Gerry Haines - Executive Vice President and Chief Financial Officer Mark Aslett - President and Chief Executive Officer.

Sheila Kahyaoglu - Jefferies Peter Arment - Sterne Agee Mark Jordan - Noble Financial Michael Ciarmoli - KeyBanc Capital Michael French - Drexel Hamilton.

Good day, everyone and welcome to the Mercury Systems’ Fourth Quarter Fiscal 2015 Conference Call. Today’s call is being recorded. At this time, for opening remarks and introduction, I would like to turn the call over to the company’s Executive Vice President and Chief Financial Officer, Gerry Haines. Please go ahead, sir..

Good afternoon and thank you for joining us. With me today is our President and Chief Executive Officer, Mark Aslett. If you have not received a copy of the press release we issued earlier this afternoon, you can find it on our website at mrcy.com.

We would like to remind you that remarks that we may make during this call about future expectations, trends, and plans for the company and its business constitute forward-looking statements as that term is defined in the Private Securities Litigation Reform Act of 1995.

You can identify these statements by use of the words may, will, could, should, would, plans, expects, anticipates, continue, estimate, project, intend, likely, forecast, probable, potential and other 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 unperceived 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 or unanticipated expenses due to performance quality issues with outsourced components; inability to fully realize the expected benefits from acquisitions and restructurings or delays in realizing such benefits; challenges in integrating acquired businesses and achieving anticipated synergies; changes to export regulations; increases in tax rates; changes to generally accepted accounting principles; difficulties in retaining key employees and customers; unanticipated costs under fixed price service and system integration engagements and various other factors beyond our control.

These risks and uncertainties also include such additional risk factors as are discussed in the company’s filings with the U.S. Securities and Exchange Commission, including it’s Annual Report on Form 10-K for the fiscal year ended June 30, 2014.

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 arising after the date on which such statement is made.

I would also like to mention that in addition to reporting financial results in accordance with generally accepted accounting principles, or GAAP, during our call, we will discuss several non-GAAP financial measures, specifically adjusted EBITDA and free cash flow.

Adjusted EBITDA excludes interest income and expense, income taxes, depreciation, amortization of intangible assets, restructuring and other charges, impairment of long-lived assets, acquisition and financing costs, fair value adjustments from purchase accounting and stock-based compensation costs from GAAP income from continuing operations.

Free cash flow excludes capital expenditures from cash flows from operating activities. A reconciliation of adjusted EBITDA to GAAP income from continuing operations and free cash flow to GAAP cash flows from operating activities are included in the press release we issued this afternoon.

Finally, we will be discussing the company’s financial results and comparisons to prior periods and guidance on a continuing operations basis unless otherwise noted. With that, I will now turn the call over to Mercury’s President and CEO, Mark Aslett..

Thanks, Gerry. Good afternoon, everyone and thank you for joining us. I will begin today’s call with a business update. Gerry will review the financials and guidance and then we will open it up for your questions. Mercury concluded the solid fiscal year with a strong fourth quarter and we are off to a good start in FY ‘16.

For fiscal 2015 as a whole bookings and backlog reached record levels for the second year in a row, growing 9% and 19% respectively and positioning us well as we head into fiscal 2016. Total revenue for FY ‘15 increased 13% year-over-year to $235 million, significantly above industry growth and at the top end of our guidance.

Reflecting improved operating leverage in the business as a result of our acquisition integration efforts, adjusted EBITDA for FY ‘15 was up 89% year-over-year and at 19% of revenue in line with our target business model. Operating cash flow increased by $18 million, up 126% from FY ‘14 and our year end cash balance grew by more than $30 million.

Moving to our fourth quarter results, our total revenue was up 19% from Q4 last year and at the top end of our guidance. Adjusted EBITDA for the fourth quarter nearly doubled year-over-year to $14.2 million or nearly $10.4 million of incremental revenue.

This was well ahead of our Q4 guidance and at about 22% of revenue also at the top end of our target business model. Mercury remained GAAP profitable in the quarter. Our cash flow from operations continued to strengthen as anticipated driven by improved profitability as well as strong collections.

Total bookings in Q4 were up strong 45% from the sequential third quarter and up 3% year-over-year at $82.5 million. Our total book-to-bill was 1.3 compared with 1.5 in Q4 last year. Looking specifically at defense, total defense bookings increased 6% year-over-year in Q4 to $81.4 million, largely driven by our Mercury Defense, or MDS business.

