Mercury Systems Inc 10-Q for FY2024 Q2

Mercury Systems Inc (MRCY)

10-Q 2024-02-06 For: 2023-12-29

Added on April 09, 2026

About this 10-Q

Mercury Systems Inc filed this 10-Q on February 6, 2024, covering the quarter ended December 29, 2023 (FY2024 Q2).

Headline figures

Quarter ended December 29, 2023, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $197.46M; down 14.0% from $229.59M a year earlier
Net loss: $45.58M; compared with a net loss of $10.92M a year earlier
Diluted EPS: -$0.79; compared with -$0.19 a year earlier

Search and read filings like this one from Claude or ChatGPT with the SEC filings MCP server →


Massachusetts		04-2741391
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

50 MINUTEMAN ROAD		01810
ANDOVER	MA
(Address of principal executive offices)		(Zip Code)


Title of Each Class	Trading Symbol(s)	Name of Each Exchange on Which Registered
Common Stock, par value $0.01 per share	MRCY	Nasdaq Global Select Market


		PAGE NUMBER
PART I. FINANCIAL INFORMATION

Item 1.	Financial Statements (unaudited)	3

	Consolidated Balance Sheets as of December 29, 2023 and June 30, 2023	3

	Consolidated Statements of Operations and Comprehensive Loss for the second quarters and six months ended December 29, 2023 and Decem ber 30, 2022	4

	Consolidated Statements of Shareholders’ Equity for the second quarters and six months ended December 29, 2023 and December 30, 2022	5

	Consolidated Statements of Cash Flows for the six mo nths ended December 29, 2023 and December 30, 2022	6

	Notes to Consolidated Financial Statements	7

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	22

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	36

Item 4.	Controls and Procedures	36

PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	37

Item 1A.	Risk Factors	37

Item 5.	Other Information	37

Item 6.	Exhibits	38

	Signatures	39


	December 29, 2023		June 30, 2023
Assets
Current assets:
Cash and cash equivalents	$	168,646	$	71,563

Accounts receivable, net of allowance for credit losses of $737 and $1,335 at December 29, 2023 and June 30, 2023, respectively	82,737		124,729
Unbilled receivables and costs in excess of billings, net of allowance for credit losses of $2,313 and $0 at December 29, 2023 and June 30, 2023, respectively	351,003		382,558
Inventory	354,212		337,216

Prepaid income taxes	5,753		—
Prepaid expenses and other current assets	21,470		20,952

Total current assets	983,821		937,018

Property and equipment, net	114,361		119,554
Goodwill	938,093		938,093
Intangible assets, net	273,309		298,051
Operating lease right-of-use assets, net	65,657		63,015
Deferred tax asset	55,426		27,099
Other non-current assets	5,585		8,537

Total assets	$	2,436,252	$	2,391,367
Liabilities and Shareholders’ Equity
Current liabilities:
Accounts payable	$	88,060	$	103,986

Accrued expenses	31,484		28,423
Accrued compensation	25,133		30,419
Income taxes payable	—		13,874
Deferred revenues and customer advances	81,044		56,562


Total current liabilities	225,721		233,264


Income taxes payable	5,166		5,166
Long-term debt	616,500		511,500
Operating lease liabilities	68,252		66,797
Other non-current liabilities	16,121		7,955

Total liabilities	931,760		824,682
Commitments and contingencies (Note L)
Shareholders’ equity:
Preferred stock, $0.01 par value; 1,000,000 shares authorized; no shares issued or outstanding	—		—
Common stock, $0.01 par value; 85,000,000 shares authorized; 57,563,733 and 56,961,665 shares issued and outstanding at December 29, 2023 and June 30, 2023, respectively	576		570
Additional paid-in capital	1,220,343		1,196,847
Retained earnings	275,150		357,439
Accumulated other comprehensive income	8,423		11,829
Total shareholders’ equity	1,504,492		1,566,685
Total liabilities and shareholders’ equity	$	2,436,252	$	2,391,367


	Second Quarters Ended				Six Months Ended
	December 29, 2023		December 30, 2022		December 29, 2023		December 30, 2022
Net revenues	$	197,463	$	229,588	$	378,454	$	457,167
Cost of revenues	165,943		148,628		296,407		298,112
Gross margin	31,520		80,960		82,047		159,055
Operating expenses:
Selling, general and administrative	44,470		45,057		80,264		84,000
Research and development	28,476		26,906		60,348		54,672
Amortization of intangible assets	12,270		13,536		24,817		28,110
Restructuring and other charges	2		2,069		9,548		3,577

