Mercury Systems, Inc. (NASDAQ: MRCY, www.mrcy.com), reported
operating results for the first quarter of fiscal year 2024, ended
September 29, 2023.
“In the first quarter, we made progress against our enhanced
execution plan to deliver predictable results, build a thriving
growth engine, expand margins, and drive improved free cash flow,”
said Bill Ballhaus, Mercury’s President and CEO. “We are
reiterating our full-year guidance based on our current view of
bookings, timing of product delivery, and allocation of factory
capacity.”
“During the quarter we completed two of our 20 challenged
programs, remaining on track to complete a total of at least five
by the end of the first half and the majority by the end of the
fiscal year. We received several important bookings in the quarter
and have good line of sight on additional major franchise awards
later in the year that will drive organic growth next year and
beyond. We are targeting margin expansion by executing on
challenged programs and minimizing cost growth impacts, moving
closer to our historical mix of production and development
programs, and achieving efficiencies through our cost structure.
And we are working to improve free cash flow conversion and cash
release by delivering hardware and transitioning to a more
cash-efficient approach to timing material buys more closely to
resource availability and hardware deliveries.”
First Quarter Fiscal
2024 Results
Total Company first quarter fiscal 2024 revenues were $181.0
million, compared to $227.6 million in the first quarter of fiscal
2023.
Total bookings for the first quarter of fiscal 2024 were $191.5
million, yielding a book-to-bill ratio of 1.06 for the quarter.
Total Company GAAP net loss and loss per share for the first
quarter of fiscal 2024 was $36.7 million, and $0.64, respectively,
compared to GAAP net loss and loss per share of $14.3 million, and
$0.26, respectively, for the first quarter of fiscal 2023. Adjusted
(loss) earnings per share (“adjusted EPS”) was $(0.24) per share
for the first quarter of fiscal 2024, compared to $0.24 per share
in the first quarter of fiscal 2023.
First quarter fiscal 2024 adjusted EBITDA for the total Company
was $2.0 million, compared to $31.2 million for the first quarter
of fiscal 2023.
Cash flows used in operating activities in the first quarter of
fiscal 2024 were $39.1 million, compared to $66.0 million in the
first quarter of fiscal 2023. Free cash flow, defined as cash flows
from operating activities less capital expenditures for property
and equipment, was $(47.1) million for the first quarter of fiscal
2024 and $(73.4) million for the first quarter of fiscal 2023.
Backlog
Mercury’s total backlog at September 29, 2023 was $1.15 billion,
a $73.3 million increase from a year ago. Of the September 29, 2023
total backlog, $732.8 million represents orders expected to be
recognized as revenue within the next 12 months.
Business Outlook
This section presents our current expectations and estimates,
given current visibility, on our business outlook for fiscal year
2024. It is possible that actual performance will differ materially
from the estimates given, either on the upside or on the downside.
Investors should consider all of the risks with respect to these
estimates, including those listed in the Safe Harbor Statement
below and in the First Quarter Fiscal 2024 Earnings Presentation
and in our periodic filings with the U.S. Securities and Exchange
Commission, and make themselves aware of how these risks may impact
our actual performance. All references in this press release to the
full fiscal 2024 are to the 52-week period ending June 28,
2024.
For the full fiscal year 2024, revenues are forecasted to be in
the range of $950.0 million to $1.00 billion, and GAAP net (loss)
income of $(15.9) million to $3.8 million, or $(0.28) to $0.07
(loss) earnings per share, and approximately 58.0 million weighted
average diluted shares outstanding. Adjusted EBITDA for the full
fiscal year is expected to be approximately $160.0 million to
$185.0 million, and adjusted EPS for the full fiscal year is
expected to be approximately $1.19 to $1.54 per share.
Conference Call Information
Management will host a conference call and simultaneous webcast
at 5:00 p.m. ET on Tuesday, November 7, 2023, to discuss
Mercury's quarterly financial results, business highlights and
outlook. In addition, Company representatives may answer questions
concerning business and financial developments and trends, the
Company's view on earnings forecasts, and other business and
financial matters affecting the Company, the responses to which may
contain information that has not been previously disclosed.
To attend the conference call or webcast, participants should
register online at ir.mrcy.com/events-presentations. Participants
are requested to register a day in advance or at a minimum 15
minutes before the start of the call. A replay of the webcast will
be available two hours after the call and archived on the same web
page for six months.