Our largest programs from a bookings perspective were Patriot, Aegis, and Filthy Buzzard. For FY ‘15 as a whole, our largest bookings programs were Aegis, F-35, Patriot, SEWIP and Filthy Buzzard as anticipated. Our defense book-to-bill in Q4 was 1.3 compared with 1.5 in the comparable period last year.

Defense backlog and total backlog exiting Q4 were up 24% and 19% respectively year-over-year. International defense bookings including foreign military sales was 16% of total bookings compared with 26% in Q4 last year. Our Q4 total defense revenue was up 21% year-over-year.

International defense revenue, including foreign military sales, was 15% of total revenue compared with 27% in Q4 last year. Revenue from radar and electronic warfare accounted for 89% of total defense revenue versus 85% in Q4 a year ago. Radar defense revenue grew 35% year-over-year and EW revenue was essentially flat.

Our largest revenue programs in defense this quarter were F-35, Patriot and Aegis. For the full year, radar revenue grew 31% and EW 11% versus fiscal 2014. Our largest revenue programs in fiscal 2015 were Patriot, F-35, Aegis and SEWIP as anticipated.

Our fourth quarter and FY ‘15 bookings and revenue metrics represent growth rates well in excess of industry growth. Leveraging organic innovation and strategic acquisitions, we have built a best-in-class portfolio of secure products and capabilities across the entire chain.

At the same time, we have developed a strong go-to-market model focused on strategic account management and solutions selling. Our customers pay us substantial sums of complex engineering services.

Our IRAD investments coupled with these services ultimately result in high margin annuity revenues from the sale of secure and sensor processing subsystems on long-term production programs. Our average transaction size and the lifetime value of the programs we have won and are pursuing are also both increasing.

In effect, we are partnering more closely with our customers as they navigate defense procurement reform and a challenging defense budget environment. As a consequence, we have established ourselves on critical production programs in the right segments of the market.

Our key programs appear to be well funded, currently in or moving to production and are precisely aligned with the DoD’s new roles and missions. We have been very successful in growing the potential value of these franchised programs. New design wins continue to be relatively few and far between in this environment.

So, targeting this side of program is a low-risk content expansion growth strategy. For the long-term, we are focusing on outsourcing opportunities in three main areas. The first is secured processing where our opportunity pipeline continues to grow and we believe that we are significantly ahead of our competition.

The activity level around radar and EW platform modernization is the highest that we have seen in several years. We have made significant investments in our next generation secured Intel server class product line.

Coupled with the mandate from the government to secure electronic systems, the domestic and foreign military sales, these new products position us very well to capitalize on this opportunity set.

In addition to the sensor processing based platform modernization, these investments also position us to capitalize on demand for secure server class computing applications beyond the sensor. These include other onboard mission-critical computer applications that historically we haven’t played in.

The second outsource opportunity is RF and microwave where the industry continues to reshape itself at a rapid pace. Smaller companies are having a hard time dealing with defense funding delays. At the same time, larger players are going through significant restructurings, creating opportunities for us to gain market share.

The third outsourcing opportunity is in pre-integrated sensor processing subsystem sales where our RF, microwave and digital product lines are well positioned. We now have world class scalable RF and microwave manufacturing and subsystems integration capabilities at our Advanced Microelectronics Center or AMC in Hudson, New Hampshire.

The AMC is proving to be a valuable asset for Mercury at a time when the industry needs more capable suppliers. It’s key to our strategy to provide our customers with industry-leading outsourced end to end subsystem solutions. The AMC is also being crucial to our success in improving the operating leverage in our business model.

The integrated business systems we have installed in the facility have allowed us to centralize wherever possible, administrative and manufacturing operations across the company following our FY ‘13 acquisitions.

With our technology investments, sales strategies and acquisitions, we have created a next generation business platform that should enable us to continue driving growth organically.

Our plan is to increase Mercury’s enterprise value by scaling this platform through acquisitions, targeting companies and support the key pillars of the business RF, microwave and embedded processing. As we do so, we will be looking for opportunities both revenue and cost synergies.

Our goal is to continue to assemble critical and differentiated capabilities across the entire sensor processing chain and thus provide our cost synergies with more affordable solutions. We will seek to prioritize deals that are accretive in the short-term and drive long-term shareholder value.

Moving to the industry conditions, new awards are still experiencing protected delays and the increased competition. So, the contracting environment remains challenging. The President’s GFY ‘16 budget submission was encouraging and if approved will represent first real growth in defense spending in years.