Acquisition costs and other related expenses	231		939		1,200		3,437
Total operating expenses	85,449		88,507		176,177		173,796
Loss from operations	(53,929)		(7,547)		(94,130)		(14,741)
Interest income	29		220		132		249
Interest expense	(8,674)		(6,590)		(16,537)		(11,137)
Other (expense) income, net	(1,148)		846		(2,922)		(2,799)
Loss before income tax benefit	(63,722)		(13,071)		(113,457)		(28,428)
Income tax benefit	(18,141)		(2,151)		(31,168)		(3,173)



Net loss	$	(45,581)	$	(10,920)	$	(82,289)	$	(25,255)





Basic net loss per share	$	(0.79)	$	(0.19)	$	(1.44)	$	(0.45)





Diluted net loss per share	$	(0.79)	$	(0.19)	$	(1.44)	$	(0.45)

Weighted-average shares outstanding:
Basic	57,424		56,252		57,314		56,126
Diluted	57,424		56,252		57,314		56,126

Comprehensive loss:
Net loss	$	(45,581)	$	(10,920)	$	(82,289)	$	(25,255)
Change in fair value of derivative instruments, net of tax	(5,864)		(458)		(4,122)		3,962
Foreign currency translation adjustments	409		(35)		829		394
Pension benefit plan, net of tax	(57)		48		(113)		96
Total other comprehensive (loss) income, net of tax	(5,512)		(445)		(3,406)		4,452
Total comprehensive loss	$	(51,093)	$	(11,365)	$	(85,695)	$	(20,803)


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


	For the Second Quarter Ended December 29, 2023
	Common Stock			Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Income		Total Shareholders’ Equity
	Shares	Amount
Balance at September 29, 2023	57,274	$	573	$	1,205,573	$	320,731	$	13,935	$	1,540,812
Issuance of common stock under employee stock incentive plans	82	1		(1)		—		—		—
Issuance of common stock under employee stock purchase plan	107	1		3,162		—		—		3,163
Issuance of common stock under defined contribution plan	101	1		3,578		—		—		3,579
Retirement of common stock	—	—		(15)		—		—		(15)
Stock-based compensation	—	—		8,046		—		—		8,046
Net loss	—	—		—		(45,581)		—		(45,581)
Other comprehensive loss	—	—		—		—		(5,512)		(5,512)
Balance at December 29, 2023	57,564	$	576	$	1,220,343	$	275,150	$	8,423	$	1,504,492


	For the Second Quarter Ended December 30, 2022
	Common Stock			Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Income		Total Shareholders’ Equity
	Shares	Amount
Balance at September 30, 2022	56,180	$	562	$	1,156,501	$	371,439	$	10,428	$	1,538,930
Issuance of common stock under employee stock incentive plans	59	1		(1)		—		—		—
Issuance of common stock under employee stock purchase plan	57	1		2,392		—		—		2,393
Issuance of common stock under defined contribution plan	69	—		3,269		—		—		3,269

Stock-based compensation	—	—		10,865		—		—		10,865
Net loss	—	—		—		(10,920)		—		(10,920)
Other comprehensive loss	—	—		—		—		(445)		(445)
Balance at December 30, 2022	56,365	$	564	$	1,173,026	$	360,519	$	9,983	$	1,544,092



	For the Six Months Ended December 29, 2023
	Common Stock			Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Income		Total Shareholders’ Equity
	Shares	Amount
Balance at June 30, 2023	56,962	$	570	$	1,196,847	$	357,439	$	11,829	$	1,566,685
Issuance of common stock under employee stock incentive plans	269	3		(3)		—		—		—
Issuance of common stock under employee stock purchase plan	107	1		3,162		—		—		3,163
Issuance of common stock under defined contribution plan	226	2		8,215		—		—		8,217
Retirement of common stock	—	—		(15)		—		—		(15)
Stock-based compensation	—	—		12,137		—		—		12,137
Net loss	—	—		—		(82,289)		—		(82,289)
Other comprehensive loss	—	—		—		—		(3,406)		(3,406)
Balance at December 29, 2023	57,564	$	576	$	1,220,343	$	275,150	$	8,423	$	1,504,492