Use of Non-GAAP Financial Measures In addition
to reporting financial results in accordance with generally
accepted accounting principles, or GAAP, the Company provides
adjusted EBITDA, adjusted income, adjusted earnings per share
(“adjusted EPS”), free cash flow, organic revenue and acquired
revenue, which are non-GAAP financial measures. Adjusted EBITDA,
adjusted income, and adjusted EPS exclude certain non-cash and
other specified charges. The Company believes these non-GAAP
financial measures are useful to help investors understand its past
financial performance and prospects for the future. However, these
non-GAAP measures should not be considered in isolation or as a
substitute for financial information provided in accordance with
GAAP. Management believes these non-GAAP measures assist in
providing a more complete understanding of the Company’s underlying
operational results and trends, and management uses these measures
along with the corresponding GAAP financial measures to manage the
Company’s business, to evaluate its performance compared to prior
periods and the marketplace, and to establish operational goals. A
reconciliation of GAAP to non-GAAP financial results discussed in
this press release is contained in the attached exhibits.
Mercury Systems – Innovation that matters®
Mercury Systems is a technology company that delivers
mission-critical processing power to the edge, making advanced
technologies profoundly more accessible for today’s most
challenging aerospace and defense missions. The Mercury Processing
Platform allows customers to tap into innovative capabilities from
silicon to system scale, turning data into decisions on timelines
that matter. Mercury’s products and solutions are deployed in more
than 300 programs and across 35 countries, enabling a broad range
of applications in mission computing, sensor processing, command
and control, and communications. Mercury is headquartered in
Andover, Massachusetts, and has 24 locations worldwide. To learn
more, visit mrcy.com. (Nasdaq: MRCY)
Investors and others should note that we announce material
financial information using our website (www.mrcy.com), SEC
filings, press releases, public conference calls, webcasts, and
social media, including Twitter (twitter.com/mrcy and
twitter.com/mrcy_CEO) and LinkedIn
(www.linkedin.com/company/mercury-systems). Therefore, we encourage
investors and others interested in Mercury to review the
information we post on the social media and other communication
channels listed on our website.
Forward-Looking Safe Harbor Statement
This press release contains certain forward-looking statements,
as that term is defined in the Private Securities Litigation Reform
Act of 1995, including those relating to the Company's focus on
enhanced execution of the Company's strategic plan under a
refreshed Board and leadership team. You can identify these
statements by the words “may,” “will,” “could,” “should,” “would,”
“plans,” “expects,” “anticipates,” “continue,” “estimate,”
“project,” “intend,” “likely,” “forecast,” “probable,” “potential,”
and similar expressions. These forward-looking statements involve
risks and uncertainties that could cause actual results to differ
materially from those projected or anticipated. Such risks and
uncertainties include, but are not limited to, continued funding of
defense programs, the timing and amounts of such funding, general
economic and business conditions, including unforeseen weakness in
the Company’s markets, effects of any U.S. federal government
shutdown or extended continuing resolution, effects of geopolitical
unrest and regional conflicts, competition, changes in technology
and methods of marketing, delays in or cost increases related to
completing development, engineering and manufacturing programs,
changes in customer order patterns, changes in product mix,
continued success in technological advances and delivering
technological innovations, changes in, or in the U.S. government’s
interpretation of, federal export control or procurement rules and
regulations, changes in, or in the interpretation or enforcement
of, environmental rules and regulations, market acceptance of the
Company's products, shortages in or delays in receiving components,
supply chain delays or volatility for critical components such as
semiconductors, production delays or unanticipated expenses
including due to quality issues or manufacturing execution issues,
failure to achieve or maintain manufacturing quality
certifications, such as AS9100, the impact of the COVID pandemic
and supply chain disruption, inflation and labor shortages, among
other things, on program execution and the resulting effect on
customer satisfaction, inability to fully realize the expected
benefits from acquisitions, restructurings, and execution
excellence initiatives or delays in realizing such benefits,
challenges in integrating acquired businesses and achieving
anticipated synergies, effects of shareholder activism, increases
in interest rates, changes to industrial security and
cyber-security regulations and requirements and impacts from any
cyber or insider threat events, changes in tax rates or tax
regulations, such as the deductibility of internal research and
development, changes to interest rate swaps or other cash flow
hedging arrangements, changes to generally accepted accounting
principles, difficulties in retaining key employees and customers,
which difficulties may be impacted by the termination of the
Company’s announced strategic review initiative, unanticipated
challenges with the transition of the Company’s Chief Executive
Officer and Chief Financial Officer roles, including any dispute
arising with the former CEO over his resignation, unanticipated
costs under fixed-price service and system integration engagements,
and various other factors beyond our control. These risks and
uncertainties also include such additional risk factors as are
discussed in the Company's filings with the U.S. Securities and
Exchange Commission, including its Annual Report on Form 10-K for
the fiscal year ended June 30, 2023 and subsequent Quarterly
Reports on Form 10-Q and Current Reports on Form 8-K. The Company
cautions readers not to place undue reliance upon any such
forward-looking statements, which speak only as of the date made.
