see but right very

business impact. obviously, more I and become challenging much from to still more I think now seen is You think but attuned has we everyone done. home, right getting It’s know any working haven’t

Got Thanks guys. it.

you. Thank

question from comes Raviv ahead. next go from Our Citi. Please Jon

Hey, thanks all. everyone you from hear and good to

trying the you On the before out, just can hit. market matter just the just – get I volatility to was because M&A of a it I’m guess you you all in you I things do this down, unsticking market image see coming a in sort that question, when of Mike on a pipeline so Is plane when some matter had speak, again. to

So I’m new are of sourcing deals kind frozen. wondering if or those are frozen

you still lot and on guys little balance M&A pull a on have sheet of what because color here. a really more to Just looking do, are to

mean I you’re right. Yeah,

before quite into period coming said, was Mark COVID of busy quarter incredibly As was pipeline the strong the an hit. time and

their and things care taking shareholders of of and terms for buys the is In to the the thing. are most the are, and it’s honoring focused sellers now to are timing people we commitments right know, on hard their same rebound, doing customers same we which think really

and do going But You the as luckily for well where a some there's to of an to John environment to term offer us earnings, is think visibility earnings, really lot begin pick activity workplace, be I think defense getting think to sectors. again, I we're know other know employees predictability future think to near returning as more be appears the key to say, than travel back up once well see you open the and start you're I up, states starts to you positioned does. as the going to going as it I

sort national potential prepared you from Mark to both world how that. and you position about remarks question and least for aside priorities in at in thing, Thank then does a in of earlier which out various And brought expand? crowding of itself crowding earlier spending. Mercury response up the out budget could a for Kind

opportunity out previously, know you got and So a for guys have for But such about into requirements company real good swap long in requirements the and healthcare sort heading you post-COVID you to swap applications, very picture, medical you of used big a for also of application. for world. I going do defense the structural maybe medical forward, that. it think but how you kind and do on reason term

a it’s Yeah, good question John.

we've what now do been just for going we're to think I to continue doing.

there's inside think around – electronics opportunity of just we’re primarily M&A there's I enormous perspective. still of a industry focused, I an opportunity from where the think and which the different modernization the still tremendous will an defense

know even You probably earlier, perspective. I M&A said I form there’s opportunity think an as more

with we stick area are at, So of diversify. we what in But be not a and term. is in the to believe pursuing we long are opportunities space, continue to good a growth to progress seek we trusted the one necessarily could right now which things know there significant want what major additional as obviously and we microelectronics

Mark. you. hearing thank for Seriously, one that on me Thanks

comes Please I Instructions]. from [Operator ahead. you. Thank next our Blair. William Jonathan see question go Ho from

Hi, color there? potentially your good on bit in does and recent COVID of a are going give additional down afternoon. of some your efforts acquisition with slow particular guess Can to plans prior how us the you maybe integration I and little relative acquisitions anything

job, good Yes, We their the and into began to the one so travel. point that’s go then business done with say the systems obviously we APC did acquisition. at I only outstanding that the got we Alpharetta, have is to a kick-off, impacted is transition which to would and the but we really world this pretty through inability

part the of right very has a little and team you Mercury. bit. know moved excited to is it said, be is the to That So the well extremely business performing

of What was very is stepping as talked addressed interesting to me a business the of mitigate structure different we very, that crisis. helped business quickly continues really is fully and back think kind been you ways. the matrix actually organizational us us a lot the couple a across and COVID model risk, of very The we I business come a helped integrator. to lot responses it a We’ve grow. really capabilities not of organization we’ve deploy sooner had about know into set as deploying a matrix play scalability much gives in That

us actually fact helped through create respond got an has and organizational the we not in And we’ve a so crisis, that believe structure a to and M&A. value full integration an model only

financial the track it's it’s again, been on to but get do impacting we’ll once So another have travel continue good reason we what back are to Jonathan. doing we and able to not performance

subcontracts of follow-up, around Do the some as just a think maybe and maybe picture facilities delayering, know project? given you've you a different then having If sub-primes you in big And value. you already Great! a are can you trends single multiple on know a accelerates the adding to particularly truly down that having level. that more that to consolidate COVID quick been work in of now risks seeing few

perspective picture again, you the Just out could maybe long from over know if play you wondering big a think that run.

result think we COVID flight of to you of is as see going that had. think we’ve the you quality about, that What one Yeah, the know continued to macro the that dominant impact has industry theme trends talked when a more it. suppliers be around trend I is to the probably is as that’s and happen so delayering the level just

exposed businesses it’s dealing chain the around has that challenges aren't with supply to as the or with small that think capitalized some and I well a vulnerabilities risks perspective necessarily from presented. COVID able deal

more well to forward. been people think that are the going years very back We've I going I doing deal companies figure who with long to it and need really within the so out, and are chain with And are we term. the supply see think five of that last step in I going even and think over to that they partner

the, and own of supply the domestic some thing is to exposed you for and going have the chain play trusted obviously as time facilities capability think quite the some this our bring and other The that’s domestic U.S. I just to need that that is manufacturing out as invested in to we know back well.

strategy well given what positioned I with with are you previously So we important more everything just just think that know that has done we is had been even the happened.

Thank to you. Great hear.

Mr. you. Thank

for there no further Therefore over any questions. are turn like I’d it you Aslett, appears to back closing call remarks. the

time in well very to you. next to you Okay, the Thank look today. for to quarter. taking forward listen speaking you We again much thank

concludes call. conference that for participating. gentlemen, today's and Thank Ladies you

You now may disconnect.