Mercury Systems (MRCY) 3 Feb 212021 Q2 Earnings call transcript

Good day, everyone, and welcome to the Mercury Systems Second Quarter Fiscal 2021 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, Mike Ruppert. Please go ahead sir.

Good afternoon and thank you for joining us. our Chief is Aslett. Officer, today me President Executive and Mark With

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

call and of turn Mercury's non-GAAP to Please presentation press X. reconciliation the in earnings measures, in an we Mark or would adjusted in statements, that information future Before I forward-looking principles today's subject revenue, future turn presentation also and with over regarding outlook, slide metrics statements CEO, you reporting started, financial to to should several financial accordance remind addition acquired These share, mention to prospects, like to these today's risks per forward-looking will included free earnings GAAP, get risk like the financial the A I'll financial appendix results business includes including All EBITDA, cash results slide in plans, we and the performance. X, revenue. are could flow, with anticipated conjunction is non-GAAP during the generally uncertainties SEC performance forward-looking or be accepted objectives, also in Mercury's included statements adjusted our press filings. that materially. statements to President to as on to that cautionary income, adjusted slide factors Mercury's earnings in differ Aslett. cause and release. call, our discuss accounting and and specifically organic considered now release, actual I'd

Mercury our for the your and high-end total and open Thanks of XXXX. our at/or end will came fiscal and the to up profitability. for Mike, the quarter high second the and for it update. a begin questions. everyone. solid guidance then delivered guidance with of above I'll afternoon, employees, review We business financials above good Thanks we'll revenue in Mike

full for estimated $XXX At X.X of acquired was value. design the single-digit revenue more revenue the high fiscal expect in EBITDA. adjusted the fiscal total quarter growth a in year. for XX% growth now including deliver in million book-to-bill our and POC and XX% to adjusted wins guidance amounted total organic lifetime than quarter, company leading result double-digit end EBITDA We to as growth Our to the company substantially raising and revenue we our for XXXX to

details with the the and X. to drivers and technologies aligned Mercury's are Turning capabilities trends. strategy, industry major slide on

M&A is opportunities capitalize strength business our back the New and conditions pipeline. activity robust. on have and sheet to financial balance the remain we in

half the given the to XXXX, signed. fiscal Appropriations bill expect Defense environment of ahead the that being Looking we contracting second to improve is

the forecast Our then overall near-term at spending flat be term. low to baseline for single over digits defense remains longer grow

driven growth defense to by be the a of strategy. We national expect continuation this

another spending expect Those over out round crowd of time including we dollars With administrations, discretionary fiscal the change in stimulus. defense. could

to on delivering exceeding defense with and that revenue greater to new double-digit of likely nontraditional methodologies, what to our of growth. to overall budget This time, high speed greater low in platform environment unlike average sense Mercury's defense an modernization, supporting bipartisan in this organic is there focus strong could and commitment with be to defense existing However, a And spending. the materialize, we're believe today line We saw affordability. do contracting grow overall use on Mercury growth objectives. and goals spending well contractors past we to seems sequestration, if to on lead continue in see defense single-digit pressures ability over even the positioned

Turning to Mercury discussed both our mission of in fundamental trends and defense the in that modernization slide to well-positioned systems The the effective we've waves of is X. also the the occurring across parts driving sensor business. growth market. leverage faster-growing and targeting We're CXI is past.

our the by outsourcing subsystem is customers First at level.

we're content As on platforms. programs a and result, capturing more

see as we the Second, market. particularly and delayering, CXI government impact seeks affordable the of more the solutions in rapid

trusted flight create processing. secure Third, RF government's a to for to domestic secure is and the in supply push finally, the and primes quality advanced And microelectronics. chain suppliers

microelectronics mainly militarization the done China's are economic in developed in still and and diplomatic, IP packaging the tensions technological is US, and most tightened remains The Although, on domains. the offshore. focused manufacturing DoD

is identified a they technology As defense one result, their US microelectronics produced priority. number trusted

part, the processing for microelectronics this secure opportunity is and in us. Given investments a significant we've trusted the made

Although, said been the in impacted by our track. long-term fab COVID, remains as we've has plan Phoenix build-out on

the We and customers growing continue to from see semiconductor interest DoD. partners, our

Our and security address strategy investments significant seek to a threat. national

was and total and continued to COVID given were similar of Turning quarter the from extended year slightly for on second last highlights QX X. delivered QX book-to-bill. a CR. X.X the to QX, impact the our up financial we Mercury's bookings slide

