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Mercury Systems Reports Second Quarter Fiscal 2013 Results

Mercury Systems Reports Second Quarter Fiscal 2013 Results

                  Second quarter operating results include:
                Bookings of $62.8 million; Book-to-bill of 1.3
                          Revenues of $49.8 million
                           Net loss of $4.8 million
                       GAAP net loss per share of $0.16
                       Adjusted EBITDA of $1.0 million
                     Operating cash flow of $1.6 million

CHELMSFORD, Mass., January 29, 2013 (GLOBE NEWSWIRE) -- Mercury Systems, Inc.
(Nasdaq:MRCY) (www.mrcy.com), a best-of-breed provider of commercially
developed, open sensor and Big Data processing systems for critical
commercial, defense and intelligence applications, reported operating results
for its second quarter of fiscal 2013 ended December 31, 2012.

Second Quarter Fiscal 2013 Results

Second quarter fiscal 2013 revenues were $49.8 million, a decrease of $18.2
million from the second quarter of the prior fiscal year. Revenues from
defense customers decreased by $18.4 million, while revenues from commercial
customers increased by $0.2 million, as compared with the prior year's second
quarter.

GAAP net loss for the second quarter of fiscal 2013 was $4.8 million, or $0.16
per share, compared to GAAP net income of $9.0 million, or $0.30 per diluted
share, for the prior year's second quarter. Second quarter fiscal 2013 GAAP
net loss per share includes $0.05 associated with the amortization of acquired
intangible assets. Second quarter fiscal 2012 GAAP net diluted earnings per
share includes $0.02 associated with the amortization of acquired intangible
assets and $0.02 for acquisition costs related to the KOR Electronics
acquisition.

Second quarter fiscal 2013 GAAP net loss includes approximately $2.2 million
in tax benefits, $2.2 million in depreciation expense, $2.2 million in
amortization of acquired intangible assets, $2.0 million in stock-based
compensation costs, $1.3 million in fair value adjustments from purchase
accounting, $0.2 million in restructuring charges, and $0.1 million in
acquisition costs and other related expenses. Second quarter fiscal 2013
adjusted EBITDA (net income before interest income and expense, income taxes,
depreciation, amortization of acquired intangible assets, restructuring,
impairment of long-lived assets, acquisition costs and other related expenses,
fair value adjustments from purchase accounting, and stock-based compensation
costs) was $1.0 million, compared to $18.8 million for the prior year's second
quarter.

Cash flows from operating activities were a net inflow of $1.6 million in the
second quarter of fiscal 2013, compared to a net inflow of $11.0 million in
the second quarter of fiscal 2012. Free cash flow, defined as cash flow from
operating activities less capital expenditures, in the second quarter of
fiscal 2013 was a net inflow of $0.8 million, compared to a net inflow of $9.1
million in the second quarter of fiscal 2012. Cash and cash equivalents as of
December 31, 2012 were $33.9 million, an increase of $3.3 million from
September 30, 2012, largely due to a release of $3.0 million of restricted
cash and cash generated by operating activities.

Management Comments

"Mercury performed well during the second quarter, making good progress on
bookings in a very challenging defense industry environment," said Mark
Aslett, President and CEO, Mercury Systems. "Budgetary constraints on U.S.
defense spending, coupled with the impending expiration of the current
Congressional continuing resolution and the potential for sequestration, have
resulted in an ongoing industry slowdown, that in turn has affected our
financial results and revenue visibility. Nonetheless, our ACS core compute
business posted a strong bookings quarter, as did our recently acquired
Micronetics business. Our second-quarter bookings included major orders
related to the Air Force's B-1 Bomber as well as the Navy's Aegis Ballistic
Missile Defense System and Surface Electronic Warfare Improvement Program
(SEWIP) Block 2."

"Given the unpredictability of deal timing and revenues in the current
environment, we are managing Mercury's business differently than in the past,"
Aslett said. "We are focusing on things that are within our control, managing
to a more conservative forecast and revenue plan, and maximizing our cash. At
the same time we believe that we have sufficient liquidity and financial
flexibility to manage the ongoing needs of the business."