The Company undertakes no obligation to update any forward-looking
statement to reflect events or circumstances after the date on
which such statement is made.
Contact:David E. Farnsworth, CFOMercury Systems,
Inc.978-967-1991
Mercury Systems and Innovation That Matters are registered
trademarks of Mercury Systems, Inc. Other product and company names
mentioned may be trademarks and/or registered trademarks of their
respective holders.
MERCURY
SYSTEMS, INC. |
|
UNAUDITED
CONSOLIDATED BALANCE SHEETS |
|
(In thousands) |
|
|
|
|
|
|
September 29, |
|
June 30, |
|
|
2023 |
|
2023 |
|
|
|
|
|
Assets |
|
|
|
|
Current assets: |
|
|
|
|
Cash and cash equivalents |
|
$ |
89,369 |
|
$ |
71,563 |
Accounts receivable, net |
|
|
91,448 |
|
|
124,729 |
Unbilled receivables and costs in excess of billings |
|
|
388,555 |
|
|
382,558 |
Inventory |
|
|
362,910 |
|
|
337,216 |
Prepaid expenses and other current assets |
|
|
22,422 |
|
|
20,952 |
Total current assets |
|
|
954,704 |
|
|
937,018 |
|
|
|
|
|
Property and equipment, net |
|
|
117,174 |
|
|
119,554 |
Goodwill |
|
|
938,093 |
|
|
938,093 |
Intangible assets, net |
|
|
285,551 |
|
|
298,051 |
Operating lease right-of-use
assets, net |
|
|
60,877 |
|
|
63,015 |
Deferred tax asset |
|
|
39,919 |
|
|
27,099 |
Other non-current assets |
|
|
4,446 |
|
|
8,537 |
Total assets |
|
$ |
2,400,764 |
|
$ |
2,391,367 |
|
|
|
|
|
Liabilities and Shareholders’
Equity |
|
|
|
|
Current liabilities: |
|
|
|
|
Accounts payable |
|
$ |
95,825 |
|
$ |
103,986 |
Accrued expenses |
|
|
33,660 |
|
|
28,423 |
Accrued compensation |
|
|
17,717 |
|
|
30,419 |
Income taxes payable |
|
|
— |
|
|
13,874 |
Deferred revenues and customer advances |
|
|
58,116 |
|
|
56,562 |
Total current liabilities |
|
|
205,318 |
|
|
233,264 |
|
|
|
|
|
Income taxes payable |
|
|
5,166 |
|
|
5,166 |
Long-term debt |
|
|
576,500 |
|
|
511,500 |
Operating lease
liabilities |
|
|
64,168 |
|
|
66,797 |
Other non-current
liabilities |
|
|
8,800 |
|
|
7,955 |
Total liabilities |
|
|
859,952 |
|
|
824,682 |
|
|
|
|
|
Shareholders’ equity: |
|
|
|
|
Preferred stock |
|
|
— |
|
|
— |
Common stock |
|
|
573 |
|
|
570 |
Additional paid-in capital |
|
|
1,205,573 |
|
|
1,196,847 |
Retained earnings |
|
|
320,731 |
|
|
357,439 |
Accumulated other comprehensive income |
|
|
13,935 |
|
|
11,829 |
Total shareholders’ equity |
|
|
1,540,812 |
|
|
1,566,685 |
Total liabilities and shareholders’ equity |
|
$ |
2,400,764 |
|
$ |
2,391,367 |
|
|
|
|
|
|
|
MERCURY SYSTEMS,
INC. |
|
|
|
|
UNAUDITED
CONSOLIDATED STATEMENTS OF OPERATIONS |
(In thousands, except per
share data) |
|
|
|
|
|
|
First Quarters Ended |
|
|
September 29, 2023 |
|
September 30, 2022 |
Net revenues |
|
$ |
180,991 |
|
|
$ |
227,579 |
|
Cost of revenues(1) |
|
|
130,464 |
|
|
|
149,484 |
|
Gross margin |
|
|
50,527 |
|
|
|
78,095 |
|
|
|
|
|
|
Operating expenses: |
|
|
|
|
Selling, general and administrative(1) |
|
|
35,794 |
|
|
|
38,943 |
|
Research and development(1) |
|
|
31,872 |
|
|
|
27,766 |
|
Amortization of intangible assets |
|
|
12,547 |
|
|
|
14,574 |
|
Restructuring and other charges |
|
|
9,546 |
|
|
|
1,508 |
|
Acquisition costs and other related expenses |
|
|
969 |
|
|
|
2,498 |
|
Total operating expenses |
|
|
90,728 |
|
|
|
85,289 |
|
|
|
|
|
|
Loss from operations |
|
|
(40,201 |
) |
|
|
(7,194 |
) |
|
|
|
|
|
Interest income |
|
|
103 |
|
|
|
29 |
|
Interest expense |
|
|
(7,863 |
) |
|
|
(4,547 |
) |
Other expense, net |
|
|
(1,774 |
) |
|
|
(3,645 |
) |
|
|
|
|
|
Loss before income taxes |
|
|
(49,735 |
) |
|
|
(15,357 |
) |
Income tax benefit(2) |
|
|
(13,027 |
) |
|
|
(1,022 |
) |
Net loss |
|
$ |