For approximately the XX% X.XX. prior XX months, book-to-bill was and bookings our were up

past, for first, As in than second stronger expecting we're full half positive the the which year. the should be to book-to-bill lead the a to fiscal

activity the backlog. and pipeline second the remains high. business beginning is new half We're with Our record level robust

coverage. up XX% forward strong was year-over-year providing backlog revenue us with QX Our

programs and largest QX Our total. organically in X% and bookings were X% C SEWIP, increased quarter Mercury's MODS. in for the DWES revenue P-X,

activity program X% program revenue. single to and a this are design no programs different more five look than programs total currently next past. programs. total as expected an XXX to and year. These the revenue more than into for Similarly, over transition in than platforms We're time. radar account including LTAMDS, many in we programs participating than the of ground out X% seen F-XX, classified and over and be were we to largest of radar beginning radar Our more airborne production program, revenue more program fiscal No quarter will several is years, recent We've benefit LTAMDS Patriot. the expect single of others in win the

in in largest for totaled than more estimated consecutive wins $XXX related the million QX, As quarter to I value, our mentioned, the second lifetime microelectronics. trusted design

levels Given current culture where our solutions. may of and with our avionics of fiscal mission win part more the increases and we're for well strategy scale focus pipeline, us on believe Mercury. capabilities thrilled half fit this team the out to computing and we'll and strength second XXXX and business. example, we be of Acquiring both our POC our and management, robust, design the POC's welcome activity in platform mission building in to

to of our guidance, in QX. results Mercury decreased adjusted with guidance. net XX% exceeding income up line. while Consistent bottom the was deliver the to continued end our EBITDA strong high X% GAAP Turning year-over-year,

For net and came of in EBITDA Mike at as the will EBITDA QX income XX% XX% GAAP months, last up XX% and adjusted for flow were adjusted respectively. discuss. cash XX Free

proved employees to be the Mercury behavioral-based other COVID at Turning health a is early and X. has We our our for to testing thing as companies we'll all our believe safety to core the our testing COVID decision-making result, Putting element protocols. the and most the operational invest right This back across company's slide to operationalizing center stakeholders. and continue rollout do of of ahead that facilities. Amidst the July. We of testing of began in business strategy. is pandemic, on weekly in the continuity

open have facilities and our of through the All productive remained pandemic.

calendar encouraging will Looking do XXXX. we That the ahead, continue in vaccine that the into continuity to business it's our see and well expect rollout. place protocols said, investments put that we've

to remains M&A X. is to organic continue slide with we're of accretive pleased of going strategy. an The hiatus POC. to active. Turning recent After acquisition level growth our acquisitions integral supplementing high forward. that We well completed believe have the the in Mercury's we're market very activity, part of positioned

and We the Our pipeline all our our be with values, a robust liquidity. disciplined is both positioning believe strategy accretive and to of our strategically in culture of and in We as short given with seen line varying in great of aligned of capacity that pursuit and good the buyer deals place financial multiple terms in business Mercury sizes performance. purpose, can and that intend We're core is remain strategy. in long-term. opportunities a

remains and our margins growing growth generate that business X. same: while significant disciplined the our organically supplementing we value Overall, Turning strategy five for full organic integration. strong execute continue the areas. the M&A over to believe strategy We as slide to to with deliver and will shareholders plans our this long-term in

XX% supplement averaging grow to The double-digit at level to this growth of and high acquisitions. first organic over low is revenues time to our with organically single-digit high

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

leverage growth business. businesses than And faster synergies across over other acquire for performance shareholders. should to areas Fourth, operating combined to well time. allow attractive of in our the with grow continue driving locations. maintaining synergies is in Third cost we operating should revenues to operating the we're plan integrating the in-sourcing as finally, generate produce we're and fully strong returns These while as expenses. investing manufacturing organic revenue our us seeking manufacturing This strong

of Mercury strategy past extend XX. record the slide success has to in XXXX Turning We're worked confident its years. fiscal beyond. This will and six that over very well

and clear the defense. sitting and and model of business a purpose We positioning have intersection tech unique at

markets are working with and our continuity the We workforce trends. protocols a engaged in highly and have COVID-related industry business right We're aligned dominant well.

our in investments year our growth total EBITDA. Mike? anticipate I'd and assets. adjusted domestic XX% great M&A the call double-digit people, is for and and We growth leading With organic shape. like fiscal in our revenue now growth-focused manufacturing in Mike. XX% to to over Mercury's POC make technology turn growth to continue single-digit to the to with company that sheet is balance We trusted back high

you, record strong delivered and end afternoon, GAAP revenue, high Total financial the EPS our and our quarter We performance. a Thank the QX with quarter income guidance everyone. good were adjusted solid again with adjusted exceeded GAAP bookings EPS EBITDA and respectively. Mark concluded QX net guidance. backlog. of at and and midpoint was

we on acquisition combination facility. XXth, funded with which credit December a hand our and cash of the POC, completed revolving we on addition In of

adjusted result well full a strong of acquisition in increasing net EPS. our Mercury's adjusted year income, As the XXXX as organic we and EBITDA as half, are performance for guidance first revenue, fiscal the

our to on now slide turn Let's results XX. QX

mentioned, the we of the I closed As end at quarter. acquisition POC of very the

on an for had on immaterial results million, POC up bookings Mercury's X.X% result, year-over-year. a QX were shown the XX. $XXX impact operating slide As total

up bookings For the last XX%. XX are months,

EW Our driven markets our bookings and key be radar by CXI. continue including to