"Our longer-term outlook for Mercury remains positive as well. We have
established and secured a competitive standing as the premier commercial ISR
subsystem outsourcing partner to the defense prime contractors. When the
industry returns to more normal conditions, we believe the pressure to
outsource to companies like ours will only increase, and that Mercury is
well-positioned to capture a significant share of this potential growth
opportunity. In addition, given our cash management focus and recent expense
reductions, we expect this recovery to include the potential for improved
profitability and cash flow generation."

Backlog

Mercury's total backlog at December 31, 2012 was $133.2 million, a $13.0
million sequential increase from September 30, 2012, and a $10.7 million
increase from December 31, 2011. Of the December 31, 2012 total backlog,
$109.4 million represents orders scheduled to be shipped over the next 12
months. The defense backlog at December 31, 2012 was $116.2 million, an $8.3
million sequential increase from September 30, 2012, and a $2.5 million
decrease from December 31, 2011. Bookings for the second quarter of fiscal
2013 were $62.8 million, compared to $56.8 million for the second quarter of
fiscal 2012 and $41.1 million for the first quarter of fiscal 2013. The total
book-to-bill ratio was 1.3 for the second quarter of fiscal 2013 compared to
0.8 for both the second quarter of fiscal 2012 and the first quarter of fiscal
2013.

Revenues by Operating Segment

Advanced Computing Solutions (ACS) — Revenues for the second quarter of fiscal
2013 from ACS were $46.7 million, including KOR Electronics and Micronetics,
Inc., representing a decrease of $19.4 million from the second quarter of
fiscal 2012, as a result of a decrease of $19.6 million in defense and an
increase of $0.2 million in commercial. Approximately 91% of ACS revenues for
the second quarter of fiscal 2013 related to defense business, as compared to
approximately 94% in the second quarter of fiscal 2012.

Mercury Federal Systems (MFS)— Revenues for the second quarter of fiscal 2013
from MFS were $7.9 million, including Paragon Dynamics, representing an
increase of $2.7 million from the second quarter of fiscal 2012.

The revenues by operating segment do not include adjustments to eliminate $4.8
million of inter-company revenues included in those operating segments in the
second quarter of fiscal 2013.

Business Outlook

This section presents our current expectations and estimates, given current
visibility, on our business outlook for the current fiscal quarter. It is
possible that actual performance will differ materially from the estimates
given, either on the upside or on the downside. Investors should consider all
of the risks, including those listed in the Safe Harbor Statement below and in
our periodic filings with the U.S. Securities and Exchange Commission, with
respect to these estimates, and make themselves aware of the risk factors that
may impact our actual performance.

For the third quarter of fiscal 2013, revenues are currently forecasted to be
in the range of $44 million to $50 million.At this range, GAAP net loss per
share is expected to be in the range of a net loss of $0.02 to $0.08 per
share.Projected GAAP net loss per share includes $0.06 per share associated
with forecasted amortization of acquired intangible assets and previously
announced restructuring expense.

Adjusted EBITDA for the third quarter of fiscal 2013 is expected to be in the
range of ($2.5) million to $1.0 million.

Recent Highlights

December – Mercury Systems announced that its Mercury Defense Systems
subsidiary received contracts from two major defense prime contractors to
supply high-fidelity radio frequency (RF) environment simulators. The RF
environment simulators represent some of the latest advancements in simulator
technology used by customers to test and validate RF sensors both under
development and in production. The combined total of these contracts exceeds
$5 million and includes a provision for the acquisition of additional
simulators within Mercury's fiscal 2013.

December – Mercury announced industry-leading innovations in thermal
management for air-cooled, conduction-cooled and VITA 48 subsystem chassis,
including its revolutionary Air Flow-By™cooling technique for VITA 48.7/48.1
circuit card assemblies that reduces module weight by more than 20 percent,
reduces the power of a typical system by greater than 5 percent, and improves
the mean-time-between-failures by five times. These new solutions establish
Mercury as a forerunner in addressing the insatiable industry demand for more
processing performance at the mezzanine, module and system levels.

December – Mercury announced the appointment of Jamie Ryan as Vice
President/Chief Information Officer. Mr. Ryan will lead the company's full
range of information technology (IT) initiatives, which are designed to ensure
that the company's secure, flexible IT environment continues to meet its
business needs and support growth.

December – Mercury announced it received $2.3 million in follow-on orders from
a leading defense prime contractor for digital signal processing modules for
two airborne synthetic aperture radar applications.

November – Mercury announced the appointment of Dr. Paul Monticciolo as Chief
Technology Officer.