It was also encouraging to see the House of Senate defense budget markups at firmly overall spend levels. That said neither markup dealt with the GFY ‘16 budget control accounts. Overall, in line with the continued uncertainty around the GFY ‘16 spending levels, delays in fund inflows and slow contract awards remain the norm.

We believe that Mercury is well positioned to continue delivering above industry average revenue growth and improved profitability in this environment.

The business delivered a very strong performance in fiscal 2015 with our record year end backlog and the benefits of integrating our acquisitions, Mercury remains on track for another strong performance in fiscal 2016. For the year, we would continue to anticipate approximately 5% revenue growth and 10% growth in the adjusted EBITDA versus FY ‘15.

Gerry will discuss these expectations in more detail. Before I turn the call over to Gerry, I would like to welcome Mercury's newest Director, Mark Newman, who was elected on June 1 and serves as the member of the Audit Committee. Mark is the former Chairman and CEO of DRS Technologies.

The defense electronics business, he was instrumental in building over the years both organically as well as through numerous acquisitions. We look forward to benefiting from Mark’s experience and his insight as Mercury pursues much of the same path going forward. With that, I would like to turn the call over to Gerry.

Gerry?.

Thank you, Mark and good afternoon, again everyone.

Before go through the financial results, I would like to once again remind everyone that unless otherwise noted, I will be discussing the company’s financial results in comparisons to prior periods and guidance on a continuing operations basis, which excludes Mercury Intelligence Systems or MIS, which was sold in January of 2015.

However, in accordance with GAAP, MIS is reflected in our statement of cash flows and balance sheet for periods in which it was on by us. Turning to our results, Q4 was a strong finish to a successful fiscal 2015. Mercury delivered double-digit growth in both revenue and backlog for the fiscal year.

Revenue for the full year grew 13% over fiscal 2014 and as anticipated our book to bill for all of fiscal 2015 was positive coming in at 1.3 for Q4 and 1.4 – sorry 1.14 for the year as a whole. We closed the year with record total backlog of $208 million, up $33.8 million or 19% from $174.1 million a year earlier.

Of this total backlog, $198.9 million or 96% of it related to defense, representing 24% growth in defense backlog year-over-year. Approximately, $166.5 million or 80% of our total backlog is expected to be shipped within the next 12 months.

These bookings and the backlog growth, we delivered in fiscal ‘15 leaves us very well positioned as we entered fiscal 2016. Looking at Q4 specifically, total revenue grew $10.4 million or 19% year-over-year to $64.1 million, slightly ahead of our guidance of $62 million to $64 million.

Revenue from defense customers for the fourth quarter increased $10.3 million or 21% year-over-year, our revenue from commercial customers increased $0.1 million or 2%. In our largest reporting segment, Mercury Commercial Electronics or MCE, revenue increased $8.1 million or 17% year-over-year to $55.6 million in Q4.

In our Mercury Defense Systems or MDS reporting segment, revenue was $10.6 million for Q4, up $1.6 million or 18% from the prior year’s fourth quarter. These segment results exclude adjustments to eliminate $2.1 million of inter-company revenue in the fourth quarter of fiscal 2015 and $2.8 million in Q4 of fiscal 2014.

We continued to translate our revenue growth into even stronger gains and profitability. Mercury reported fourth quarter GAAP income from continuing operations of $6.1 million or $0.18 per share well above the top end of our guidance of $0.10 to $0.13 per share for the quarter.

For the fourth quarter of last year, we reported GAAP loss from continuing operations of $0.7 million or a loss of $0.02 per share. GAAP income for Q4 of fiscal 2015 includes approximately $0.01 per share of restructuring and other charges and $0.03 per share for amortization of intangible assets.

The GAAP loss from continuing operations for Q4 of last year included $0.04 per share of restructuring and other charges as well as $0.04 per share for amortization of intangible assets.

Reflecting the benefits came from our restructuring and integration efforts plus a favorable sales mix, adjusted EBITDA for Q4 of fiscal 2015 increased 97% year-over-year to $14.2 million, also exceeding the top end of our guidance of $11.7 million to $13.2 million for the quarter.

Our operating expenses for Q4 fiscal 2015 were down $1.4 million year-over-year to $23.3 million, primarily due to lower SG&A expense and lower restructuring charges. Thanks to the completion of our acquisition and integration which was finished in the second quarter of fiscal 2015.

Savings from the integration have materialized as expected and we saw the full financial benefit of those efforts for the second half of fiscal 2015. At approximately 36% of revenue for Q4, this proportion was an all-time low for Mercury as we saw the significant benefits of both the integration and our ongoing cost control efforts.