Our was book-to-bill for months, XX book-to-bill our X.X, X.XX. was and for QX last the

to the diversified base the 'XX. to total XXXX, QX which an second single of of is above XX% compared of XX.X% POC, of guidance compared fiscal the XX% ship Organic $XXX the solid company to revenue QX exceeding full of 'XX $XXX.X $XXX XX% within XX.X% $XXX,XXX second X. grew QX months at be was end margin with million year continue only we fiscal to was for Gross $XXX 'XX. considered revenue acquired the increase QX to of Mercury revenue highly $XXX to up, revenue half with expected also QX record million, revenue XX contributed year-over-year. in POC, quarter. than last of XXXX. expect the the with from X% ended compared second of into of Backlog million. continues quarter. no the bookings program high during fiscal in during more providing quarter million Mercury's next a Total a X% our million to to For quarter visibility backlog book-to-bill revenue including fiscal representing increased

In in This goods direct million of of expenses sold reflected last basis the QX mix on XX% primarily charged COVID-related Operating increase cost X%, by year. quarter. up $XX.X QX margins. program primarily had R&D in decrease point year, was R&D in last favorable in million expense. addition up a XXX driven to impact $X.X QX, this expenses QX an to were from

new decrease Adjusted well mission our XX half, percentage QX to million respectively. This computers of opportunities GAAP first of in strong increase was as million of adjusted investment EPS and $X.X driven these end the Adjusted totaling and back QX were and revenue modernization, continued by in that sales above last business. and as to primarily were processing income EPS QX, as weekly million expenses For in XX% $XX R&D EBITDA expenses. up were year-over-year increase guidance net million, compared compared a in expenses acquisition-related increased driven $XX to This to in was adjusted add to discussed. COVID-related related profitability. our XX.X% the months, down by up XX% and QX back primarily year-over-year. was of for expenses COVID-related $X.X XX.X% with margins avionics EBITDA for driven Adjusted R&D million a of income radar direct was added and EBITDA XX.X% $XX.X XX% and our $X.X XX%. of secure which testing X% QX were the GAAP by both guidance respectively. million, XX% and top Mark microelectronics employee year-over-year direct 'XX.

these expenses sheet we cash expenses. investments payments also cash our well to derisking. XXXX relief In and reflects approximately for quarters. balance for from million. goods We million cost employee to made approximately quarter as for $XX.X QX, COVID-related $XXX year-over-year the We POC. respectively. flow expenses last were Slide and fiscal CapEx, of We $X.X declines fund workforce required this COVID and supplies XX protocols. incurred services the of operating and million and of safety as in QX continued the ended free million with Mercury's sold $XX.X cash cash flow and charged for acquisition of five $XXX,XXX equivalents presents QX R&D The operating reflected

credit and financed capital. cash business. by million facility. on Mercury structure a continued This offset QX. from revolving we in as to our million million well decrease of remains from Our generated flow was at the end flexibility drawn with capital we as $XXX access reflected of well The POC, the cash with partially the perspective, down $XXX of balance acquisition hand, $XXX $XXX positioned million great was cash which From the

at growth to as debt future of investments million. for the as $XX net quarter minimal at drive end well Our still significant have and the was capacity M&A. We capital organic R&D

as second said, Mark pipeline XXXX. As begin half the of opportunities remains fiscal our of we M&A strong

continue execute continue to the to we on active substantial portion strategy. financial expect have to of We our M&A be and to flexibility

the tax we these flow operations Free acquisition-related in and items million included to our slide Massachusetts; Turning revenue to $XX.X of and approximately and turn with payment build-outs for were direct to primarily compared now to California; guidance by completion $XX.X driven to quarter. billings XXXX. cash Together Hampshire our $XX.X QX financial flow of of New Hudson, was $X.X timing adjusted Cypress, of in a capital QX our the shareholders Themis during a million expenditures related well COVID-related points. cash Andover, million other sources cash in flow of investment for accounts. Capital in along by $XX.X primarily in cash flow continued and by These ratio related million this the in X.X% from on facility expenses. cash XX. reduced million $X.X with business. The across or shipments the QX was quarter. approximately was starting QX of had offset EBITDA. payments onetime for QX working POC XX% in of million inventory conversion was XX. million I'll Cash approximately cash partially procured We settlement microelectronics on XX the outflows, million as slide were $X.X outflows representing free as quarter This decline $X.X