November – Mercury applauded the successful performance of both the Patriot
air and missile defense system and the Aegis Ballistic Missile Defense system
during the U.S. Missile Defense Agency's Flight Test Integrated-01 live fire
missile defense exercise recently conducted at the U.S. Army's Kwajalein
Atoll/Reagan Test Site in the Pacific Ocean and Hickam Air Force Base in
Hawaii. Mercury's Application-Ready Subsystems are integrated as core
technologies in both systems.

November – Mercury announced that the Company had changed its name to Mercury
Systems, Inc.™ to better reflect the breadth and depth of its capabilities.
The name change was effective as of November 12, 2012 and the Company's common
stock continued to be listed on the NASDAQ Stock Market under its ticker
symbol: "MRCY." In addition, the Company adopted a new slogan, "Innovation
That Matters™," revealed a new corporate logo, and changed its website to
www.mrcy.com, as part of a complete rebranding campaign.

November – Mercury announced that it was collaborating with TE Connectivity™
to develop next-generation rugged OpenVPX™ connector technology. This
deployment-ready technology will dramatically increase the performance and
reliability of OpenVPX-based embedded subsystems in high-vibration,
high-signal speed environments.

October – Mercury announced that it had entered into a credit agreement with a
syndicate of commercial banks, with KeyBank National Association acting as the
administrative agent. The credit agreement provides for a $200.0 million
senior unsecured revolving line of credit (the "Revolver"). The Revolver is
available for working capital, acquisitions, and general corporate purposes of
Mercury and its subsidiaries. The Revolver is available for borrowing during
a five year period, with interest payable periodically during such period as
provided in the credit agreement and principal due at the maturity of the
Revolver. Mercury has not borrowed under the credit agreement to date. In
connection with entering into the credit agreement, Mercury terminated its
prior revolving line of credit with Silicon Valley Bank.

October – Mercury announced that its KOR Electronics subsidiary received a 5
year sole source basic ordering agreement (BOA) from the U.S. Navy. This BOA
supports the continued development of state-of-the-art techniques and target
generation capabilities in conjunction with the advanced Digital RF Memory
architecture developed under a prior Small Business Innovation Research Phase
II.5 award issued to KOR Electronics. The BOA provides for research and
development, production, engineering services and ongoing support and is
valued at up to $58 million.

October – Mercury announced it had received a $2.2 million purchase order
relating to an airborne radar application for fighter aircraft.

Conference Call Information

Mercury will host a conference call on Tuesday, January 29, 2013, at 5:00 p.m.
EST to discuss the second quarter fiscal year 2013 results and review its
financial and business outlook going forward.

To listen to the conference call, dial (888) 220-8746 in the U.S.A. and
Canada, and (913) 312-0956 in all other countries. The conference code number
is 7413316. Please call five to ten minutes prior to the scheduled start time.
This call will also be broadcast live over the web at www.mrcy.com/investor
under "Financial Events."

A replay of the call by telephone will be available from approximately 8:00
p.m. EST on Tuesday, January 29, 2013, through 8:00 p.m. EST on Sunday,
February 10, 2013. To access the replay, dial (888) 203-1112 in the U.S.A. and
Canada, and (719) 457-0820 in all other countries. Enter access code 7413316.
A replay of the webcast of the call will be available for an extended period
of time on the Financial Events page of the Company's website at
www.mrcy.com/investor.

Use of Non-GAAP (Generally Accepted Accounting Principles) Financial Measures

In addition to reporting financial results in accordance with generally
accepted accounting principles, or GAAP, the Company provides adjusted EBITDA
and free cash flow, which are non-GAAP financial measures.Adjusted EBITDA
excludes certain non-cash and other specified charges. Free cash flow is
defined as cash flow from operating activities less capital expenditures.The
Company believes these non-GAAP financial measures are useful to help
investors understand its past financial performance and prospects for the
future. However, the presentation of adjusted EBITDA and free cash flow is not
meant to be considered in isolation or as a substitute for financial
information provided in accordance with GAAP. Management believes the adjusted
EBITDA and free cash flow financial measures assist in providing a more
complete understanding of the Company's underlying operational results and
trends, and management uses these measures along with the corresponding GAAP
financial measures to manage the Company's business, to evaluate its
performance compared to prior periods and the marketplace, and to establish
operational goals. A reconciliation of GAAP to non-GAAP financial results
discussed in this press release is contained in the attached exhibits.