As anticipated, we recorded $0.7 million charge for restructuring and other charges for the fourth quarter of fiscal 2015.

These charges related primarily to the continued optimization of our RF and microwave operations on the heels of our integration activity as well as our utilization of more efficient infrastructure and administrative support systems across the business.

Mercury’s gross margins of 49% for the fourth quarter was up modestly year-over-year and near the top end of our target business model of mid to high 40s, primarily as a result of the favorable product mix in Q4.

The company generated $10.2 million of free cash flow during the fourth quarter, with $12.7 million of operating cash flow driven by cash earnings and partially offset by $2.5 million of capital expenditures accordingly. For fiscal 2015 as a whole, Mercury’s free cash flow was $26.2 million, up from $7.5 million in fiscal 2014.

Turning to the balance sheet, Mercury ended fiscal 2015 with cash and cash equivalents of $77.6 million, up 64% compared to the $47.3 million of the year earlier. I will turn now to our financial guidance.

Based on Mercury’s performance in fiscal 2015, our strong year end backlog and the growth opportunities that Mark described, we expect fiscal 2016 to be another year of growth for Mercury on the top and bottom lines.

As I mentioned earlier, of Mercury’s total backlog of $208 million at the end of fiscal 2015, $166.5 million, or 80% of it is expected to be shipped within the next 12 months.

Given this historically strong level of backlog as we entered fiscal 2016, we believe Mercury is well-positioned to deliver revenue growth under any of the defense budgetary scenarios that can be realistically expected to unfold during the year.

For the first quarter of fiscal 2016, we are forecasting revenue in the range of $54 million to $59 million, with 90% or more of that expected to come in the defense side of the business.

We are forecasting a gross margin of approximately 47% for the quarter, which is up roughly 300 basis points year-over-year and close to the middle of our target business model and we expect approximately $23 million to $24 million in operating expenses in Q1 of fiscal 2016.

GAAP income from continuing operations for Q1 is expected to be $1.5 million to $2.6 million or $0.05 to $0.08 per share. This forecast assumes a provisional income tax rate of approximately 38% for the quarter.

Adjusted EBITDA for the first quarter is estimated to be in the range of $9 million to $10.8 million, representing approximately 17% to 18% of revenue based on the forecasted revenue range and an increase of about 12.5% to 35% from Q1 of fiscal ‘15.

Once again, the improved year-over-year profitability that we are forecasting for Q1 primarily reflects the impact of sales growth and the gains in operating leverage.

As we await further developments from Congress and the administration with respect to the government fiscal year ‘16 defense budget, we continue to expect that revenue will increase approximately 5% for the full fiscal year with adjusted EBITDA growing approximately 10% over fiscal 2015.

With the operating leverage gain from our acquisition integration plan yielding its full benefit, we also expect to once again achieve our target business model for the year.

In terms of the balance sheet, we expect to continue building our cash balance through positive free cash flow driven primarily by cash earnings and offset in part by a modest increase in capital expenditures for the year. Finally, the balance sheet remains pristine with zero debt.

In summary, our success in growing our bookings, backlog, revenue and adjusted EBITDA in today’s defense environment demonstrates that our strategy continues to work very well. As a result, we believe that Mercury’s fiscal 2016 will be another year of solid revenue growth, higher operating income and stronger profitability overall.

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

Thank you. [Operator Instructions] Our first question is from Sheila Kahyaoglu with Jefferies. Your line is open..

Hi, good afternoon guys. Thanks for taking my question and good quarter..

Hi, Sheila..

I guess, do you mind reconciling a bit the robust bookings and backlogs that you had in the quarter and the 5% revenue growth for the year you are forecasting?.

Sure. I mean, I think at the end of the day, there is still a lot of water that’s going to flow under the bridge in respect to the fiscal – government fiscal ‘16 defense budget. So, we try to take that into account in terms of our guidance going forward.

And as you know, they are still going to deal with sequestration prior to it kicking in again in January of next year..

And in terms of the major programs, is there a shift, I mean, would you see more Patriot work in ‘16 over ‘15? How do we think about your program mix?.

Sure. So, I think next fiscal year, we expect to deliver revenues really from a broader base of programs than what we saw during fiscal 2015.

We do expect to see probably some declines of revenue associated with both the F-35 and Patriot, but given that we still expect that our top revenue programs for the year will be actually very similar to this year, meaning, SEWIP, Aegis, Patriot, Buzzard, Reaper as well as the F-35..

