Mercury Systems(US:MRCY)2025-11-04 22:11Revenue and Financial Performance - Total revenues increased by $20.8 million, or 10.2%, to $225.2 million for the first quarter ended September 26, 2025, compared to $204.4 million for the same period in 2024[137]. - The increase in total revenue was primarily driven by C4I and other sensor applications, with increases of $26.2 million and $3.4 million, respectively[138]. - Net loss for the first quarter ended September 26, 2025, was $12,515,000, an improvement from a net loss of $17,525,000 for the same period in 2024[177]. - Adjusted EBITDA for the first quarter ended September 26, 2025, was $35,568,000, compared to $21,450,000 for the first quarter ended September 27, 2024, representing a 65.8% increase[177]. - Adjusted income for the first quarter ended September 26, 2025, was $15,560,000, with adjusted EPS of $0.26, compared to adjusted income of $2,444,000 and adjusted EPS of $0.04 for the same period in 2024[180]. - Free cash flow for the first quarter ended September 26, 2025, was $(4,366,000), a decrease from $(20,896,000) for the first quarter ended September 27, 2024[184]. - Net cash provided by operating activities for the first quarter ended September 26, 2025, was $2,182,000, compared to $(14,660,000) for the same period in 2024[184]. Expenses and Costs - Selling, general and administrative expenses rose by $12.7 million, or 38.4%, to $45.9 million, primarily due to higher compensation and litigation expenses[141]. - Research and development expenses decreased by $5.2 million, or 28.3%, to $13.2 million, mainly due to headcount reductions of approximately 230 employees[142]. - The company incurred $7,224,000 in litigation and settlement expenses for the first quarter ended September 26, 2025, compared to $1,394,000 in the same quarter of 2024[180]. - Stock-based and other non-cash compensation expense for the first quarter ended September 26, 2025, was $16,328,000, compared to $10,560,000 for the same period in 2024[180]. - The company expects to continue incurring expenses similar to those reflected in adjusted income and adjusted EPS adjustments[179]. Margins and Profitability - Gross margin improved to 27.9%, an increase of 260 basis points from 25.3% in the prior year, driven by favorable program mix and lower manufacturing adjustments[139]. - Total interest expense for the first quarter ended September 26, 2025, was $5,859,000, down from $8,362,000 in the same quarter of 2024[177]. Cash and Liquidity - Cash and cash equivalents at the end of Q1 2025 were $304.7 million, a decrease of $4.4 million from the previous quarter[162]. - Working capital increased by $9.0 million as of September 26, 2025, compared to June 27, 2025, indicating improved liquidity[155]. - The company has a $900.0 million Revolver with $591.5 million outstanding as of September 26, 2025, and is in compliance with all covenants[158]. Strategic Initiatives - Acquisition costs and related expenses were $0.6 million for Q1 2025, up from $0.2 million in Q1 2024, indicating increased efforts in seeking acquisition opportunities[146]. - The company continues to explore acquisitions or strategic alliances, with potential material acquisition costs expected in future periods[170]. - A new share repurchase program was authorized for up to $200.0 million of common stock, with no expiration date[172]. - The company expects to incur an additional $2.4 million in restructuring charges during the second quarter, primarily related to severance for 42 international positions[145]. Employee and Operational Metrics - The company has over 2,175 employees as of September 26, 2025, focusing on engineering and research to maintain technological leadership[132]. - Integrated solutions product grouping saw a decrease of $0.2 million, while modules and sub-assemblies increased by $20.4 million[138]. Interest and Other Financial Metrics - Interest income increased to $2.0 million from $0.5 million, while interest expense decreased to $7.9 million from $8.9 million[136]. - Interest income increased to $2.0 million in Q1 2025 from $0.5 million in Q1 2024, driven by higher average cash and cash equivalents[148]. - Interest expense decreased to $7.9 million in Q1 2025 from $8.9 million in Q1 2024, attributed to lower interest rates on the existing credit facility[149]. - Other expense, net rose to $2.1 million in Q1 2025 from $1.3 million in Q1 2024, including $0.9 million in financing costs and $0.8 million in foreign currency translation losses[150]. - Income tax benefits were $4.0 million on losses before income taxes of $16.5 million in Q1 2025, compared to $5.6 million on losses of $23.1 million in Q1 2024[151]. Market Risk - There were no material changes in the company's exposure to market risk from June 27, 2025, to September 26, 2025[187].