Mercury Systems(MRCY) - 2024 Q3 - Quarterly Results

Overview of Q3 FY2024 Performance Management Commentary The company is progressing on four priorities: shifting to production, expanding backlog, optimizing costs, and reducing working capital - The company is focused on four key priorities: shifting development to production, growing backlog, streamlining operations, and reducing working capital[2] - Working capital decreased by 8.0% year-over-year, reversing a multi-year growth trend[2] - The company expects to enter FY25 with a clearer path to predictable organic growth, expanding margins, and strong cash flow[3] Key Financial Highlights The company reported a book-to-bill ratio of 1.06 and a record backlog of $1.3 billion despite a GAAP net loss Q3 FY2024 Key Metrics | Metric | Value | Note | | :--- | :--- | :--- | | Bookings | $219.9 million | - | | Book-to-bill Ratio | 1.06 | - | | Revenue | $208.3 million | - | | GAAP Net Loss | ($44.6) million | - | | Adjusted EBITDA | ($2.4) million | - | | Record Backlog | $1.3 billion | Up 17% YoY | Detailed Financial Results Third Quarter Fiscal 2024 Results Q3 FY2024 saw a significant downturn with decreased revenue, a swing to a GAAP net loss, and negative adjusted EBITDA Q3 FY2024 vs Q3 FY2023 Financial Performance | Metric | Q3 FY2024 | Q3 FY2023 | | :--- | :--- | :--- | | Revenues | $208.3 million | $263.5 million | | GAAP Net (Loss) Income | ($44.6) million | $5.2 million | | GAAP (Loss) EPS | ($0.77) | $0.09 | | Adjusted (Loss) EPS | ($0.26) | $0.40 | | Adjusted EBITDA | ($2.4) million | $43.5 million | Q3 FY2024 vs Q3 FY2023 Cash Flow | Metric | Q3 FY2024 | Q3 FY2023 | | :--- | :--- | :--- | | Cash flows used in operating activities | ($17.8) million | ($3.2) million | | Free cash flow | ($25.7) million | ($12.7) million | Backlog The company's total backlog reached a record $1.29 billion, with $761.2 million expected to convert to revenue within 12 months - Total backlog increased by $190.5 million year-over-year to a record $1.29 billion[9] - $761.2 million of the total backlog is expected to be converted to revenue in the next 12 months[9] Business Outlook Fiscal Year 2024 Guidance The company maintains its full-year revenue guidance and expects bookings to exceed $1 billion with positive free cash flow Full Fiscal Year 2024 Outlook | Metric | Guidance Range / Expectation | | :--- | :--- | | Revenue | $800.0 million to $850.0 million | | Bookings | Exceed $1 billion | | Free Cash Flow | Positive | Financial Statements Consolidated Balance Sheets Total assets remained stable while total liabilities increased, leading to a decrease in shareholders' equity Balance Sheet Summary (in thousands) | Account | March 29, 2024 | June 30, 2023 | | :--- | :--- | :--- | | Total Assets | $2,378,178 | $2,391,367 | | Cash and cash equivalents | $142,645 | $71,563 | | Goodwill | $938,093 | $938,093 | | Total Liabilities | $905,385 | $824,682 | | Long-term debt | $616,500 | $511,500 | | Total Shareholders' Equity | $1,472,793 | $1,566,685 | Consolidated Statements of Operations The company's Q3 operating results show a significant decline in revenue and a shift from operating income to a loss Q3 Statement of Operations Summary (in thousands, except per share data) | Account | Q3 FY2024 | Q3 FY2023 | | :--- | :--- | :--- | | Net revenues | $208,258 | $263,479 | | Gross margin | $40,642 | $90,289 | | (Loss) income from operations | ($45,656) | $1,954 | | Net (loss) income | ($44,574) | $5,156 | | Diluted net (loss) earnings per share | ($0.77) | $0.09 | Consolidated Statements of Cash Flows Net cash used in operating activities increased year-over-year, contributing to a decrease in total cash and cash equivalents Q3 Statement of Cash Flows Summary (in thousands) | Account | Q3 FY2024 | Q3 FY2023 | | :--- | :--- | :--- | | Net cash used in operating activities | ($17,805) | ($3,217) | | Net cash used in investing activities | ($7,938) | ($9,398) | | Net cash provided by financing activities | $0 | $0 | | Net decrease in cash | ($26,001) | ($12,503) | | Cash and cash equivalents at end of period | $142,645 | $64,441 | Non-GAAP Financial Measures Reconciliation of GAAP to Adjusted EBITDA Adjusted EBITDA turned negative at ($2.4) million, a sharp decline from the prior year's positive result Adjusted EBITDA Reconciliation Summary (in thousands) | Metric | Q3 FY2024 | Q3 FY2023 | | :--- | :--- | :--- | | Net (loss) income (GAAP) | ($44,574) | $5,156 | | Adjustments (Net) | $42,177 | $38,305 | | Adjusted EBITDA (Non-GAAP) | ($2,397) | $43,461 | Reconciliation of GAAP to Free Cash Flow Free cash flow remained negative and worsened compared to the same period last year Free Cash Flow Reconciliation (in thousands) | Metric | Q3 FY2024 | Q3 FY2023 | | :--- | :--- | :--- | | Net cash used in operating activities | ($17,805) | ($3,217) | | Purchases of property and equipment | ($7,938) | ($9,446) | | Free cash flow | ($25,743) | ($12,663) | Reconciliation of GAAP to Adjusted Income and EPS The company reported a non-GAAP adjusted loss per share, reversing the adjusted income from the prior-year quarter Adjusted (Loss) Income and EPS Reconciliation | Metric | Q3 FY2024 | Q3 FY2023 | | :--- | :--- | :--- | | Net (loss) income (GAAP) | ($44.6) M | $5.2 M | | Adjusted (loss) income (Non-GAAP) | ($15.1) M | $22.6 M | | Diluted (loss) EPS (GAAP) | ($0.77) | $0.09 | | Adjusted (loss) EPS (Non-GAAP) | ($0.26) | $0.40 | Reconciliation of GAAP to Organic Revenue All reported net revenues for the quarter were classified as organic, with no contribution from recent acquisitions - For Q3 FY2024, total net revenues of $208.3 million were entirely organic, with no contribution from acquired revenue[60] Other Information Conference Call Information A conference call was scheduled to discuss the quarterly results and provide a business outlook - A conference call to discuss financial results was scheduled for 5:00 p.m. ET on May 7, 2024[13] Forward-Looking Safe Harbor Statement The report contains forward-looking statements that are subject to various risks and uncertainties - The report includes a safe harbor statement cautioning that forward-looking statements are subject to risks and uncertainties that could cause actual results to differ[20]