for of includes the guidance third The year expenses QX $X full includes COVID-related Our estimates the for also direct and guidance million. fiscal POC. quarter

not does full include the for direct for QX. fiscal year guidance expenses Our COVID-related

guidance QX attributable revenue million midpoint For to million GAAP QX in the POC XX% the QX fiscal million growth or expect of XX% XXXX. $X.XX $XXX At $X.X $XX the result we million is QX decline a of be representing to QX $X.XX in year-over-year we of $XXX or to non-operating fiscal to to share. The we is $XX.X per benefits acquisition. income to net currently compared total includes XXXX, range approximately share revenue of expected to this XXXX have that in not tax will per discrete million XXXX. $X.XX that investment and million had $XX.X of income

expected guidance EBITDA XXXX EBITDA includes be are of COVID-related $XX to to QX be million of EPS adjusted to million margins compared expected XX% expenses. QX is $X.XX XXXX. QX to fiscal QX XX.X% to $X.X be Adjusted incremental per representing is of to our million XX% Additionally, to revenue. to XX.X% growth Adjusted for expected share. an $XX.X $X.XX

expect EBITDA CapEx, to expansion expenses. We an to in free investment R&D continued adjusted well flow conversion cash as COVID-related reflect as

Turning to slide XX.

growth Our the guidance second the we POC for on fiscal reflects addition XXXX strong of anticipated. half organic of of year full top previously

revenue fiscal company we includes $XXX well single-digit two XXXX, high as POC fiscal total This from full XX% million growth expect to now and as XX% organic represents quarters $XXX to growth. XXXX For of of million.

when the XXXX $XXX year calendar revenue of had stated we company POC, As million. we announced approximately

expect in million of the the POC business XXXX XX% calendar low single-digit high to million calendar second margins. The midpoint rate for $XX.X of year revenue guidance $XX the will year. We fiscal of EBITDA approximately of grow HX double-digit Mercury's towards a our and that weighted approximately EBITDA half generate or XXXX at for assumes

$X.XX down of fiscal we is that fiscal that be approximately business continue of is high year-over-year We expect tax for rate GAAP XXXX million we the single-digit EBITDA revenue non-operating result in fiscal consolidated to XXXX and fiscal share. from million discrete This share per as not basis XXXX at in and on income a in a or margins XXXX. $XX to $X.XX million to net investment double-digit or grow $XX.X to expand. $XX.X expected $X.XX will POC a had low to benefits income have to per Total

as dilutive fiscal for per share. to $X.XX XXXX fiscal compared in is This as of XXXX direct POC well a as is million both fiscal result is of our per from of of margins XX.X% discrete $X.X from approximate not $X range EBITDA Mercury's $X.X to offset to expected a performance COVID POC, EPS this impact expenses be XX% adjusted XXXX partially Adjusted X% of to to million, organic includes Adjusted accretion the increase XXXX approximately on XX.X%. range $XXX a have an expected X% expected recur increase $XXX benefit basis expected our million for to up which Additionally, Again fiscal in of or acquisition. be XXXX. to share the XXXX. This is includes result an are million our million be EBITDA which compared in XXXX to XXXX. fiscal XXXX. to fiscal point margins fiscal in to $X.XX guidance to of approximately $X.XX in is is approximately tax in fiscal fiscal XX% expected the to as XX

As Mercury. the margins into expand integrate expect we mentioned I to POC's business EBITDA we as

capital expect We be as we to fiscal to approximately revenue, the to expenditures growing X% business. X% of XXXX invest continue for in

XX% Finally level adjusted expect for we to of is cash COVID approximately This year, the by primarily be our expansion CapEx EBITDA. flow driven free and conversion investments.

organic Mercury the Turning for solid of quarter by another to execution slide XX. by and QX, growth team. strong delivered great results driven

We POC. of acquisition also completed announced the and

HX, deploying can organic financial questions. to With executing well for you capital our with EBITDA continue positioned proceed to revenue we're above happy and ahead average industry be now. Q&A Looking your long-term strategic the to Operator, that, growth take we'll on M&A, of margins. model while

[Operator of Peter going you. to Instructions] And Global. question from Alembic line our come with Thank Skibitski the first is

add synergies revenue just maybe terms gets you on that you before? deal or add you Mark, on does from customer to programs have guys. that wondering enable deals in color you've the this didn't I'm evening that this larger you can potential I'm envision more you already or to you guys deal? sets, wondering space. bid of good -- Can the POC, any done different -- allow what Hey, in

and synergy question good a is It's this largely revenue deal. Sure. a Pete,

revenue As that actually But the programs of about it those life with of business don't things does broad particularly in you that based know, programs. the we one overlap the take synergies the -- upon defense are like Mercury. occur range for time is the to of just cycle

