Company Overview - Mercury Systems (MRCY) shares have increased by approximately 7.6% over the past month, outperforming the S&P 500 [1] - The most recent earnings report is crucial for understanding the key drivers behind this performance [1] Earnings Estimates - Estimates for Mercury Systems have trended upward in the past month, with a consensus estimate shift of 8.33% [2] - The stock currently holds a Zacks Rank of 3 (Hold), indicating expectations for an in-line return in the upcoming months [4] VGM Scores - Mercury Systems has a Growth Score of B, but a low Momentum Score of D, and a Value Score of D, placing it in the bottom 40% for the value investment strategy [3] - The overall aggregate VGM Score for the stock is D, which is significant for investors not focused on a single strategy [3] Industry Performance - Mercury Systems is part of the Zacks Aerospace - Defense Equipment industry, where another player, Woodward (WWD), has seen a 20.8% increase in shares over the past month [5] - Woodward reported revenues of $883.63 million for the last quarter, reflecting a year-over-year increase of 5.8% [5] - Woodward's expected earnings for the current quarter are $1.60 per share, showing a year-over-year decline of 1.8% [6]

ANDOVER, Mass., May 14, 2025 (GLOBE NEWSWIRE) -- Mercury Systems, Inc. (NASDAQ: MRCY, www.mrcy.com), a technology company that delivers mission-critical processing power to the edge, today introduced the first safety-certifiable, SOSA-aligned aviation mission computer, which will allow government and commercial organizations to field and modernize aircraft that support next-generation applications such as those enabled by 5G communications and artificial intelligence. Mercury's new ROCK3 is a DAL-certifiabl ...

Core Insights - Mercury Systems (MRCY) reported third-quarter fiscal 2025 results with earnings in line with estimates and revenues exceeding expectations [1] - Non-GAAP earnings were 6 cents per share, a significant improvement from a loss of 26 cents in the same quarter last year [1] - Non-GAAP revenues increased by 1.5% year over year to $211.4 million, surpassing the consensus estimate by 4.07% [1] Financial Performance - Total bookings for the quarter were $200.4 million, resulting in a book-to-bill ratio of 0.95 [3] - Total backlog as of March 28, 2025, was $1.34 billion, up by $51 million from the previous year [3] - Gross profit rose to $57.1 million, reflecting a 40.5% year-over-year increase, with gross margin expanding from 19.5% to 27% [4] - Research and development (R&D) expenses decreased by 25.9% year over year to $16 million, representing 7.56% of revenues [5] - Selling, general and administrative (SG&A) expenses fell by 0.3% year over year to $43 million, accounting for 20.4% of revenues [5] - Total operating expenses decreased by 13.7% to $74.5 million, with operating expenses as a percentage of revenues down 620 basis points to 35.3% [6] - Adjusted EBITDA was $24.7 million, a turnaround from a negative EBITDA of $2.397 million in the prior year [6] Cash Flow and Balance Sheet - Cash and cash equivalents stood at $269.8 million as of March 28, 2025, up from $242.6 million at the end of December 2024 [7] - Long-term debt was reported at $591.5 million as of March 27, 2025 [7] - Cash flows from operating activities for the third quarter were $30 million, down from $85.5 million in the previous quarter [7] - Free cash flow for the quarter was $24.1 million, compared to $81.9 million in the second quarter [8] Future Estimates - The Zacks Consensus Estimate for fourth-quarter fiscal 2025 revenues is $248.11 million, indicating a slight year-over-year decline of 0.18% [9] - The consensus estimate for earnings is 21 cents per share, reflecting an 8.7% decline from the same quarter last year [9] Market Performance - MRCY shares have gained 20% year to date, outperforming the Zacks Aerospace sector and peers such as Spirit Aerosystems and CAE [2] - Spirit Aerosystems and CAE have seen year-to-date growth of 8.1%, 4.9%, and 0.2%, respectively [2]

THIRD QUARTER FISCAL YEAR 2025 FINANCIAL RESULTS Bill Ballhaus Chairman and CEO David Farnsworth Executive Vice President and CFO May 6, 2025, 5:00 pm ET WEBCAST LOGIN AT WWW.MRCY.COM/INVESTOR WEBCAST REPLAY AVAILABLE BY 7:00 P.M. ET MAY 6, 2025 © Mercury Systems, Inc. 1 Forward-looking safe harbor statement This presentation contains certain forward-looking statements, as that term is defined in the Private Securities Litigation Reform Act of 1995, including those relating to the Company's focus on enhance ...