Mercury Systems – Innovation That Matters^™

Mercury Systems (Nasdaq:MRCY) is a best-of-breed provider of commercially
developed, open sensor and Big Data processing systems, software and services
for critical commercial, defense and intelligence applications. We deliver
innovative solutions, rapid time-to-value and world-class service and support
to our prime contractor customers. Mercury Systems has worked on over 300
programs, including Aegis, Patriot, SEWIP, Gorgon Stare and Predator/Reaper.
We are based in Chelmsford, Massachusetts. To learn more, visit www.mrcy.com.

Forward-Looking Safe Harbor Statement

This press release contains certain forward-looking statements, as that term
is defined in the Private Securities Litigation Reform Act of 1995, including
those relating to fiscal 2013 business performance and beyond and the
Company's plans for growth and improvement in profitability and cash flow. You
can identify these statements by the use of the words "may," "will," "could,"
"should," "would," "plans," "expects," "anticipates," "continue," "estimate,"
"project," "intend," "likely," "forecast," "probable," and similar
expressions. These forward-looking statements involve risks and uncertainties
that could cause actual results to differ materially from those projected or
anticipated. Such risks and uncertainties include, but are not limited to,
continued funding of defense programs, the timing of such funding, general
economic and business conditions, including unforeseen weakness in the
Company's markets, effects of continued geopolitical unrest and regional
conflicts, competition, changes in technology and methods of marketing, delays
in completing engineering and manufacturing programs, changes in customer
order patterns, changes in product mix, continued success in technological
advances and delivering technological innovations, changes in the U.S.
Government's interpretation of federal procurement rules and regulations,
market acceptance of the Company's products, shortages in components,
production delays due to performance quality issues with outsourced
components, inability to fully realize the expected benefits from acquisitions
or delays in realizing such benefits, challenges in integrating acquired
businesses and achieving anticipated synergies, changes to export regulations,
increases in tax rates, changes to generally accepted accounting principles,
difficulties in retaining key employees and customers, unanticipated costs
under fixed-price service and system integration engagements, and various
other factors beyond our control. These risks and uncertainties also include
such additional risk factors as are discussed in the Company's filings with
the U.S. Securities and Exchange Commission, including its Annual Report on
Form 10-K for the fiscal year ended June 30, 2012. The Company cautions
readers not to place undue reliance upon any such forward-looking statements,
which speak only as of the date made. The Company undertakes no obligation to
update any forward-looking statement to reflect events or circumstances after
the date on which such statement is made.

Mercury Systems, Inc., Innovation That Matters, Air Flow-By, and
Application-Ready Subsystems are trademarks of Mercury Systems, Inc. Other
product and company names mentioned may be trademarks and/or registered
trademarks of their respective holders.

                                                                  
MERCURY SYSTEMS, INC.                                            
UNAUDITED CONSOLIDATED BALANCE SHEETS                             
(In thousands)                                        December 31, June 30,
                                                     2012         2012
                                                                 
Assets                                                            
Current assets:                                                   
Cash and cash equivalents                            $33,900    $115,964
Accounts receivable, net                            35,275      38,532
Unbilled receivables and costs in excess of billings 12,567      10,918
Inventory                                            40,783      25,845
Deferred income taxes                                13,194      7,653
Prepaid income taxes                                 2,617       2,585
Prepaid expenses and other current assets            5,444       6,206
Total current assets                                 143,780     207,703
                                                                 
Restricted cash                                       658         3,281
Property and equipment, net                           18,261      15,929
Goodwill                                             178,429     132,621
Intangible assets, net                                39,565      25,083
Other non-current assets                              1,446       989
Total assets                                         $382,139   $385,606
                                                                 
Liabilities and Shareholders' Equity                              
Current liabilities:                                              
Accounts payable                                     $8,875     $9,002
Accrued expenses                                     9,822       9,895
Accrued compensation                                 10,558      13,190
Deferred revenues and customer advances              6,007       4,855
Total current liabilities                            35,262      36,942
                                                                 
Deferred gain on sale-leaseback                       3,821       4,399
Deferred income taxes                                 12,768      7,197
Income taxes payable                                  2,597       2,597
Other non-current liabilities                         1,608       1,367
Total liabilities                                    56,056      52,502
                                                                 