H-XX. the So F-XX, on strong F-XX, V-XX presence

do got now capabilities the over domain about provide Mercury's some opportunities what storage programs pull-through a capabilities. some what of very able programs. of time of particular in And and And is capabilities well. some got seeing more right Mercury we've they've very, likewise of basically to they've largest got where we're taking our of been computing range is could the we've where into interested opportunity capabilities POC's in strong programs. been to they what are see they've in able So understanding mission In very what some unique do as to we other our and

think a So of and potentially over cross-selling for Pete. lot opportunity time I upselling

Okay. Appreciate the color.

largely CapEx revenue? -- Just CapEx it with line Mercury's it percentage one Is kind of wise, on follow-up. in of a is levels

Oh you mean at POC?

Yes.

Sorry.

than lower CapEx their Pete ours. levels are

are guidance. in specific X% terms those to provided we've know of higher investing that. levels. CapEx haven't than maintenance as running been than of you lower We But X% Theirs our

Lower than your maintenance level?

Yeah, to X% lower X%. than the

Okay. Thanks so much guys.

will Thank from Baird the our question Peter of And line Arment come Equity Research. you. next with

you Good and M&A back. is quarter. I Mark, mentioned that afternoon, think Nice Mark And Mike. both

flattening on accelerate obviously closed if things could but deal Any just just in budget on change you of you you for activity? just you? just are you And POC highlight the do terms seeing color environment overall a in think cadence – might So deal Thanks. that? maybe maybe the

Sure. Thanks Peter.

pretty opportunity quite opportunities, that the are think larger into. others deal the some that size done The terms range we're is we lot the past deals pipeline that developing deals time, case in for are I in same last than that. is size and relationships we've of I with POC with processes much invited right think to themselves from been of of and the with some companies robust said quarter. There a So as now, we've which

For themes M&A as sensor core Those are as penetrate as markets as well to in with our over gain two well time. to have. stick using those the going effector markets to systems, current us, CXI we and capabilities we're mission that

whether it's budget a are defense driven you hard if it's rates money. market cost the But just tell add overall, to where marketplace. to the know or by very, active. is anything that? dynamic So I and to of Mike, very very interest don't the It's want

Yeah. even a No, my lot in flexibility hit financial after and balance POC it. good pipeline we've that we as and to been I closing is prepared The we pipeline. of remarks sheet And capacity Peter, execute I active. have to said you strong think still continue on –

Appreciate leave the one Thanks. I'll question. color. at

Yeah. Thanks, Peter.

you. Company. with Thank And come Greg next line & will question the Jefferies from our of Konrad

to I architecture one opportunity Just new opportunity disclosure family talk architecture announcement set? mean open the start out. expands in you the kind was of the the about launch how stands of the Can of open solutions, a this maybe and EMS maybe

Sure.

foundational Greg So a you as strategy. part Mercury's been have open know of architectures really

So grown as We're technology areas and the we're innovation levels And drives seek we've well as the as rapid to both in seeing horizontal our modernization. the well. that in those what's principles can what applying now business driving And investing as same industry-leading technology think drives upgrades. those and in that that into technology player at domain, business RF in them processing do more as growth in affordability. company I mixed be and that done signal. really is in historically we've across obviously as It rapidly industry open the a we taking that's design architectures a well CXI, systems that is to reused sensor as

year. over maybe to closer you maybe talk X% conversion your of revenue CapEx maintenance next target back about to you're target to COVID some about thinking of the maybe to cash, couple how Can of this mentioned conversion for and the years? on one X% you of investments just of CapEx given CapEx XX% rate? And X% trends getting runoff the year X% for then And this how

Sure.

as the in in and of to our perspective our terms mentioned trusted yeah, expect tied investing months down be the complete So we've we XX facility things from said, this of I acquisitions last we CapEx as That of terms facilities. – we tends those facility in ramp expansion that investments the over this were making build-outs as know microelectronics having and to to Greg, those our in fiscal some we been a those Cypress are the of year. Andover consolidate in that year some been you CapEx

will year forward really tell those driven said And And I needed. see And to do it's CapEx that or we've so, we investments. CapEx barring going X%. to our of down continue protect levels that, think so continue X% business maintenance be priority over getting that. a invest next to by as to COVID that But the to continuity. to we've hard our on mean to the as long going and I do it we're to made employees it's back

draw be And XXXX the fully that set. cash though hopefully free we conversion so costs as down. expect flow ramped at COVID target once that those fiscal to levels CapEx And we do we get expenses beyond into down, we'll and have return those maintenance we levels our and

Thank you.

is Canfield to line next of And Colin our question going Citi. with from the come

