Mercury Systems(US:MRCY)2022-05-10 20:11Revenue Performance - Total revenues for the third quarter ended April 1, 2022, decreased by $3.8 million, or 1.5%, to $253.1 million compared to $256.9 million for the same period in 2021[134] - Organic revenues decreased by $23.1 million, partially offset by $19.3 million of acquired revenues from Pentek, Avalex, and Atlanta Micro[134] - Total revenues increased by $25.3 million, or 3.8%, to $698.5 million for the nine months ended April 1, 2022, driven by $97.9 million of acquired revenues[147] - Organic revenue for the third quarter ended April 1, 2022, was $233,747,000, representing 92% of total net revenue, a decrease of 9% from $256,857,000 in the same quarter of 2021[185] - Total revenues for the nine months ended April 1, 2022, increased to $698,468,000, up 4% from $673,154,000 in the same period of 2021, driven by acquired revenue growth[185] - Acquired revenue for the third quarter ended April 1, 2022, was $19,328,000, contributing 8% to total net revenue, marking a 100% increase as it was not present in the same quarter of the previous year[185] Profitability and Income - The company reported a net income of $4.1 million for the third quarter, down from $15.6 million in the same quarter of the previous year[133] - The company reported a net loss of $5.6 million for the nine months ended April 1, 2022, compared to a net income of $44.1 million for the same period in 2021[164] - Adjusted income for the nine months ended April 1, 2022, was $32.2 million, with adjusted EPS of $0.57, compared to $35.5 million and $0.64 in the prior year[180] - For the nine months ended April 1, 2022, the company reported a net loss of $5,640,000, compared to a net income of $44,119,000 for the same period in 2021, resulting in a diluted loss per share of $0.10 versus earnings per share of $0.80[181] - Adjusted income for the nine months ended April 1, 2022, was $76,728,000, with adjusted earnings per share of $1.38, compared to $93,754,000 and $1.69 for the same period in 2021[181] Expenses and Costs - Gross margin for the third quarter was 39.4%, a decrease of 170 basis points from 41.1% in the prior year, primarily due to program mix and supply chain disruptions[135] - Selling, general and administrative expenses increased by $1.0 million, or 2.6%, to $39.3 million, with expenses as a percentage of revenue rising to 15.5% from 14.9%[136] - Research and development expenses were $25.4 million, representing 10.0% of total revenues, down from 11.8% in the prior year[133] - Research and development expenses decreased by $4.8 million, or 16.0%, to $25.4 million for the third quarter ended April 1, 2022, compared to $30.2 million for the same period in 2021, accounting for 10.0% of revenues[137] - Selling, general and administrative expenses increased by $10.3 million, or 10.0%, to $113.0 million for the nine months ended April 1, 2022, influenced by recent acquisitions[150] - Research and development expenses decreased by $3.2 million, or 3.7%, to $82.6 million for the nine months ended April 1, 2022, accounting for 11.8% of revenues[151] - Amortization of intangible assets increased by $3.4 million to $16.1 million during the third quarter ended April 1, 2022, due to acquisitions[138] - The company incurred $243.3 million in acquisition costs related to Avalex and Atlanta Micro during the nine months ended April 1, 2022[165] - Acquisition costs and other related expenses were $7.5 million during the nine months ended April 1, 2022, compared to $5.0 million in the same period of 2021[153] Cash Flow and Financing - The company generated $566,000 in net cash from operating activities for the nine months ended April 1, 2022, a significant decrease from $70.1 million for the same period in 2021[163] - The company reported a cash used in operating activities of $(4,252,000) for the third quarter ended April 1, 2022, compared to cash provided of $23,185,000 in the same quarter of 2021[184] - Net cash used in investing activities was $265.9 million, a decrease of $72.5 million compared to $338.4 million in the prior year, primarily due to $243.3 million spent on acquisitions[165] - Financing activities provided $243.6 million in cash, an increase of $80.5 million from $163.1 million in the previous year, driven by $91.5 million in additional borrowings[166] - Interest expense increased to $3.4 million for the nine months ended April 1, 2022, related to $451.5 million of outstanding borrowings[154] - Cash and cash equivalents decreased by $22.1 million to $91.7 million from July 2, 2021, primarily due to acquisition activities and capital expenditures[163] - The company amended its revolving credit facility to increase borrowing capacity to $1.1 billion, maturing on February 28, 2027[162] Strategic Initiatives - The company has completed 15 acquisitions since fiscal year 2014, deploying $1.4 billion of capital, which has significantly scaled and transformed the business[130] - The 1MPACT initiative aims to achieve full growth, margin expansion, and adjusted EBITDA potential over the next five years[130] - Restructuring and other charges amounted to $6.3 million in the third quarter ended April 1, 2022, compared to less than $0.1 million in the same quarter of 2021, primarily related to 1MPACT[139] - Restructuring and other charges totaled $22.4 million for the nine months ended April 1, 2022, compared to $2.2 million in the same period of 2021, mainly due to 1MPACT[152] - The company expects to continue incurring expenditures similar to those reflected in the free cash flow adjustment, indicating ongoing investment needs for future growth[183] Workforce and Operations - As of April 1, 2022, the company had 2,294 employees, focusing on engineering and research to maintain technological leadership[127] - The company’s products are deployed in over 300 programs with more than 25 different defense prime contractors and commercial aviation customers[122]