	For the Six Months Ended December 30, 2022
	Common Stock			Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Income		Total Shareholders’ Equity
	Shares	Amount
Balance at July 1, 2022	55,680	$	557	$	1,145,323	$	385,774	$	5,531	$	1,537,185
Issuance of common stock under employee stock incentive plans	477	5		(5)		—		—		—
Issuance of common stock under employee stock purchase plan	57	1		2,392		—		—		2,393
Issuance of common stock under defined contribution plan	152	1		7,391		—		—		7,392
Retirement of common stock	(1)	—		(63)		—		—		(63)
Stock-based compensation	—	—		17,988		—		—		17,988
Net loss	—	—		—		(25,255)		—		(25,255)
Other comprehensive income	—	—		—		—		4,452		4,452
Balance at December 30, 2022	56,365	$	564	$	1,173,026	$	360,519	$	9,983	$	1,544,092


	Fair Value Measurements
	December 29, 2023		Level 1		Level 2		Level 3
Liabilities:



Interest rate swap	$	8,710	$	—	$	8,710	$	—

Total	$	8,710	$	—	$	8,710	$	—


	As of
		December 29, 2023		June 30, 2023
Raw materials		$	227,072	$	229,984
Work in process		108,247		81,930
Finished goods		18,893		25,302
Total		$	354,212	$	337,216


	Severance & Related
Balance at June 30, 2023	$	1,529
Restructuring charges	9,548

Cash paid	(7,390)

Balance at December 29, 2023	$	3,687


	Options Outstanding
	Number of Shares	Weighted Average Grant Date Fair Value		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (Years)	Aggregate Intrinsic Value as of 12/29/23
Outstanding at June 30, 2023	—	$	—	$	—	—	—
Granted	934	12.71		45.00
Exercised	—			—
Canceled	—			—
Outstanding at December 29, 2023	934	$	12.71	$	45.00	3.18	—
Exercisable at December 29, 2023	—	$	—	$	—	—	—


	Second Quarter Ended
	December 29, 2023
Expected volatility	45		%
Expected term	4 years
Risk-free interest rate	4.44		%
Expected dividend yield	—		%
Weighted-average grant date fair value per share	$	12.71


	U.S.		Europe		Asia Pacific		Eliminations		Total
SECOND QUARTER ENDED DECEMBER 29, 2023
Net revenues to unaffiliated customers	$	183,162	$	14,295	$	6	$	—	$	197,463
Inter-geographic revenues	1,286		204		—		(1,490)		—
Net revenues	$	184,448	$	14,499	$	6	$	(1,490)	$	197,463
SECOND QUARTER ENDED DECEMBER 30, 2022
Net revenues to unaffiliated customers	$	219,155	$	10,431	$	2	$	—	$	229,588
Inter-geographic revenues	(68)		168		—		(100)		—
Net revenues	$	219,087	$	10,599	$	2	$	(100)	$	229,588
SIX MONTHS ENDED DECEMBER 29, 2023
Net revenues to unaffiliated customers	$	355,043	$	23,399	$	12	$	—	$	378,454
Inter-geographic revenues	3,005		296		—		(3,301)		—
Net revenues	$	358,048	$	23,695	$	12	$	(3,301)	$	378,454
SIX MONTHS ENDED DECEMBER 30, 2022
Net revenues to unaffiliated customers	$	437,977	$	19,183	$	7	$	—	$	457,167
Inter-geographic revenues	79		372		—		(451)		—
Net revenues	$	438,056	$	19,555	$	7	$	(451)	$	457,167


	Second Quarters Ended				Six Months Ended
	December 29, 2023		December 30, 2022		December 29, 2023		December 30, 2022
Radar(1)	$	13,254	$	43,707	$	41,813	$	97,115
Electronic Warfare(2)	28,377		33,718		56,518		68,807
Other Sensor & Effector(3)	22,635		29,333		43,801		50,536
Total Sensor & Effector	64,266		106,758		142,132		216,458
C4I(4)	115,470		103,735		206,674		198,866
Other(5)	17,727		19,095		29,648		41,843
Total Net Revenue	$	197,463	$	229,588	$	378,454	$	457,167


(In thousands)	Total		Less Than 1 Year		1-3 Years		3-5 Years		More Than 5 Years
Purchase obligations	$	122,449	$	122,449	$	—	$	—	$	—
Operating leases	96,252		14,607		28,044		25,476		28,125


	$	218,701	$	137,056	$	28,044	$	25,476	$	28,125


	Second Quarters Ended				Six Months Ended
(In thousands)	December 29, 2023		December 30, 2022		December 29, 2023		December 30, 2022
Net cash provided by (used in) operating activities	$	45,494	$	35,392	$	6,426	$	(30,647)
Purchase of property and equipment	(7,990)		(13,176)		(16,005)		(20,504)
Free cash flow	$	37,504	$	22,216	$	(9,579)	$	(51,151)