Mercury's you seeing your what and Guys then role a of asset what it. new just a supplier little about a Appreciate about might of future a in You thanks administration increasingly smid change pool, merchant in administration? expansion ability right an the talk question. bit Can the terms deals. for little and A&D bit you're horizontal to discuss need discussed shrinking as for pursue

good a It's Colin. Sure, question.

industry R&D year really invest that's more provide is XX%. my the growth playing the to respect above companies, X.X% to is with and in and to actually right? able and companies, quickly would That more they strong And Department and levels. in belief innovation. And specialist industrial X% the level to Defense Our the a that Mercury one certainly this from willingness have is So, ability of they're base. those And is robust X how is Tier affordably capabilities benefit way out our of average.

to with of investing inside important DoD. improvements innovation, our doing. the infrastructure, seeking very in work capital innovation just in the domestic but where what only And manufacturing today's partner around trusted with, technology described. companies not who as that's the can with are in much customers so manufacturing can in them the who Our Mike they assets, benefit manufactured we're in that can We're our invest investing world also We're are much world. of commercial is assets particularly and

the those So, would and one base and companies industrial is having think a clearly from secure DoD of processing solutions. I focus trusted on providing benefit strong Mercury

one. Perfect. Thanks. I keep the

question from Michael next Truist. the of line Ciarmoli our And will with come

and for guys. the evening, taking me results. to semantics, Nice I XX%. Good X% organic is think maybe question. for Thanks but this growth are Maybe looking guys the just you

calling it absolutely changed. high-single-digits. now I You're nothing's realize

$XX You're adding I for with But, environment. anything translated like a bit. environment stays would million would place clearly improved maybe well growth But in prior any organic It sounded the same. bookings thought the the as in into have color POC. that The budget environment? organic the with have changed the the there? has guide

of a more Yes. range just really It's we that prior the gave refinement Mike.

prepared to well think the as did second COVID the respect quarter said I as my continued remarkably impact in slowness remarks, really see CR. the I where extended was as first we like with

the have year what the bookings, quite So, as we they liked. would weren't does that as have an although impact. progresses we were maybe pleased And with obviously high as

revenue double-digit six deliver guidance both look you organic months for company when double-digit to POC, in we year the overall though, fundamentally, total adjusted guidance now the at in and growth growth of top and layering So, on the EBITDA. of expect the another

strong for year going us. be another it's really to So

it. Got

Just anything sorry, driver, historic a more if component The mean budget to to that. changes your help historically we mean, get in-house I at of in think I outsourcing if look maybe overhead, you one done budget more think downturns, do – there? growth and absorb continue follow-up some a you do primes squeezed, their they've of environment? the down as or just do think can they trend keep you that to larger work

Yes.

I we're think across on innovation we're focus dramatically And a customers internal both because, trend to There's innovation. of the our similar going I you Mike, many at potentially our many yes, we what greater the particularly that going levels at divisions higher. the do. of continues programs. a look for if And greater be on versus playing things, we to think there's those focus be customers trends. Again, Again are affordability. and for R&D leveraging

far or helps in-house. it is when make decision, so is Mercury latest for bidding business. develop capabilities of them investment model the as have it's new -- actually they And which always what do they'll affordable to find because we to acquire from technology, of a And that the it purchasing they're generation more than buy got the

So see and alive outsourcing the trend we absolutely is well. that

it was XX% growth we're second year-over-year. the our at quarter, the look which where in is you If up outsourcing, in subsystems really seeing the

production we so very pretty there substantial and things programs transitioning certain And a growth we're in with which way going. are saw into very, the in pleased

a Thanks guys. it. lot, Got

Thank you.

Kenneth come going Canaccord line from is of the next question our And to Herbert Genuity. with

Hi. Good Mike. and Mark afternoon,

year. book-to-bill a the bookings see half provide you optimistic visibility the pretty of second you're half where that sort sort good have -- the how on? the more sounded where be to you in like got any now elevated both it the You the detail of sounds how just based in could year maybe expect on of Mark, bookings of on strong you've budget, you this can and coming do that from on second

Sure.

fiscal might their we expecting But terms like. getting the are bookings book-to-bill POC, expect positive full look year. positive our just we a we're We organically, So arms obviously organically around for that so do of book-to-bill. acquired just a in what

as at of In bookings year well CXI. radar, Those opportunities terms airborne the where potential is potential as are level, see growth I level. drivers coming we the in of kind from, think year growth the of the at three, EW

of older and the and if requirements there, question of about on to seems you extend restart those newer the just to and impactful the think production the push life be fact specific a the clearly programs. in That's There as of F-XX. Are a in we aircraft you how programs think could case modernization of do the to some these helpful. I of And F-XX or some about sort relative for platforms opportunity systems?

