Mercury Computer Systems, Inc. today reported results for its second quarter ended December 31, 2004. The Company posted its 56th consecutive quarter of profitable performance. Second quarter revenues were $59.3 million, an increase of 46% compared to $40.6 million for the same period last year, and a new quarterly record. Operating income was $9.3 million, representing 15.7% of revenues. Second quarter net income was $6.8 million, or 11.5% of revenues. Earnings per share were $0.29 for the second quarter. Cash flows from operating activities were $8.3 million in the second quarter. Cash and marketable securities balance at the end of the quarter was $222.7 million. "We are pleased with the strong financial results posted for the second quarter, including the strength of reported backlog," said Jay Bertelli, president and chief executive officer of Mercury Computer Systems, Inc. "We remain on the path for growth in all of our business units, and are therefore increasing our forecast for fiscal 2005 revenues to range from $240 to $245 million." Backlog The Company's total backlog at the end of the quarter was $102.2 million, up from $83.0 million at the beginning of the quarter. Of the current total backlog, $91.4 million represents shipments scheduled over the next 12 months. The book-to-bill ratio for the second quarter exceeded one. Defense Electronics Defense electronics revenues were $33.2 million, an increase of $5.5 million from the same quarter last year, primarily due to strength in both the radar and signals intelligence segments. Imaging and Visualization Solutions Revenues for imaging and visualization solutions of $15.2 million were up $7.8 million from last year, based primarily on growth in medical applications. OEM Solutions OEM solutions revenues of $10.4 million were almost double last year's revenues for the same quarter as a result of strength in applications serving the semiconductor market. Momentum Computer business unit The Momentum Computer business unit, acquired in December 2004, reported revenues of $0.5 million during the quarter. Business Outlook This section presents our current expectations and estimates given current visibility, on our business outlook. It is possible that actual performance will differ materially from the ranges and 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, with respect to these estimates, and make themselves aware of the risk factors that may impact the Company's actual performance. On October 13, 2004, the Financial Accounting Standards Board (FASB) ratified the Emerging Issues Task Force (EITF), Issue No. 04-08, "The Effect of Contingently Convertible Debt on Diluted Earnings per Share." This change in accounting treatment became effective with the quarterly reporting cycle ended December 31, 2004, and as a result, the impact of this accounting change is included within the reported results and guidance provided below. In the third quarter of fiscal year 2005, revenues are expected to be in the range of $62 to $64 million. At these revenue levels, the Company projects a range of $0.30 to $0.33 for earnings per share for the third quarter ended March 31, 2005. For the full year, revenues are expected to be in the range of $240 to $245 million. At these revenue levels, the Company projects a range of $1.18 to $1.21 for earnings per share for the fiscal year ended June 30, 2005. Recent Highlights * December -- Mercury announced the acquisition of Momentum Computer, Inc. for approximately $14 million in cash, with the potential for additional cash payments upon the achievement of certain performance criteria. Momentum is a developer of high-performance single-board computers for telecommunications, defense, medical, and other commercial markets. The acquisition will enable Mercury to broaden and strengthen its product offering while extending its outreach into high- growth markets. * November -- Mercury introduced its new portfolio of advanced 3D imaging products and services for life sciences OEMs. The embedded software and hardware components, turnkey applications, and systems solutions deliver increased performance and enhanced image quality for critical applications that include diagnostic and interventional imaging, picture archiving communications systems (PACS), and biotechnology. * November -- Mercury was selected by the Boeing Company for the JTRS Cluster 1 Testing Program, a U.S. Department of Defense initiative designed to provide voice, data, and video communications among U.S. and allied warfighters through software-programmable radio technology. The tuners were developed at Mercury's RF Center of Excellence, which was formed following the acquisition of Advanced Radio Corporation in June 2004. * November -- Mercury announced its strategic alliance with NVIDIA Corporation, a worldwide leader in graphics and digital media processors. Mercury is working with NVIDIA to develop and deliver innovative image processing solutions for the life sciences and geosciences markets. * November -- Mercury announced its cooperation agreement with RADIN Group GmbH, a producer of web-based image information systems for medical imaging, to expand RADIN's product line with the next- generation high-end 3D visualization module for web-based PACS. Mercury also announced results from its alliance with Ziehm Imaging, a provider of mobile C-arm X-ray systems used for minimally invasive and interventional procedures in urology, neurology, orthopedics, and surgery. The first results showed acceleration in 3D medical image reconstruction by a factor of 40X. Both RADIN and Ziehm demonstrated these solutions at the Radiological Society of North America Conference held in Chicago, Illinois. * October -- Mercury introduced the XBi-400 system module. Based on mainstream technology including the latest Intel Xeon processors and chipsets, and with enhanced graphics options, the XBi-400 modules support standard operating environments in a cost-effective package, and provide modularity, performance, and scalability for applications in medical imaging, and geophysical and simulated visualization. Conference Call Information Management will host a conference call today at 11:00 a.m. ET to review the second quarter results. To listen to the conference call, dial (800) 406- 5345 in the USA and Canada, and for international, dial (913) 981-5571. The conference code number is 693909. Please call five to ten minutes prior to the scheduled start time. This call will also be broadcast live over the web at http://www.mc.com/investor. A replay of the call by telephone will be available from approximately 2:00 p.m. ET on Thursday, January 20 through noon ET on Friday, January 28. To access the replay, dial (888) 203-1112 in the USA and Canada, and for international, dial (719) 457-0820. Enter access code 693909. A replay of the webcast of the call will be available for an extended period of time on the Investor Events page of the Company's website at http://www.mc.com/investor.