Great. That’s very helpful. And then just last one if I could sneak it in. In terms of just your operating margin runway, again I feel like the adjusted EBITDA guidance about 10% seems a bit conservative.

If you look at what you have done in the second half, is there a gross margin mix headwind or anything we should be concerning for ‘16?.

So, I think as you know, EBITDA is really being driven by gross margin and the gross margin is very much dependent upon program mix and that can move around quarter-to-quarter and year-to-year..

Okay, thanks..

Thank you. Our next question is from Peter Arment with Sterne Agee. Your line is open..

Yes, good afternoon..

Hi, Peter..

Mark, good quarter, could you give us a little more color, I guess, on thinking about your backlog growth was really impressive this year and then bookings you have been able to really secure.

How do we think about kind of the way the backlog looks for ‘16? I mean, are you still seeing the same kind of bookings opportunities, obviously the international as a big piece that’s volatile, but I mean should we expect a similar level of background growth or are you seeing any changes in the market?.

So, I am not going to unnecessarily forecast growth in backlog. Obviously, we ended fiscal ‘15 very strongly. Our book-to-bill of MCE and MDS was 1.15 and 1.2 respectively. We do currently anticipate revenue growth in both MCE and MDS year-over-year and we do anticipate positive book-to-bill for 2016 in total.

But I am not going to get into a mode this early in the year of forecasting the growth in backlog..

Okay. I should give it a try. Just maybe you could at least give us kind of how you are viewing the opportunities on the M&A front, I mean, obviously not specifically, but just in general, I mean, it’s generally been considered relatively sellers market and defense multiples have come up.

I mean, how are you seeing things? Are you seeing still healthy opportunities?.

Yes. I mean, I think we believe that we are actually seeing more opportunities than what we have seen in the past. And we are continuing to look at a range of opportunities that are in line with our core target markets, which as I described on the call RF, microwave and embedded processing..

Okay.

And just if I could sneak one last in, just, Gerry, the tax rate for this year you said 35% in the first quarter, is that going to be fairly linear throughout the year you think?.

I actually said 38% for the provisional rate for the quarter, Peter. And broadly speaking absent the possibility of discrete items, it’s probably going to be pretty consistent..

Okay..

That’s not all I can say and obviously things like R&D credits and so on occasionally pop in, but you can never predict when those are, so we kind of just go with them..

Right, okay. Thank you..

Yes..

Our next question is from Mark Jordan with Noble Financial. Your line is open..

Thank you. I just wanted to expand on the tax rate issues. I looked back at my notes and I think our initial guidance you gave for fiscal ‘15 was 39%, came in at about 23% for the year.

What were the specific items that drove that down and do you have that same opportunity for events to occur that would materially move down at 38% rate that you mentioned in fiscal ‘16?.

Yes. So the short answer is it was all driven by a handful of discrete items, the R&D credit being probably the most significant of them. That remains a possibility, of course every year it comes up and every year they appear to be willing to reinstitute it.

But of course, you always have to play wait and see and then sometimes it’s delayed, it’s kind of accumulated and then pop at a certain point. Apart from that, I don’t think that we see large items in terms of the discretes that can pop through.

There is always the chance of something, but again we don’t have what I would call the traditional things like overseas tax planning issues and things like that, that we can use to or for that matter that the revenue balance can change rates on – for us and so on. So again, we plan what I said and I think that’s where we are for now..

Okay.

Do you have a CapEx expectation for 2016?.

We do have one. It’s, as I said, probably going to be a little lower than – I am sorry, a little bit higher than the low rate that we saw in fiscal ‘15. But again, I don’t think it will go above the double-digits..

Okay.

Talking again about the M&A market in terms of Hudson now that you got that fully integrated, what would you term as your capacity utilization there and do you think it’s reasonable that you will be able to find something to tuck in and obtain some significant operational efficiencies at that site in fiscal ‘16?.

Yes. So, we haven’t necessarily talked about the capacity utilization of the facility. It is beginning to ramp.

However, particularly as we have got more programs that in the EW domain that are moving in production, couple of key programs that we think are going to be important in EW next year, a program such as SEWIP, Buzzard and the Jewish program, which is BAE’s digital electronic warfare suite.

However, we do think that we have got a substantial opportunity potentially acquiring companies and integrating their manufacturing assets if they have them into that facility, which will obviously continue to improve the efficiency in the overhead absorption.

So we are pretty excited about the AMC, I think it’s a critical part of our long-term growth strategy. It clearly differentiates us versus other players in the industry. And it’s going to be an asset that I think when you look back in time will be important in terms of supporting the company spread..