Yes.

modernization we're we yes, But often as And government that's our So the systems kind change in we domain. and are of electronics the obviously wave far a platforms inside clearly nice pursuing in them. next-generation the focused model obviously than participate actually seeing is on we the overall element of know, as both that a of less those. radar

we've by driven obviously processing themselves, is that seen that platforms the And the a is that knock CXI step that is second see was if two business also of Pacific. radar to result reason major themselves. acquisition the coming of also great EW around Our sensors into, as drives command the start power and acquisitions up We're then, as think I the a with and up One is moved you we done pretty on of threats a in in the control we've think the that in well other is, POC you it prior really in modernization This of modernization. upgrade competition, once we back, a fits intelligence corresponding management. year-over-year out where of quarter XX% seeing touch parts processing. lot wave the substantially, space, mission I yeah, what of and in platform the along the Asia

our be to are we to got processing. industry-leading systems. of of new types capabilities there quite secure the trust as and go solutions is well require simply both And onboard processing that So, that modernization all that we've believe different some appropriate able provide for as systems goal

Thank Great. much. you very

is of next question our And come the to from line going with Seifman JPMorgan. Seth

Good much. evening very Thanks guys.

Seth. Hi,

Hi.

the not I most results radar, that it impact it the having and which a basically could I'm if a on then sort maybe was ask Is if is typical process and program that high give sense QX. in where then development you considerably So considerably And below, margins? that's, you And of sort gross of in of but talked part to cost. seems of lot a And -- the growth of your that us And fastest-growing think margin to wanted the terms in sure on mentioned time program I program, in the might about, how the given LTAMDS. of other be you margin how playout is that's in about, over gross versus of given LTAMDS that the opportunity mix is time? growth over the that what evolves? Raytheon

a to the financial Mike it it and then, Yeah. relate back Why of I model. can level maybe from high talk don't about kind

three LTAMDS but our quarter, programs and one ground the So, was program. was an radar in number other radar program airborne first with radar along programs. revenue Two it

in Raytheon Patriot right? upwards Raytheon gotten with and time of we've program the stages, this clearly funded are and you that of has the own investing year R&D for The thing, where XXX the could believes major associated capability, the the is six radar probably And to it's initial at drivers And talked upgrade. benefit And past, level, a EW growth. for Mercury. new been of the the been several delivering we're seeing, clearly itself, think We're as internal early So be something now. program, driver LTAMDS wave over technologies I a are systems. you again, radar to this that as radars on about modernization. first seeing years We're we've our know substantial that. The be our in opportunity But of subject going both funding. internally is substantial of very a R&D similar

rate that as both, year as result programs So, are we the fiscal go of into in well some of the QX for when programs, And other the mentioned the typically themselves, in profile production. along margin as the a than that is with full early the full phases. program lower

as know Mike? with level funded well R&D. of to add that if So, internally anything want a little don't bit combined you the dilutive to I overall

we you biggest is think is it's lot at over said. were is year, And perspective, couple And investing, years. way have typical an program. our from lot mean, biggest production. has as that last that our margins of they first to margins, the of like the bigger of I it's they hit it. behind we R&D go as higher full of like perspective, into as Mercury's from But it is program our going a all a then Seth, rate four of us in and programs Mark our up, the one been in lower three, years beginning, a back ramp QX. I program it it our over that biggest R&D -- of a and lot half the And the

very Thanks much. Great.

next And with is Jonathan & from come of to the our line Ho William Company. Blair going question

Hi. Good afternoon.

playing out Thanks. earlier it comes to question trusted programs your for in that can talk how maybe in of me. impact as and well? referenced margin you some the you type one about Just When discussion, the of programs potential that's

Yes.

our programs, literally that Jonathan, inside that various that believe of microelectronics, the our CASM driving crossing capabilities. IP we've type industry-leading actually processing, nature growth on link through to trusted believe, not to have now, we're up So, the last And and what yes, be of on the years significant over capabilities. all And able is of of its specialized here we given do. substantially, processing there XX we're unfortunately the system-level the fourth we specific some we We going we -- to spans just our capabilities invested capabilities and of the believe yes, But, generation it. way next-generation got into business.

just or Just, it. specifically of areas nature unfortunately, the I just you due can't the programs, tell the to

you. Thank Understood.

Goldman question of from with Thank line come Noah Sachs. you. the will And our Poponak next

guys. evening, Good Hey.