Company Performance - Mercury Systems reported quarterly earnings of $0.06 per share, matching the Zacks Consensus Estimate, compared to a loss of $0.26 per share a year ago [1] - The company posted revenues of $211.36 million for the quarter ended March 2025, exceeding the Zacks Consensus Estimate by 4.07% and showing an increase from $208.26 million year-over-year [2] - Over the last four quarters, Mercury Systems has surpassed consensus EPS estimates three times and topped consensus revenue estimates four times [2] Stock Movement and Outlook - Mercury Systems shares have increased approximately 21.8% since the beginning of the year, while the S&P 500 has declined by 3.9% [3] - The sustainability of the stock's price movement will depend on management's commentary during the earnings call and future earnings expectations [3][4] - The current consensus EPS estimate for the upcoming quarter is $0.21 on revenues of $248.11 million, and for the current fiscal year, it is $0.39 on revenues of $878.75 million [7] Industry Context - The Aerospace - Defense Equipment industry, to which Mercury Systems belongs, is currently ranked in the top 12% of over 250 Zacks industries, indicating a favorable outlook [8] - Empirical research suggests a strong correlation between near-term stock movements and trends in earnings estimate revisions, which can impact stock performance [5][6]

Financial Data and Key Metrics Changes - Bookings for Q3 were $200 million with a trailing twelve-month book-to-bill ratio of 1.1, while revenue was $211 million, reflecting a year-to-date revenue growth of 8.9% [8][19] - Adjusted EBITDA for Q3 was $24.7 million, significantly improved from a negative $2.4 million in the same quarter last year, with an adjusted EBITDA margin of 11.7% [21][19] - Free cash flow for Q3 was approximately $24 million, a substantial increase from an outflow of $26 million in the prior year [26][21] Business Line Data and Key Metrics Changes - The company reported a backlog of $1.34 billion, up 4% year over year, with significant contract awards contributing to this growth [10][19] - Over 80% of trailing twelve-month bookings were production contracts, indicating a shift towards production-focused revenue [12][19] Market Data and Key Metrics Changes - The company noted a decrease in unbilled receivables by approximately $54 million or 17% year over year, reflecting improved cash flow performance [23][25] - Deferred revenues increased year over year by approximately $72 million, driven by milestone billing events achieved during the period [24][25] Company Strategy and Development Direction - The company is focused on four priorities: delivering predictable performance, driving organic growth, expanding margins, and improving free cash flow [7][9] - Recent strategic moves include the acquisition of Starlab for cybersecurity software and the divestiture of manufacturing operations in Switzerland to enhance scalability and efficiency [12][12] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the ongoing efforts to improve performance and expected revenue growth approaching mid-single digits for FY 2025 [16][17] - The company anticipates that Q4 adjusted EBITDA margins will be the highest of the fiscal year, approaching the mid-teens [16][17] Other Important Information - The company ended Q3 with $270 million in cash, driven by improved cash provided by operations [23][19] - Net working capital decreased by approximately $148 million year over year, demonstrating progress in reversing a multi-year trend of growth in working capital [25][25] Q&A Session Summary Question: Update on LTAMDS program - Management highlighted the program's significant milestone achievement and expressed excitement about its growth prospects [29] Question: Increase in deferred revenues - Management explained that the increase is due to achieving milestones with customers, leading to solid payment terms [31] Question: Optimal net working capital level - Management indicated a target of 30% to 40% for net working capital as a percentage of revenue, with current levels at around 51% [36] Question: Impact of low margin backlog - Management stated that the transition from low margin backlog to higher margin bookings will be gradual, impacting future EBITDA margins positively over time [40] Question: Revenue split between development and production - Management did not provide specific revenue splits but noted that revenue trends will follow bookings, which are increasingly production-focused [52] Question: Production contracts for common processing architecture - Management confirmed that recent production contracts significantly contributed to backlog and expressed confidence in demand for this area [62] Question: Macro environment and federal space disruptions - Management reported no significant disruptions from federal space dynamics and expressed a positive outlook on defense budget growth [105] Question: Tariff impacts on supply chain - Management indicated no material impact from tariffs in FY 2025 and expressed confidence in sourcing and cost management strategies [110][111]