Shareholders' equity:                                             
Common stock                                         302         297
Additional paid-in capital                           227,827     222,769
Retained earnings                                    96,748      108,732
Accumulated other comprehensive income              1,206       1,306
Total shareholders' equity                           326,083     333,104
                                                                 
Total liabilities and shareholders' equity           $382,139   $385,606


MERCURY SYSTEMS, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
                                                                
                                  Three Months Ended   Six Months Ended
                                  December 31,         December 31,
                                  2012       2011      2012        2011
Net revenues                       $49,804  $67,959 $99,232   $117,081
Cost of revenues (1)              32,232    27,046   61,270     46,252
Gross margin                      17,572    40,913   37,962     70,829
                                                                
Operating expenses:                                              
Selling, general and              14,574    14,419   29,107     28,064
administrative (1)
Research and development (1)      7,588     11,724   17,627     23,589
Amortization of intangible assets 2,230     692      4,018      1,508
Restructuring and other charges   217       --      5,201      --
Acquisition costs and other       42        593      272        618
related expenses
Total operating expenses          24,651    27,428   56,225     53,779
                                                                
(Loss) income from operations      (7,079)   13,485   (18,263)   17,050
                                                                
Interest income                    2         3        4          9
Interest expense                   (15)      (9)      (23)       (18)
Other income, net                  116       394      455        799
                                                                
(Loss) income from operations      (6,976)   13,873   (17,827)   17,840
before income taxes (benefit)
                                                                
Tax (benefit) provision            (2,192)   4,828    (5,843)    6,142
                                                                
Net (loss) income                 $(4,784) $9,045  $(11,984) $11,698
                                                                
                                                                
Basic net (loss) earnings per      $(0.16)  $0.31   $(0.40)   $0.40
share:
                                                                
Diluted net (loss) earnings per    $(0.16)  $0.30   $(0.40)   $0.39
share:
                                                                
Weighted-average shares                                          
outstanding:
Basic                             30,107     29,457    29,995      29,367
Diluted                          30,107     29,969    29,995      30,001
                                                                
                                                                
(1) Includes stock-based
compensation expense, allocated as                               
follows:
Cost of revenues                  $99      $70     $230      $158
Selling, general and              $1,706   $1,573  $3,609    $3,248
administrative
Research and development         $205     $169    $516      $446


MERCURY SYSTEMS, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
                                 Three Months Ended    Six Months Ended
                                 December 31,          December 31,
                                 2012       2011       2012        2011
Cash flows from operating                                        
activities:
Net (loss) income                $(4,784) $9,045   $(11,984) $11,698
Depreciation and amortization    4,421     2,597     8,420      5,268
Other non-cash items, net        (626)     348       (1,815)    2,366
Changes in operating assets and
liabilities, net of effect of     2,548     (962)     (3,011)    (4,088)
business acquired
                                                                
Net cash provided by (used in)   1,559     11,028    (8,390)    15,244
operating activities
                                                                
Cash flows from investing                                        
activities:
Acquisition of business, net of  --        (70,370)  (67,721)   (70,370)
cash acquired
Purchases of property and        (746)     (1,925)   (1,726)    (3,571)
equipment
Payments for acquired intangible --        --        --         (20)
assets
Increase in other investing      (112)     (281)     (377)      (281)
activities
                                                                
Net cash used in investing       (858)     (72,576)  (69,824)   (74,242)
activities
                                                                
Cash flows from financing                                        
activities:
Proceeds from employee stock     537       695       670        785
plans
Payments of deferred financing   (774)     --        (774)      (30)
and offering costs
Payment of acquired debt         --        --        (6,575)    --
Payments of capital lease        (222)     (43)      (268)      (102)
obligations
Decrease in restricted cash      3,000     --        3,000      --
Excess tax benefits from         --        7         9          412
stock-based compensation
                                                                
Net cash provided by (used in)   2,541     659       (3,938)    1,065
financing activities
                                                                
Effect of exchange rate changes   90        (18)      88         13
on cash and cash equivalents
                                                                
Net increase (decrease) in cash   3,332     (60,907)  (82,064)   (57,920)
and cash equivalents
                                                                
Cash and cash equivalents at      30,568    165,862   115,964    162,875
beginning of period
                                                                
