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Mercury (MRCY) Q3 Earnings & Revenues Top Estimates, Up Y/Y

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Mercury Systems (MRCY - Free Report) reported third-quarter fiscal 2021 non-GAAP earnings of 64 cents per share, beating the Zacks Consensus Estimate by a penny. The figure also marks improvement from the year-ago quarter’s earnings of 60 cents per share.

Revenues of $256.9 million also surpassed the consensus mark of $254.2 million as well as increased 23.5% year over year. This year-on-year improvement is mainly attributable to the Physical Optics Corporation acquisition which contributed $38.5 million to the total revenues.

Quarterly Details

Organic revenues (85% of total revenues) climbed 5% to $218.4 million in the reported quarter.

Moreover, acquired revenues (15% of total revenues) came in at $38.5 million.

Mercury Systems Inc Price, Consensus and EPS Surprise

Mercury Systems Inc Price, Consensus and EPS Surprise

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

Mercury's total bookings at the end of the fiscal third quarter came in at $210.2 million, reflecting a book-to-bill ratio of 0.82. The company ended the quarter with a backlog of $893.7 million, up $123.9 million year on year. From this backlog, $545.5 million worth of products are expected to be shipped within the next 12 months.

Operating Details

Gross margin shrunk 380 basis points (bps) year on year to 41.1% in the fiscal third quarter.

Adjusted EBITDA climbed 16.3% year over year to $54.8 million. However, adjusted EBITDA margin contracted 130 bps year on year to 21.3%.

Selling, general & administrative expenses as a percentage of revenues shrunk 140 bps year over year to 14.9%.

Moreover, research & development expenses as a percentage of revenues contracted 20 bps to 11.8%.

Operating margin shrunk 420 bps year on year to 8.5%.

Balance Sheet and Cash Flow

Mercury had cash and cash equivalents of $121.9 million as of Apr 2, 2021, down from the $109.1 million witnessed at the end of the previous quarter.

The company generated $23.2 million of cash flow from operating activities. Free cash flow was $13.2 million. During the first half of fiscal 2021, the company generated $70.1 million of operating cash flow and $35.3 million of free cash flow.

Guidance

For the fourth quarter of fiscal 2021, revenues are projected at $236.5-$246.5 million.

Adjusted EBITDA is anticipated in the band of $58.1-$60 million. Adjusted earnings are estimated to be 66-69 cents per share.

Mercury lowered its full-year revenue guidance to $910-$920 million from $925-$945 million.

The adjusted EBITDA forecast has also been lowered and narrowed to $201-$203 million from the $201-$206 million projected earlier. Adjusted earnings are now estimated to be $2.35-$2.37 per share compared with the previous expectation of $2.35-$2.42 per share.

Zacks Rank and Other Stocks to Consider

Mercury currently carries a Zacks Rank #2 (Buy).

Other better-ranked stocks in the broader technology sector include Lam Research Corporation (LRCX - Free Report) , ASML Holding N.V. (ASML - Free Report) and NVIDIA (NVDA - Free Report) . While Lam Research and ASML Holding sport a Zacks Rank #1, NVIDIA carries a Zacks Rank #2 (Buy), at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

The long-term earnings growth rate for Lam Research, ASML Holding, and NVIDIA is currently pegged at 32.8%, 29.8% and 15.1%, respectively.

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