Financial Performance - Consolidated revenues for the third quarter ended March 28, 2025, were $211.4 million, a 1.5% increase from $208.3 million in the same quarter of the previous year[129]. - The company reported a net loss of $19.2 million for the third quarter, compared to a net loss of $44.6 million in the same quarter last year[129]. - Total revenues rose by $52.2 million, or 8.9%, to $638.9 million for the nine months ended March 28, 2025, compared to $586.7 million in the prior year[148]. - Net loss narrowed to $54.3 million, or 8.5% of revenue, for the nine months ended March 28, 2025, compared to a net loss of $126.9 million, or 21.6% of revenue, in the prior year[147]. - For the third quarter ended March 28, 2025, the net loss was $19,170,000, resulting in a loss per share of $0.33, compared to a net loss of $44,574,000 and a loss per share of $0.77 for the same period in 2024[189]. - For the nine months ended March 28, 2025, the net loss was $54,274,000, with a loss per share of $0.93, compared to a net loss of $126,863,000 and a loss per share of $2.20 for the same period in 2024[191]. Expenses and Cost Management - Gross margin improved to 27.0%, up 750 basis points from 19.5% in the prior year, driven by a net estimate at completion change impact of approximately $3.7 million[135]. - Research and development expenses decreased by 25.9% to $16.0 million, primarily due to headcount reductions of 185 R&D employees[138]. - Selling, general and administrative expenses decreased by 0.4% to $43.0 million, attributed to lower bad debt expense and compensation costs[137]. - Total operating expenses were $74.5 million, down from $86.3 million in the prior year, reflecting cost-saving measures[132]. - Selling, general and administrative expenses decreased by $6.7 million, or 5.4%, to $116.7 million during the nine months ended March 28, 2025[153]. - Research and development expenses decreased by $26.2 million, or 32.0%, to $55.7 million for the nine months ended March 28, 2025[154]. - Interest expense decreased to $25.4 million during the nine months ended March 28, 2025, from $25.9 million in the same period of 2024[159]. - Other expense, net decreased to $2.9 million during the nine months ended March 28, 2025, compared to $5.7 million in the prior year[160]. Cash Flow and Liquidity - The company had a net cash inflow of $100.8 million from operating activities for the nine months ended March 28, 2025, compared to an outflow of $11.4 million for the same period in 2024[174]. - Cash and cash equivalents increased by $89.3 million from June 28, 2024, to March 28, 2025, totaling $269.8 million at the end of the period[173]. - Free cash flow for the third quarter ended March 28, 2025, was $24,060,000, compared to a negative free cash flow of $25,743,000 for the same period in 2024[195]. - For the nine months ended March 28, 2025, free cash flow was $85,071,000, while for the same period in 2024, it was a negative $35,322,000[195]. - The company reported net cash provided by operating activities of $29,974,000 for the third quarter ended March 28, 2025, compared to a cash used in operating activities of $17,805,000 for the same period in 2024[195]. Investments and Strategic Initiatives - The company invested $11.1 million in investing activities during the nine months ended March 28, 2025, a decrease of $12.8 million compared to $23.9 million in the same period in 2024[175]. - The company is exploring acquisitions or strategic alliances as part of its growth strategy[180]. Employee and Workforce Management - The company had 2,200 employees as of March 28, 2025, focusing on engineering and research to maintain technological leads[128]. - Restructuring and other charges amounted to $4.9 million, down from $9.8 million in the prior year, related to workforce reductions[140]. Tax and Regulatory Matters - The effective tax rate for the nine months ended March 28, 2025, was impacted by federal and state research and development credits and return to provision adjustments[162]. - The company maintains a valuation allowance on the majority of foreign net operating loss carryforwards and state research and development tax credit carryforwards[163]. Debt and Financing - As of March 28, 2025, the company had a borrowing capacity of approximately $900.0 million, with outstanding borrowings of $591.5 million[169]. - The company executed Amendment No. 5 to the Revolver, increasing the Consolidated Total Net Leverage Ratio covenant from 4.50 to 5.25 for Q2 2024[167]. Litigation and Market Risk - The company experienced litigation and settlement expenses of $5,467,000 for the third quarter ended March 28, 2025, compared to $2,096,000 for the same period in 2024[189]. - There were no material changes in the company's exposure to market risk from June 28, 2024, to March 28, 2025[199].