(36,708 |
) |
|
$ |
(14,335 |
) |
|
|
|
|
|
Basic net loss per share |
|
$ |
(0.64 |
) |
|
$ |
(0.26 |
) |
|
|
|
|
|
Diluted net loss earnings per
share |
|
$ |
(0.64 |
) |
|
$ |
(0.26 |
) |
|
|
|
|
|
Weighted-average shares
outstanding: |
|
|
|
|
Basic |
|
|
57,105 |
|
|
|
55,931 |
|
Diluted |
|
|
57,105 |
|
|
|
55,931 |
|
|
|
|
|
|
(1) Includes
stock-based compensation expense, allocated as follows: |
Cost of revenues |
|
$ |
816 |
|
|
$ |
799 |
|
Selling, general and administrative |
|
$ |
1,761 |
|
|
$ |
4,878 |
|
Research and development |
|
$ |
1,540 |
|
|
$ |
1,572 |
|
|
|
|
|
|
|
|
|
|
(2)
For the first quarter ended September 29, 2023, the Company
calculated the U.S. income tax benefit using the discrete method as
though the three-month period was the annual period as this was
more appropriate given the facts and circumstances. The Company
determined that the application of the estimated annual effective
tax rate (“AETR”) method generally required by ASC 740 is
impractical given that normal deviations in the projected close to
break-even pre-tax net income (loss) could result in a
disproportionate and unreliable effective tax rate under the AETR
method. |
|
|
|
|
|
MERCURY SYSTEMS,
INC. |
|
|
|
|
UNAUDITED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS |
(In thousands) |
|
|
|
|
|
|
First Quarters Ended |
|
|
September 29, 2023 |
|
September 30, 2022 |
Cash flows from operating
activities: |
|
|
|
|
Net loss |
|
$ |
(36,708 |
) |
|
$ |
(14,335 |
) |
Depreciation and amortization |
|
|
22,692 |
|
|
|
23,701 |
|
Other non-cash items, net |
|
|
(3,651 |
) |
|
|
8,814 |
|
Cash settlement for termination of interest rate swap |
|
|
7,403 |
|
|
|
5,995 |
|
Changes in operating assets and liabilities |
|
|
(28,804 |
) |
|
|
(90,214 |
) |
|
|
|
|
|
Net cash used in operating activities |
|
|
(39,068 |
) |
|
|
(66,039 |
) |
|
|
|
|
|
Cash flows from investing
activities: |
|
|
|
|
Purchases of property and equipment |
|
|
(8,015 |
) |
|
|
(7,328 |
) |
Other investing activities |
|
|
— |
|
|
|
50 |
|
|
|
|
|
|
Net cash used in investing activities |
|
|
(8,015 |
) |
|
|
(7,278 |
) |
|
|
|
|
|
Cash flows from financing
activities: |
|
|
|
|
Borrowings under credit facilities |
|
|
65,000 |
|
|
|
60,000 |
|
Payments for retirement of common stock |
|
|
— |
|
|
|
(63 |
) |
|
|
|
|
|
Net cash provided by financing activities |
|
|
65,000 |
|
|
|
59,937 |
|
|
|
|
|
|
Effect of exchange rate
changes on cash and cash equivalents |
|
|
(111 |
) |
|
|
(293 |
) |
|
|
|
|
|
Net increase (decrease) in
cash and cash equivalents |
|
|
17,806 |
|
|
|
(13,673 |
) |
|
|
|
|
|
Cash and cash equivalents at
beginning of period |
|
|
71,563 |
|
|
|
65,654 |
|
|
|
|
|
|
Cash and cash equivalents at
end of period |
|
$ |
89,369 |
|
|
$ |
51,981 |
|
UNAUDITED
SUPPLEMENTAL INFORMATION RECONCILIATION OF GAAP TO NON-GAAP
MEASURES |
(In thousands) |
|
|
|
|
|
|
Adjusted EBITDA, a non-GAAP measure for reporting financial
performance, excludes the impact of certain items and, therefore,
has not been calculated in accordance with GAAP. Management
believes that exclusion of these items assists in providing a more
complete understanding of the Company’s underlying results and
trends, and management uses these measures along with the
corresponding GAAP financial measures to manage the Company’s
business, to evaluate its performance compared to prior periods and
the marketplace, and to establish operational goals. The
adjustments to calculate this non-GAAP financial measure, and the
basis for such adjustments, are outlined below:
Other non-operating adjustments. The Company records other
