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Mercury Systems (MRCY) Beats on Q1 Earnings & Revenue Estimates
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Mercury Systems (MRCY - Free Report) kick-started fiscal 2023 on a strong note by reporting better-than-expected results in the first quarter.
The aerospace and defense tech firm reported non-GAAP earnings of 24 cents per share, which surpassed the Zacks Consensus Estimate of 20 cents and its guidance range of 19-23 cents. The bottom line also came ahead of our estimates of 21 cents per share.
However, non-GAAP earnings declined 41.5% year over year, mainly due to increased costs and higher interest expenses.
Mercury Systems Inc Price, Consensus and EPS Surprise
Mercury Systems’ first-quarter non-GAAP revenues increased marginally to $227.6 million from the $225 million reported in the year-ago quarter. The top line came ahead of the consensus mark of $218.4 million and its guidance range of $215-$225 million.
Mercury Systems’ acquired businesses (5% of the total revenues) — Avalex Technologies and Atlanta Micro — cumulatively contributed $11.8 million to first-quarter revenues. Organic revenues (95% of the total revenues) increased 4.1% year over year and contributed $215.8 million to first-quarter sales.
Mercury Systems’ total bookings were $266.9 million, resulting in a 1.17 book-to-bill ratio.
The company ended the quarter with a backlog of $1.08 billion, up $193.1 million on a year-over-year basis. Within the next 12 months, products worth $694.6 million from this order backlog are expected to be shipped.
Operating Details
Mercury Systems’ gross profit was $78.1 million, down 11.7% year over year. Moreover, its gross margin contracted by 500 basis points (bps) to 34.3%.
Adjusted EBITDA plunged by 19% year over year to $31.2 million. The margin decreased by 330 bps to 13.7%, mainly due to a lower gross margin, partially offset by the reduction in operating expenses as a percentage of revenues.
Total operating expenses decreased 9% to $85.3 million. As a percentage of revenues, operating expenses declined 430 bps to 31.8% from 37.5% in the year-ago quarter.
Balance Sheet & Other Details
As of Sep 30, 2022, MRCY’s cash and cash equivalents were $52 million compared with $65.7 million as of Jul 1, 2022. The long-term debt as of Sep 30, 2022 was $511.5 million.
The company used $66 million in cash for operational activities in the first quarter. It generated negative free cash flow of $73.4 million in the first quarter.
Second-Quarter & Fiscal 2023 Guidance
For the second quarter of fiscal 2023, Mercury Systems projects revenues between $225 million and $240 million. Adjusted EBITDA is anticipated between $38 million and $42 million. Adjusted earnings are projected in the range of 31 cents-36 cents per share.
For fiscal 2023, Mercury Systems now expects revenues between $1.01 billion and 1.05 billion instead of the earlier guidance range of $1-$1.05 billion. It also raised the lower end of the guidance range for adjusted EBITDA to $202.5-$215 million from the previous range of $200-$215 million.
However, MRCY lowered the forecast for adjusted earnings to the $1.93-$2.10 per share band from the earlier range of $1.96 $2.17 per share.
Zacks Rank & Key Picks
Mercury Systems currently carries a Zacks Rank #5 (Strong Sell). Shares of MRCY have decreased 11.7% year to date (YTD).
The Zacks Consensus Estimate for Zscaler's first-quarter fiscal 2023 earnings has been revised 7 cents north to 26 cents per share over the past 60 days. For fiscal 2023, earnings estimates have moved a penny north to $1.18 per share in the past 30 days.
ZS’ earnings beat the Zacks Consensus Estimate in each of the preceding four quarters, the average surprise being 28.6%. Shares of the company have declined 53.2% YTD.
The Zacks Consensus Estimate for Digi’s first-quarter fiscal 2023 earnings has increased by 4 cents to 42 cents per share over the past 90 days. For fiscal 2023, earnings estimates have moved 2.2% up to $1.88 per share in the past 60 days.
DGII's earnings beat the Zacks Consensus Estimate in each of the preceding four quarters, the average surprise being 28.6%. Shares of the company have increased 54.3% YTD.
The Zacks Consensus Estimate for Fortinet's fourth-quarter 2022 earnings has been revised a penny northward to 35 cents per share over the past 90 days. For 2022, earnings estimates have moved upward by 3 cents to $1.05 per share in the past 90 days.
Fortinet's earnings beat the Zacks Consensus Estimate in each of the preceding four quarters, the average surprise being 10.3%. Shares of FTNT have slumped 21.5% YTD.
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Mercury Systems (MRCY) Beats on Q1 Earnings & Revenue Estimates
Mercury Systems (MRCY - Free Report) kick-started fiscal 2023 on a strong note by reporting better-than-expected results in the first quarter.
