Mercury Systems' (MRCY) Q1 Earnings & Revenues Top Estimates

Mercury Systems MRCY reported solid first-quarter fiscal 2022 results, wherein both earnings and revenues not only outpaced the respective Zacks Consensus Estimate but also improved year over year.

The aerospace and defense tech company reported non-GAAP earnings of 41 cents per share, which beat the Zacks Consensus Estimate of 39 cents per share. However, the bottom line declined 23.5% from 51 cents per share in the year-ago quarter.

Mercury Systems’ non-GAAP revenues increased 9% year over year to $225 million surpassing the Zacks Consensus Estimate of $212.5 million. The company’s acquired businesses — Physical Optics Corporation and Pentek — cumulatively contributed $41.3 million to the first-quarter revenues.

During the quarter, the company announced the buyout of global avionics maker, Avalex Technologies, and accelerated 1MPACT value creation initiative launched in the fourth quarter of fiscal 2021 to realign its organizational structure.

Mercury Systems Inc Price, Consensus and EPS Surprise

Mercury Systems Inc price-consensus-eps-surprise-chart | Mercury Systems Inc Quote

Quarterly Details

Organic revenues accounted for 81.7% of total revenues, which decreased by 10.6% to $183.7 million in the reported quarter.

Acquired revenues, representing 18.3% of total revenues, were $41.3 million in the quarter under review.

Mercury Systems’ total bookings were $199.3 million, resulting in a 0.89 book-to-bill ratio. The company’s largest bookings in the reported quarter were a classified C2 program, a classified EW program, F-18, F-16 and F-35.

The company ended the quarter with a backlog of $883.9 million, up $57.8 million on a year-over-year basis. Within the next 12 months, products worth $553.9 million from this order backlog are expected to be shipped.

Operating Details

Mercury Systems’ gross profit was $88.4 million, up by 0.3% year over year. However, its gross margin contracted 360 basis points (bps) to 39.3%.

Adjusted EBITDA slumped 10.4% year over year to $38.3 million.

Selling, general & administrative expenses as a percentage of revenues expanded 40 bps to 16.4%. Research & development expenses as a percentage of revenues contracted 50 bps to 12.8%.

Balance Sheet & Other Details

As of Oct 1, 2021, Mercury Systems’ cash and cash equivalents were $95.8 million compared with $239.1 million on Jul 3, 2020. Long-term debt was $200 million at the end of first-quarter.

The company used $2 million worth cash for operational activities during the first quarter of fiscal 2022. Free cash flow was negative $7.4 million.

The company’s largest revenue programs for the quarter were a classified radar program, a classified C2 program, MH-60, F-35 and P8.

Guidance

For the second quarter of fiscal 2022, the company projects revenues between $215 million and $225 million.

Adjusted EBITDA is anticipated between $38 million and $41 million. Adjusted earnings are projected to be 39-43 cents per share.

Mercury Systems expects fiscal 2022 revenues of $1-1.03 billion.

Adjusted EBITDA is expected to be $220-$227 million for the full fiscal 2022.

Adjusted earnings for fiscal 2022 are estimated to be $2.51-$2.60 per share.

Zacks Rank & Key Picks

Mercury Systems currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the broader computer and technology sector are Salesforce CRM which sports a Zacks Rank #1 (Strong Buy), HP Inc. HPQ and Avnet AVT carrying Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term earnings growth rates for Salesforce, HP and Avnet are currently pegged at 16.8%, 12.7% and 27.7%, respectively.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

HP Inc. (HPQ) : Free Stock Analysis Report

salesforce.com, inc. (CRM) : Free Stock Analysis Report

Avnet, Inc. (AVT) : Free Stock Analysis Report

Mercury Systems Inc (MRCY) : Free Stock Analysis Report

To read this article on Zacks.com click here.