Financial Data and Key Metrics Changes - Bookings for Q3 were $200 million with a trailing twelve-month book-to-bill ratio of 1.1, while revenue was $211 million, reflecting a year-to-date revenue growth of 8.9% [7][20] - Adjusted EBITDA for Q3 was $25 million, with an adjusted EBITDA margin of 11.7%, both significantly up year-over-year [7][20] - Free cash flow for Q3 was $24 million, an increase of $50 million year-over-year, resulting in $146 million of free cash flow over the last four quarters [7][20] Business Line Data and Key Metrics Changes - The company recognized approximately $3.7 million of net EAC change impacts in Q3, the lowest level in several quarters, indicating improved program management capabilities [8][9] - Q3 bookings included significant contract awards, such as $40 million in production contracts for the common processing architecture and a $20 million follow-on production order for the F-35 program [10][11] Market Data and Key Metrics Changes - The backlog increased by 4% year-over-year to $1.34 billion, driven by strong bookings primarily in production contracts [10][20] - The company reported that over 80% of trailing twelve-month bookings were production in nature, indicating a shift towards production-focused contracts [12] Company Strategy and Development Direction - The company is focused on four priorities: delivering predictable performance, driving organic growth, expanding margins, and improving free cash flow [6][8] - The acquisition of Starlab, a cybersecurity software provider, is expected to enhance the company's competitive position and differentiation in the market [12] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the company's strategic positioning and the ability to deliver predictable organic growth with expanding margins and robust free cash flow [5][16] - For FY 2025, the company expects annual revenue growth approaching mid-single digits, with adjusted EBITDA margins in the low double digits [16][17] Other Important Information - The company ended Q3 with $270 million in cash, driven by improved cash flow from operations [23] - Net working capital decreased by approximately $148 million year-over-year, demonstrating progress in reversing a multi-year trend of growth in working capital [25] Q&A Session Summary Question: Update on LTAMDS program - Management noted that LTAMDS has achieved significant milestones and is moving into initial production, indicating strong growth prospects [29] Question: Increase in deferred revenues - Management explained that the increase in deferred revenues is linked to achieving milestones with customers, which allows for solid payment terms [30][31] Question: Optimal net working capital level - Management indicated a target of 30% to 40% for net working capital as a percentage of revenues, with current levels at around 51% [36][38] Question: Impact of low margin backlog - Management stated that the low margin backlog will gradually improve as new bookings are added, but it will take several quarters to fully transition [39][92] Question: Revenue split between development and production - Management did not provide specific revenue splits but indicated that revenue trends will follow the bookings mix, which is increasingly production-focused [52] Question: Competitive landscape and growth opportunities - Management expressed confidence in the company's position to outgrow the industry, supported by a strong book-to-bill ratio and recent contract wins [66][68] Question: Tariffs impact on supply chain - Management reported no material impact from tariffs in FY 2025 and indicated that sourcing remains stable [110][111]