The aerospace and defense tech firm reported non-GAAP earnings of 24 cents per share, which surpassed the Zacks Consensus Estimate of 20 cents and its guidance range of 19-23 cents. The bottom line also came ahead of our estimates of 21 cents per share.
However, non-GAAP earnings declined 41.5% year over year, mainly due to increased costs and higher interest expenses.
Mercury Systems Inc Price, Consensus and EPS Surprise
Mercury Systems Inc price-consensus-eps-surprise-chart | Mercury Systems Inc Quote
Revenue Details
Mercury Systems’ first-quarter non-GAAP revenues increased marginally to $227.6 million from the $225 million reported in the year-ago quarter. The top line came ahead of the consensus mark of $218.4 million and its guidance range of $215-$225 million.
Mercury Systems’ acquired businesses (5% of the total revenues) — Avalex Technologies and Atlanta Micro — cumulatively contributed $11.8 million to first-quarter revenues. Organic revenues (95% of the total revenues) increased 4.1% year over year and contributed $215.8 million to first-quarter sales.
Mercury Systems’ total bookings were $266.9 million, resulting in a 1.17 book-to-bill ratio.
The company ended the quarter with a backlog of $1.08 billion, up $193.1 million on a year-over-year basis. Within the next 12 months, products worth $694.6 million from this order backlog are expected to be shipped.
Operating Details
Mercury Systems’ gross profit was $78.1 million, down 11.7% year over year. Moreover, its gross margin contracted by 500 basis points (bps) to 34.3%.
Adjusted EBITDA plunged by 19% year over year to $31.2 million. The margin decreased by 330 bps to 13.7%, mainly due to a lower gross margin, partially offset by the reduction in operating expenses as a percentage of revenues.
Total operating expenses decreased 9% to $85.3 million. As a percentage of revenues, operating expenses declined 430 bps to 31.8% from 37.5% in the year-ago quarter.
Balance Sheet & Other Details
As of Sep 30, 2022, MRCY’s cash and cash equivalents were $52 million compared with $65.7 million as of Jul 1, 2022. The long-term debt as of Sep 30, 2022 was $511.5 million.
The company used $66 million in cash for operational activities in the first quarter. It generated negative free cash flow of $73.4 million in the first quarter.
Second-Quarter & Fiscal 2023 Guidance
For the second quarter of fiscal 2023, Mercury Systems projects revenues between $225 million and $240 million. Adjusted EBITDA is anticipated between $38 million and $42 million. Adjusted earnings are projected in the range of 31 cents-36 cents per share.
For fiscal 2023, Mercury Systems now expects revenues between $1.01 billion and 1.05 billion instead of the earlier guidance range of $1-$1.05 billion. It also raised the lower end of the guidance range for adjusted EBITDA to $202.5-$215 million from the previous range of $200-$215 million.
However, MRCY lowered the forecast for adjusted earnings to the $1.93-$2.10 per share band from the earlier range of $1.96 $2.17 per share.
Zacks Rank & Key Picks
Mercury Systems currently carries a Zacks Rank #5 (Strong Sell). Shares of MRCY have decreased 11.7% year to date (YTD).
Some better-ranked stocks from the broader Computer and Technology sector are Zscaler (ZS - Free Report) , Digi International (DGII - Free Report) and Fortinet (FTNT - Free Report) . Zscaler currently sports a Zacks Rank #1 (Strong Buy), while Digi and Fortinet each carry a Zacks Rank #2 (Buy). You can see the complete list of today's Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Zscaler's first-quarter fiscal 2023 earnings has been revised 7 cents north to 26 cents per share over the past 60 days. For fiscal 2023, earnings estimates have moved a penny north to $1.18 per share in the past 30 days.
ZS’ earnings beat the Zacks Consensus Estimate in each of the preceding four quarters, the average surprise being 28.6%. Shares of the company have declined 53.2% YTD.
The Zacks Consensus Estimate for Digi’s first-quarter fiscal 2023 earnings has increased by 4 cents to 42 cents per share over the past 90 days. For fiscal 2023, earnings estimates have moved 2.2% up to $1.88 per share in the past 60 days.
DGII's earnings beat the Zacks Consensus Estimate in each of the preceding four quarters, the average surprise being 28.6%. Shares of the company have increased 54.3% YTD.
The Zacks Consensus Estimate for Fortinet's fourth-quarter 2022 earnings has been revised a penny northward to 35 cents per share over the past 90 days. For 2022, earnings estimates have moved upward by 3 cents to $1.05 per share in the past 90 days.
Fortinet's earnings beat the Zacks Consensus Estimate in each of the preceding four quarters, the average surprise being 10.3%. Shares of FTNT have slumped 21.5% YTD.