Cash and cash equivalents at end  $33,900  $104,955 $33,900   $104,955
of period
                                                                

UNAUDITED SUPPLEMENTAL INFORMATION
RECONCILIATION OF GAAP TO NON-GAAP MEASURES
(In thousands)

Adjusted EBITDA, a non-GAAP measure for reporting financial performance,
excludes the impact of certain items and, therefore, has not been calculated
in accordance with GAAP.Management believes that exclusion of these items
assists in providing a more complete understanding of the Company's underlying
operational results and trends, and management uses these measures along with
the corresponding GAAP financial measures to manage the Company's business, to
evaluate its performance compared to prior periods and the marketplace, and to
establish operational goals. The adjustments to calculate this non-GAAP
financial measure, and the basis for such adjustments, are outlined below:

Interest income and expense.The Company receives interest income on
investments and incurs interest expense on loans, capital leases and other
financing arrangements.These amounts may vary from period to period due to
changes in cash and debt balances and interest rates driven by general market
conditions or other circumstances outside of the normal course of Mercury's
operations.

Income taxes.The Company's GAAP tax expense can fluctuate materially from
period to period due to tax adjustments that are not directly related to
underlying operating performance or to the current period of operations.

Depreciation.The Company incurs depreciation expense related to capital
assets purchased to support the ongoing operations of the business.These
assets are recorded at cost or fair value and are depreciated using the
straight-line method over the useful life of the asset.Purchases of such
assets may vary significantly from period to period and without any direct
correlation to underlying operating performance.

Amortization of acquired intangible assets.The Company incurs amortization of
intangibles related to various acquisitions it has made and license
agreements.These intangible assets are valued at the time of acquisition, are
amortized over a period of several years after acquisition and generally
cannot be changed or influenced by management after acquisition.

Restructuring.The Company incurs restructuring charges in connection with
management's decisions to undertake certain actions to realign operating
expenses through workforce reductions and the closure of certain Company
facilities, businesses and product lines.Management believes this item is
outside the normal operations of the Company's business and is not indicative
of ongoing operating results.

Impairment of long-lived assets.The Company incurs impairment charges of
long-lived assets based on events that may or may not be within the control of
management.Management believes these items are outside the normal operations
of the Company's business and are not indicative of ongoing operating
results.

Acquisition costs and other related expenses.The Company incurs costs
associated with third-party professional services related to acquisition and
potential acquisition opportunities, such as legal and accounting
fees.Although we may incur such costs and other related charges and
adjustments, it is not indicative that any transaction will be
consummated.Management believes the exclusion of these items eliminates
fluctuations in our selling, general, and administrative expenses related to
acquisition activities which are unrelated to ongoing operations.

Fair value adjustments from purchase accounting.As a result of applying
purchase accounting rules to acquired assets and liabilities, certain fair
value adjustments are recorded in the opening balance sheet of acquired
companies. These adjustments are then reflected in the Company's income
statements in periods subsequent to the acquisition. In addition, the impact
of any changes to originally recorded contingent consideration amounts are
reflected in the income statements in the period of the change. Management
believes these items are outside the normal operations of the Company and are
not indicative of ongoing operating results.

Stock-based compensation expense. The Company incurs expense related to
stock-based compensation included in its GAAP presentation of cost of
revenues, selling, general and administrative expense and research and
development expense.Although stock-based compensation is an expense of the
Company and viewed as a form of compensation, these expenses vary in amount
from period to period, and are affected by market forces that are difficult to
predict and are not within the control of management, such as the market price
and volatility of the Company's shares, risk-free interest rates and the
expected term and forfeiture rates of the awards.Management believes that
exclusion of these expenses allows comparisons of operating results to those
of other companies, both public, private or foreign, that disclose non-GAAP
financial measures that exclude stock-based compensation.

Mercury uses adjusted EBITDA as an important indicator of the operating
performance of its business.Management excludes the above-described items
from its internal forecasts and models when establishing internal operating
budgets, supplementing the financial results and forecasts reported to the
Company's board of directors, determining the portion of bonus compensation
for executive officers and other key employees based on operating performance,
evaluating short-term and long-term operating trends in the Company's
operations, and allocating resources to various initiatives and operational
requirements.The Company believes that adjusted EBITDA permits a comparative
assessment of its operating performance, relative to its performance based on
its GAAP results, while isolating the effects of charges that may vary from
period to period without any correlation to underlying operating
performance.The Company believes that these non-GAAP financial adjustments
are useful to investors because they allow investors to evaluate the
effectiveness of the methodology and information used by management in its
financial and operational decision-making.The Company believes that trends in
its adjusted EBITDA are valuable indicators of its operating performance.

