MRCY
#So it feels like things are beginning to loosen up a little bit.
We are seeing some potentially interesting opportunities.
Obviously I won't go into what they are other than to say that they are in line with what we stated from a strategy perspective, which is looking to scale both our processing as well as our RF and microwave business.
It could be related to the fact that if you look at the GFY-16 Presidential budget submission, it looks like maybe that fiscal 2015 or government fiscal 2015 could represent the floor in terms of defense spending.
So we'll see.
I mean, there are things that are starting to appear that could be somewhat attractive to us.
I think it's---+what I would say is it's going to follow a similar step progression, and frankly it followed a similar progression in 2014 as well.
There were two halves of the year.
2015 was two halves of the year.
And we think 2016 is going to represent the same kind of step function.
We won't comment yet because we're not really through our planning process on what the relative proportions are, but again, we think it's going to---+if you just looked at it on a chart it's going to look---+follow that same kind of pattern.
Thanks.
So plan at 39%.
Yes.
Sure.
So if you look at the F35, right, the work that we're currently doing on that program, we've seen huge growth to date.
So our bookings are up---+actually up 300%, or up more than $36 million year-over-year.
And in fact, F35 is actually our largest single bookings program and second largest revenue program through the third quarter of fiscal '15.
What you're describing is---+and those bookings will continue to translate into revenue for us well into fiscal '16.
We---+the opportunities that you're describing are both in the RF and microwave domain where the programs are beginning to ramp, moving from LRIP into full rate production.
We're seeing opportunities to pick up more work given the new AMC in Hudson to provide some of that capability.
The processing one is slightly longer term, and that's where I think they're going to look to provide new capabilities on the F35.
But if you look at the investments that we've made in our processing capabilities and the relationships that we've established with the companies that we believe are probably the best positioned, I think we've got a great opportunity to transition our existing business, which is more of a licensing intellectual property into the sale of product, meaning that the size of that opportunity could go up materially over time.
So hard to comment specifically in terms of just the timing of when these things are going to happen in terms of the new stuff.
But we believe that the opportunities are substantial and we're pursuing them aggressively.
Hi, <UNK>.
How are you.
Sure.
Well, we haven't really talked about the capacity utilization, other than to say that we believe that we've got substantial opportunity to push more business through that facility.
The interest remains very high to date.
Since we've opened it, we've had 60 customer visits.
We see the potential of picking up more RF and microwave work largely in the EW domain, given that's where we think the money is flowing.
And that part of our business is going to continue to grow.
We're still running one shift.
I think as I mentioned in my prepared remarks and as <UNK> alluded to in his, we continue to work on making both our engineering and manufacturing processes more efficient.
And hence the small restructuring charge that we took this quarter that will continue to play out in terms of improved profitability in fiscal '16.
Sure.
So let me step back a little bit, because Patriot is clearly an important program.
Our bookings rebounded extremely strongly in fiscal '14 after a pretty disappointing fiscal '13.
We booked close to 46 million last year alone on Patriot and actually received our largest single program bookings ever in the fourth quarter at 39 million.
Most of those awards were related to either upgrades for the U.S. Army or for FMS related sales for countries such as Kuwait, Qatar, and Saudi.
And we've seen the substantial benefit of those bookings translate into revenue for us during fiscal '15.
Through the first three quarters, Patriot is actually our top revenue program with $32 million of revenue---+sorry, up---+approximately $32 million of revenue and it's up $27 million year-to-date.
The---+if you look at say Q3, we received $7 million of new orders this quarter.
And when you look at just some of the recent announcements by Raytheon, we do anticipate additional follow on bookings probably in Q4 related to additional business for the U.S. Army, and then other countries as well.
Clearly, the---+Raytheon was selected by Poland, which could translate into business for us during fiscal '16.
And they're in competition right now for Germany, which again, could be fiscal '16 also.
So net-net, it's a really important program.
And I think not only Raytheon continuing to win more opportunities, but we actually see the opportunity of expanding our content on the Patriot system, both in terms of on the processing side, as well as in the RF dimension longer term.
So it's a great program.
It's going really well for us right now.
Yes.
So we actually had a brand new design win this quarter where we displaced an IBM blade center for a naval application that I can't go into in too much detail.
But we see it happening.
We've received our first order.
We've delivered the first capability and we're pretty excited about the potential long term.
Thank you.
Hey, Mike.
How are you.
Sure.
It's not a risk.
It's an opportunity, Mike.
I think in the short term, as Tom Kennedy mentioned on the call, we are going to look to introduce a 360 degree Acer radar using their gallium nitrate capabilities.
And so, that's going to likely require great processing capabilities, as well as we potentially see the opportunity longer term of providing some RF and microwave capability as part of that solution.
So we actually view the enhancement opportunities or the introduced---+introduction of new technology on the Patriot program as actually an opportunity, not a threat.
I think as you've probably seen historically, Mike, right, probably the one of the parts of the P&L that move around a lot is gross margin, right.
And it's very much driven by program mix.
So I wouldn't read too much into that in the short term.
It literally depends on what products and capabilities tie to what programs we're delivering.
Yes, I think that's certainly a part of it.
I mean, if you look at the preliminary outlook to fiscal '16, 5% revenue growth just given the margin profile and expenses growing more slowly than the topline will result in adjusted EBITDA growing at twice the rate.
So we think that's pretty healthy in this environment.
Thanks, Mike.
Okay.
Okay.
Well, thank you very much for taking the opportunity of listening to our third quarter results.
We look forward to speaking to you again next quarter.
Take care.