non-operating adjustments such as gains or losses on foreign
currency remeasurement, investments and fixed asset sales or
disposals among other adjustments. These adjustments may vary from
period to period without any direct correlation to underlying
operating performance.
Interest income and expense. The Company receives interest
income on investments and incurs interest expense on loans,
financing leases and other financing arrangements. These amounts
may vary from period to period due to changes in cash and debt
balances and interest rates driven by general market conditions or
other circumstances outside of the normal course of the Company’s
operations.
Income taxes. The Company’s GAAP tax expense can fluctuate
materially from period to period due to tax adjustments that are
not directly related to underlying operating performance or to the
current period of operations.
Depreciation. The Company incurs depreciation expense related to
capital assets purchased to support the ongoing operations of the
business. These assets are recorded at cost or fair value and are
depreciated using the straight-line method over the useful life of
the asset. Purchases of such assets may vary significantly from
period to period and without any direct correlation to underlying
operating performance.
Amortization of intangible assets. The Company incurs
amortization of intangible assets primarily as a result of acquired
intangible assets such as backlog, customer relationships and
completed technologies but also due to licenses, patents and other
arrangements. These intangible assets are valued at the time of
acquisition or upon receipt of right to use the asset, amortized
over the requisite life and generally cannot be changed or
influenced by management after acquisition.
Restructuring and other charges. The Company incurs
restructuring and other charges in connection with management’s
decisions to undertake certain actions to realign operating
expenses through workforce reductions and the closure of certain
Company facilities, businesses and product lines. The Company’s
adjustments reflected in restructuring and other charges are
typically related to acquisitions and organizational redesign
programs initiated as part of discrete post-acquisition integration
activities. Management believes these items are non-routine and may
not be indicative of ongoing operating results.
Impairment of long-lived assets. The Company incurs impairment
charges of long-lived assets based on events that may or may not be
within the control of management. Management believes these items
are outside the normal operations of the Company’s business and are
not indicative of ongoing operating results.
Acquisition, financing and other third party costs. The Company
incurs transaction costs related to acquisition and potential
acquisition opportunities, such as legal, accounting, and other
third party advisory fees. The Company may also incur third party
costs, such as legal, banking, communications, proxy solicitation,
and other third party advisory fees in connection with engagements
by activist investors or unsolicited acquisition offers. Although
the Company may incur such third party costs and other related
charges and adjustments, it is not indicative that any transaction
will be consummated. Additionally, the Company incurs unused
revolver and bank fees associated with maintaining its credit
facility as well as non-cash financing expenses associated with
obtaining its credit facility. Management believes these items are
outside the normal operations of the Company’s business and are not
indicative of ongoing operating results.