Adjusted EBITDA is a non-GAAP financial measure and should not be considered
in isolation or as a substitute for financial information provided in
accordance with GAAP.This non-GAAP financial measure may not be computed in
the same manner as similarly titled measures used by other companies.The
Company expects to continue to incur expenses similar to the adjusted EBITDA
financial adjustments described above, and investors should not infer from the
Company's presentation of this non-GAAP financial measure that these costs are
unusual, infrequent or non-recurring.

The following table reconciles the most directly comparable GAAP financial
measure to the non-GAAP financial measure.

                               
                               Three Months Ended  Six Months Ended      
                                December 31,         December 31,
                               2012       2011      2012        2011
Net (loss) income               $(4,784) $9,045  $(11,984) $11,698
Interest expense, net          13        6        19         9
Tax (benefit) provision        (2,192)   4,828    (5,843)    6,142
Depreciation                   2,191     1,905    4,402      3,760
Amortization of acquired       2,230     692      4,018      1,508
intangible assets
Restructuring                  217       --      5,201      --
Acquisition costs and other    42        593      272        618
related expenses
Fair value adjustments from    1,272     (44)     2,197      (22)
purchase accounting
Stock-based compensation       2,010     1,812    4,355      3,852
expense
Adjusted EBITDA                $999     $18,837 $2,637    $27,565

Free cash flow, a non-GAAP measure for reporting cash flow, is defined as cash
provided by operating activities less capital expenditures and, therefore, has
not been calculated in accordance with GAAP. Management believes free cash
flow provides investors with an important perspective on cash available for
investment and acquisitions after making capital investments required to
support ongoing business operations and long-term value creation. The Company
believes that trends in its free cash flow are valuable indicators of its
operating performance and liquidity.

Free cash flow is a non-GAAP financial measure and should not be considered in
isolation or as a substitute for financial information provided in accordance
with GAAP.This non-GAAP financial measure may not be computed in the same
manner as similarly titled measures used by other companies.The Company
expects to continue to incur expenditures similar to the free cash flow
financial adjustment described above, and investors should not infer from the
Company's presentation of this non-GAAP financial measure that these
expenditures reflect all of the Company's obligations which require cash.

The following table reconciles the most directly comparable GAAP financial
measure to the non-GAAP financial measure.

                          Three Months Ended Six Months Ended
                           December 31,       December 31,
                          2012     2011      2012        2011
Cash flows from operations $1,559 $11,028 $(8,390)  $15,244
Capital expenditures      (746)   (1,925)  (1,726)    (3,571)
Free cash flow             $813   $9,103  $(10,116) $11,673
                                                      

MERCURY SYSTEMS, INC.
RECONCILIATION OF FORWARD-LOOKING GUIDANCE RANGE
Quarter Ending March 31, 2013
(In thousands, except per share data)

The Company defines adjusted EBITDA as income from continuing operations
before interest, income taxes, depreciation, amortization of acquired
intangible assets, restructuring, impairment of long-lived assets, acquisition
costs and other related expenses, fair value adjustments from purchase
accounting, and stock-based compensation costs. 

The following table reconciles the adjusted EBITDA financial measure to its
most directly comparable GAAP measure:

                                                Range
                                                Low        High
                                                          
GAAP expectation --- Loss per share              $(0.08)  $(0.02)
                                                          
GAAP expectation --- Net loss                    $(2,246) $(524)
                                                          
Adjust for:                                                
Interest expense, net                           10        10
Income taxes                                    (7,226)   (5,491)
Depreciation                                    2,130     2,130
Amortization of acquired intangible assets      2,355     2,355
Restructuring                                   452       452
Acquisition costs and other related expenses    20        20
Fair value adjustments from purchase accounting 96        96
Stock-based compensation expense                1,945     1,945
Adjusted EBITDA expectation                      $(2,464) $993

CONTACT: Kevin Bisson, CFO
         Mercury Systems, Inc.
         978-967-1990

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