	Non-vested Restricted Stock Awards
	Number of Shares	Weighted Average Grant Date Fair Value
Outstanding at June 30, 2023	1,339	$	54.45
Granted	1,198	37.06
Vested	(269)	60.27
Forfeited	(337)	50.31
Outstanding at December 29, 2023	1,931	$	43.57


(In thousands)	December 29, 2023		As a % of Total Net Revenue		December 30, 2022		As a % of Total Net Revenue
Net revenues	$	197,463	100.0	%	$	229,588	100.0	%
Cost of revenues	165,943		84.0		148,628		64.7
Gross margin	31,520		16.0		80,960		35.3
Operating expenses:
Selling, general and administrative	44,470		22.5		45,057		19.6
Research and development	28,476		14.4		26,906		11.7
Amortization of intangible assets	12,270		6.3		13,536		5.9
Restructuring and other charges	2		—		2,069		1.0

Acquisition costs and other related expenses	231		0.1		939		0.4
Total operating expenses	85,449		43.3		88,507		38.6
Loss from operations	(53,929)		(27.3)		(7,547)		(3.3)
Interest income	29		—		220		0.1
Interest expense	(8,674)		(4.4)		(6,590)		(2.9)
Other (expense) income, net	(1,148)		(0.5)		846		0.4
Loss before income tax benefit	(63,722)		(32.3)		(13,071)		(5.7)
Income tax benefit	(18,141)		(9.2)		(2,151)		(0.9)



Net loss	$	(45,581)	(23.1)	%	$	(10,920)	(4.8)	%


	As of and For the Six Months Ended,
(In thousands)	December 29, 2023		December 30, 2022
Net cash provided by (used in) operating activities	$	6,426	$	(30,647)
Net cash used in investing activities	$	(16,005)	$	(20,402)
Net cash provided by financing activities	$	106,217	$	62,330
Net increase in cash and cash equivalents	$	97,083	$	11,290
Cash and cash equivalents at end of period	$	168,646	$	76,944


	Second Quarters Ended
(In thousands, except per share data)	December 29, 2023				December 30, 2022
Net loss and loss per share	$	(45,581)	$	(0.79)	$	(10,920)	$	(0.19)
Other non-operating adjustments, net	(1,042)				(1,463)
Amortization of intangible assets	12,270				13,536
Restructuring and other charges	2				2,069
Impairment of long-lived assets	—				—
Acquisition, financing and other third party costs	860				1,309
Fair value adjustments from purchase accounting	178				177
Litigation and settlement expense, net	1,383				70
COVID related expenses	—				—
Stock-based and other non-cash compensation expense	10,195				13,003
Impact to income taxes(1)	(2,446)				(3,039)
Adjusted (loss) income and adjusted (loss) earnings per share(2)	$	(24,181)	$	(0.42)	$	14,742	$	0.26

Diluted weighted-average shares outstanding			57,424				56,477

(1) Impact to income taxes is calculated by recasting income before income taxes to include the items involved in determining adjusted income and recalculating the income tax provision using this adjusted income from operations before income taxes. The recalculation also adjusts for any discrete tax expense or benefit related to the items.

(2) Loss per share and adjusted loss per share is calculated using basic shares whereas earnings per share and adjusted earnings per share is calculated using diluted shares. There was no impact to the calculation of adjusted earnings per share as a result of this for the second quarter ended December 30, 2022.








31.1						Certification of the Company’s Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2						Certification of the Company’s Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1+						Certification of the Company’s Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101.INS						eXtensible Business Reporting Language (XBRL) Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document

101.SCH						XBRL Taxonomy Extension Schema Document

101.CAL						XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF						XBRL Taxonomy Extension Definition Linkbase Document

101.LAB						XBRL Taxonomy Extension Label Linkbase Document

101.PRE						XBRL Taxonomy Extension Presentation Linkbase Document

104						Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)


MERCURY SYSTEMS, INC.

By:						/S/ DAVID E. FARNSWORTH
						David E. Farnsworth
						Executive Vice President,
						Chief Financial Officer


/S/ WILLIAM L. BALLHAUS
William L. Ballhaus
CHAIRMAN, PRESIDENT AND CHIEF EXECUTIVE OFFICER [PRINCIPAL EXECUTIVE OFFICER]