Okay.

Final question from me if I may, you mentioned that obviously this 2015 was in line with your – relative to your business model, do you see a situation where that target model would be increased or do you think that that’s a – given all of your business that you do that’s probably going to be the long-term model that you work with them?.

I think the model is the model until we change it. If you look at our results for fiscal ‘15, Mark, we ended up at 19% adjusted EBITDA, that’s kind of in the midpoint of our current model.

Obviously in Q4, with higher revenues and a stronger program mix, towards the high end of our range, but we are extremely pleased with the performance year-over-year and the models stand as it is they are now..

Okay, thank you very much..

[Operator Instructions] Our next question is from Michael Ciarmoli with KeyBanc Capital. Your line is open..

Hi, good evening guys. Thanks for taking my questions..

Hi, Mike.

How are you?.

Good, good, doing well. Mark, just on the bookings in the quarter, I mean I think, you guys said after what it have been several strong quarters you are going to get back to a normalized environment that came in at 1.3 times. So that would appear to have exceeded that normalized environment.

I mean, could you give us any color, was that above your expectations for the quarter and maybe can you give us a sense of what was strong in the quarter from a bookings perspective?.

Sure. So it was slightly above where we thought we were going to come in at a quarterly level. I think as we have said, somewhat consistently throughout the year that bookings are lumpy and that we did expect it to kind of normalize. Book to bill ratio for fiscal ‘14 in total was 1.14, so it was slightly ahead of what we thought, but not too much.

If you look at the – sorry fiscal ‘15 I apologize. If you look at the major programs that drove the bookings in Q4, Aegis was obviously an extremely strong program. We did close slightly over $14.5 million of bookings. We had another really strong quarter, Patriot that was associated with Korea some spas as well as ongoing business for the U.S. Army.

We had strengthened Buzzard – the Filthy Buzzard program in Mercury Defense Systems, which is beginning to ramp and will be an important driver of growth in that business. We also saw some strength in the P8 business, where we are providing some of the radar processing.

So, we had a number of really important programs that we were pleased to deliver some – some great numbers..

Got it.

And then would I – if I were to look at the backlog, I know you guys probably won’t give the full color by program, but it is pretty similar, I mean from some of those programs you just mentioned with the other top programs, is that kind of the bulk of the backlog or is anything new kind of jumped in there that’s kind of accounting for a significant piece of that exposure in the backlog?.

I don’t think we typically breakdown our backlog by program, Mike. As I mentioned, for fiscal ‘16, we anticipate our top revenue programs to be SEWIP, Aegis, Patriot, Filthy Buzzard, Reaper as well as the F-35. And we are also expecting some growth mix next year on Jews, which I mentioned P8 and maybe Trident.

So we have got a broader mix of programs heading into fiscal ‘16. They will drive some of the growth in the business..

Got it. And then you won’t give directionally or you won’t give the specifics, but it sounds like you are expecting a positive book-to-bill, so it sounds like we should expect backlog to grow through ‘16.

And just you mentioned CapEx, free cash flow was very strong for the year, can you give us any sense would you be willing to give a free cash flow forecast for ‘16?.

I don’t think we will forecast it, but as I said the CapEx is going to be relatively contained, it’s not a capital-intensive busy business. ‘15 was probably just slightly like, we have been at the increase at 15% covering around $10 million, so not to significant an offset there and that’s probably where I will leave it..

Okay, fair enough. I think that’s it for me. I will jump back in the queue guys. Thanks..

Thank you. And our next question is from Michael French with Drexel Hamilton. Your line is open..

Good afternoon gentlemen..

Hi, Michael..

How are you doing?.

Good, congratulations on a strong performance.

I apologize if you went into this a little bit, but I was wondering if you could update us on the process of optimizing RF and microwave manufacturing and the impact it had on margins during the quarter and where you think the impact is going to be on the margins going forward?.

So during the quarter, we did do a small restructuring, it was round about $700,000. It was a few handfuls of people. It was more related to the ongoing efficiencies that we have identified in terms of leaning out the engineering and the manufacturing operations. The benefits associated with that all baked into our guidance of fiscal ‘16..

Okay, very good. Thank you..

You are welcome..

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

Okay. Well, we would like to thank you for your interest in Mercury and we look forward to speaking to you again next quarter. Thank you..

Ladies and gentlemen, thank you for participating in today’s conference. This does conclude the program and you may all disconnect. Everyone have a great evening..