Noah. Hi,

you Are saying largest single is your LTAMDS program? already

program QX, the yes. is largest LTAMDS in

the Now, fiscal can be it's know, and largest in right, we quarter-to-quarter around as to it you second it's and it this largest first QX -- the jump the period-to-period. But year. expect

it size you Could year? the fiscal in

think it's at X% second level. about, it's the don't total year round in quarter less we've little maybe, of I -- a well, the and the bit

rate rate at many run how become is for production? does of LTAMDS the current full mean, when you the multiples I program

moved under full it technologies very, as the it's that's the how need urgent me is in associated of a depends the terms now the just we're right? And production needs about to prototypical guess, contract just is with rapidly. rate Well, and After for. I happens very may that, OTA, delivering of occurs. right thing it and the evolution of -- the interesting quickly what the Raytheon capabilities awards. program started contracting remember, the the transitioned that that along LTAMDS what You production is, But see itself, it. on systems to we'll way But typical out an based program upon initial

that the into probably can I program remember LRIP recent the moved it's in is that So history. fastest

capabilities upon the based both the well really potential we as threats over-the-long-term, Raytheon, Mercury, growth the deal as set program, important with important are for a that an of it's size, growth nation. a emerging to for So as facing

has the interesting. Yes. company five I'm it model the here, just If quickly, was you've I total for that's so grown staring you, moving -- I least grown that at didn't a at XX% half realize XXXX, high hit guess, revenue that lap to XXXX, a up the is the to you'll is going going in bit row end POC and inorganic above year. XX%. if be end, for you years now. little multi-year

revenue just and So assume If this 'XX, be one at of that have decade? staring if I at firepower 'XX you do me I'm the reasonable middle more XX% sheet to the much point you organic through target, combining going XX%. company with the your grows mean is how to total balance is for acquisition, it

generate environment of we now. balance more is model So, right sheet less up XX% or is seen greater I grow mentioned, an can the digits successfully, robust. the very through kind five low in high based the additional as margins, looking And it's deck, single a to averaging expressing we're we you've slide the over upon double Day think we see high we seeking continue years. which M&A at to our roughly digits shape. question, organically high great that right, as single great low Investor last as And over digits our to double look you to over in that time said is probably than organically time we done the extremely We've right M&A. think, out deliver And what digit and layer and top to business XX% XX%. We're then on

continue we model the so for against forward execute to So, that can we shareholders as it we generated much value look that think Noah.

I the guess are numbers. those just

accurate? like looks needs year? guidance the be points. Okay. guess XQ -- you sequentially Is full to be for there and basis the the guidance margin into of XQ margin go range XXX from to the half components the the gave, then components if little in I you gyration a that and -- that, then I down And your XQ through Mike, back I why the about up bit if year that take gave I much so needs is it think

Yes.

Noah, me sure, let So make I question. your understand

XX.X%. just it and answer guidance me the the of coming we're is level out where at to our That perspective from give dilutive. you margins annual include to Let on margins XX.X% of POC EBITDA does which

So, to it's about points margin. the basis XX dilutive

at back if that So, quarter. where for that our you're last out XX.X% you guidance EBITDA was

we're to imply does year. in for is that That the expect EBITDA that So QX an continuing higher. margin

We expect to revenue. have higher

at look some the you quarterly leverage. that going us If revenue, QX, operating to what implies for give which is

higher will think year. first they in expenses half also be than in the margins of slightly We the were QX pre-COVID gross

QX driving guide the which guidance. driving margin what's that's annual So is EBITDA --

you added total Okay. POC company backlog? last the one, us what That's to can tell helpful. And

Yes.

haven't We you that look out, into can broken it. but

the was Our quarter book-to-bill for one.

quarter-over-quarter our on basis flat. organic backlog an So was

Right.

it. Got Okay.

Thanks Okay. much. very

question follow-up the is our And [Operator Alembic Instructions] Peter with Global. a of next Skibitski line from

know, Mercury a see maybe think, Air thoughts do impact budgets, money but move answer beyond it's kind is Force the and tough, question of or have I push? money that Do Mark, of there you DoD there's maybe but been Navy a the and sense maybe Yes. of migrate build fiscal pro con, if of in from level around more we 'XX do that talk or potentially could gut money any of to get large Army it around? ships. lot kind tough a how you moving of about a a year buckets I out towards

Yes.

a like we're seeing we but naval, that a have with. great the is structure, modernization, tied number airborne ground is of growth linked of or force our is seeing that ground we're so But anything others HMMWVs So and majority in there's tied ground. a to -- are radar not example and the business of to involved that. right LTAMDS the really couple right? It's to of we lot growth

being move could same. think Army are – region, be competition typically and So power both I high-end into we cycles given during naval great the a going the it's payer including just bill this Asia monies Pacific other that on the But adversaries that those the the as up airborne likely well have ends true the and focus the as domain to and probably different and Russia.

ground exposure look look I other don't other the have say than we think business of pretty as – which And not good. we big parts the to radar solid. we're the modernizations So pretty a

you. Thank Great.

Thanks, Pete.

Thank you. Mr.

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

you. you thank everyone much you for We Bye. to Well, look speaking safe. forward in. next Okay. Stay Thank listening quarter. very to

like again, for on thank participating today's Once conference to we'd you call.

disconnect. now may You