Financial Performance - Q3 FY25 bookings were $200.4 million, with a trailing-twelve-month book-to-bill ratio of 1.1[5] - Revenue for Q3 FY25 was $211.4 million, reflecting an 8.9% year-to-date growth compared to the previous fiscal year[4] - Adjusted EBITDA for Q3 FY25 was $24.7 million, with an adjusted EBITDA margin of 11.7%, significantly up from $(2.4) million in Q3 FY24[8] - Free cash flow for Q3 FY25 was $24.1 million, an increase of $49.8 million year-over-year[4] - Total backlog as of March 28, 2025, was $1.34 billion, representing a 4% increase year-over-year[10] - GAAP net loss for Q3 FY25 was $19.2 million, improving from a net loss of $44.6 million in Q3 FY24[7] - Adjusted earnings per share (EPS) for Q3 FY25 was $0.06, compared to $(0.26) per share in Q3 FY24[7] - Net revenues for the third quarter of 2025 were $211,358 thousand, a slight increase of 1% compared to $208,258 thousand in the same quarter of 2024[23] - The net loss for the third quarter of 2025 was $19,170 thousand, compared to a net loss of $44,574 thousand in the same quarter of 2024, representing a 57% improvement[23] - For the nine months ended March 28, 2025, the net loss was $54,274,000, compared to $126,863,000 for the same period in 2024, showing a 57.3% improvement[52] Cash Flow and Liquidity - Operating cash flow for Q3 FY25 was $30.0 million, compared to $(17.8) million in Q3 FY24[9] - Cash and cash equivalents increased to $269.8 million as of March 28, 2025, from $180.5 million a year earlier[22] - Cash flows from operating activities generated $29,974 thousand in Q3 2025, a turnaround from a cash outflow of $17,805 thousand in Q3 2024[24] - Cash and cash equivalents at the end of Q3 2025 were $269,822 thousand, significantly higher than $142,645 thousand at the end of Q3 2024[24] - The company reported net cash provided by operating activities of $29,974,000 for the third quarter, a substantial increase from $(17,805,000) in the prior year[46] Expenses and Cost Management - Total operating expenses decreased to $74,454 thousand in Q3 2025, down 14% from $86,298 thousand in Q3 2024[23] - Research and development expenses decreased to $15,983 thousand in Q3 2025, down 26% from $21,563 thousand in Q3 2024[23] - The company incurred restructuring and other charges of $4,931 thousand in Q3 2025, down from $9,841 thousand in Q3 2024, indicating a reduction of 50%[23] - Total interest expense for the third quarter was $6,778,000, down from $8,777,000 in the same quarter of the previous year, reflecting a 22.7% decrease[41] Shareholder Information - The diluted weighted-average shares outstanding for the third quarter were 59,367,000, compared to 57,698,000 in the prior year, reflecting an increase in shares[49] - Adjusted income for the third quarter was $3,589,000, translating to adjusted earnings per share of $0.06, compared to an adjusted loss of $15,136,000 or $(0.26) per share in the previous year[49] Future Outlook - The company expects to continue incurring expenditures similar to those reflected in the free cash flow financial adjustment, indicating ongoing investment in business operations[44]

Core Insights - Mercury Systems, Inc. reported solid financial results for the third quarter of fiscal year 2025, with revenues of $211.4 million, reflecting an 8.9% year-to-date growth compared to the previous year [2][4][19] - The company secured bookings of $200.4 million in the quarter, resulting in a trailing twelve-month book-to-bill ratio of 1.1, indicating strong demand for its products and services [3][10] - Adjusted EBITDA for the quarter was $24.7 million, a significant improvement from a loss of $(2.4) million in the same quarter of the previous year, showcasing enhanced operational efficiency [6][34] Financial Performance - Total revenues for the third quarter of fiscal 2025 were $211.4 million, compared to $208.3 million in the same quarter of fiscal 2024 [4] - The company reported a GAAP net loss of $19.2 million, or $0.33 per share, which is an improvement from a net loss of $44.6 million, or $0.77 per share, in the prior year [5][19] - Free cash flow for the quarter was $24.1 million, a substantial increase of $49.8 million year-over-year, indicating strong cash generation capabilities [7][40] Operational Highlights - Mercury's total backlog as of March 28, 2025, was $1.34 billion, reflecting a $51.0 million increase from the previous year, with $787.6 million expected to be recognized as revenue within the next 12 months [8][10] - The company achieved a gross margin of $57.1 million for the quarter, compared to $40.6 million in the same quarter of the previous year, indicating improved profitability [19] - Operating cash flow was reported at $30.0 million, a significant turnaround from $(17.8) million in the same quarter of fiscal 2024 [7][21] Strategic Outlook - The CEO expressed confidence in the company's strategic positioning and its ability to deliver predictable organic growth with expanding margins and robust free cash flow [2] - Management plans to discuss the quarterly financial results, business highlights, and outlook in an upcoming conference call, indicating a commitment to transparency and investor engagement [9]