Fair value adjustments from purchase accounting. As a result of
applying purchase accounting rules to acquired assets and
liabilities, certain fair value adjustments are recorded in the
opening balance sheet of acquired companies. These adjustments
are then reflected in the Company’s income statements in periods
subsequent to the acquisition. In addition, the impact of any
changes to originally recorded contingent consideration amounts are
reflected in the income statements in the period of the change.
Management believes these items are outside the normal operations
of the Company and are not indicative of ongoing operating
results.
Litigation and settlement income and expense. The Company
periodically receives income and incurs expenses related to pending
claims and litigation and associated legal fees and potential case
settlements and/or judgments. Although the Company may incur such
costs and other related charges and adjustments, it is not
indicative of any particular outcome until the matter is fully
resolved. Management believes these items are outside the normal
operations of the Company’s business and are not indicative of
ongoing operating results. The Company periodically receives
warranty claims from customers and makes warranty claims towards
its vendors and supply chain. Management believes the expenses and
gains associated with these recurring warranty items are within the
normal operations and operating cycle of the Company’s business.
Therefore, management deems no adjustments are necessary unless
under extraordinary circumstances.
COVID related expenses. The Company incurred costs associated
with the COVID pandemic. These costs relate primarily to enhanced
compensation and benefits for employees as well as incremental
supplies and services to support social distancing and mitigate the
spread of COVID. These costs include expanded sick pay related to
COVID, overtime, the Mercury Employee COVID Relief Fund, meals and
other compensation-related expenses as well as ongoing testing for
onsite employees. Management believes these items are outside the
normal operations of the Company and are not indicative of ongoing
operating results.
Stock-based and other non-cash compensation expense. The Company
incurs expense related to stock-based compensation included in its
GAAP presentation of cost of revenues, selling, general and
administrative expense and research and development expense. The
Company also incurs non-cash based compensation in the form of
pension related expenses and matching contributions to its defined
contribution plan. Although stock-based and other non-cash
compensation is an expense of the Company and viewed as a form of
compensation, these expenses vary in amount from period to period,
and are affected by market forces that are difficult to predict and
are not within the control of management, such as the market price
and volatility of the Company’s shares, risk-free interest rates
and the expected term and forfeiture rates of the awards, as well
as pension actuarial assumptions. Management believes that
exclusion of these expenses allows comparisons of operating results
to those of other companies, both public, private or foreign, that
disclose non-GAAP financial measures that exclude stock-based
compensation and other non-cash compensation.
Mercury uses adjusted EBITDA as an important indicator of the
operating performance of its business. Management excludes the
above-described items from its internal forecasts and models when
establishing internal operating budgets, supplementing the
financial results and forecasts reported to the Company’s board of
directors, determining a portion of bonus compensation for
executive officers and other key employees based on operating
performance, evaluating short-term and long-term operating trends
in the Company’s operations, and allocating resources to various
initiatives and operational requirements. The Company believes that
adjusted EBITDA permits a comparative assessment of its operating
performance, relative to its performance based on its GAAP results,
while isolating the effects of charges that may vary from period to
period without any correlation to underlying operating performance.
The Company believes that these non-GAAP financial adjustments are
useful to investors because they allow investors to evaluate the
effectiveness of the methodology and information used by management
in its financial and operational decision-making. The Company
believes that trends in its adjusted EBITDA are valuable indicators
of its operating performance.
Adjusted EBITDA is a non-GAAP financial measure and should not
be considered in isolation or as a substitute for financial
information provided in accordance with GAAP. This non-GAAP
financial measure may not be computed in the same manner as
similarly titled measures used by other companies. The Company
expects to continue to incur expenses similar to the adjusted
EBITDA financial adjustments described above, and investors should
not infer from the Company’s presentation of this non-GAAP
financial measure that these costs are unusual, infrequent or
non-recurring.
The following table reconciles the most directly comparable GAAP
financial measure to the non-GAAP financial measure.
|
|
First Quarters Ended |
|
|
September 29, 2023 |
|
September 30, 2022 |
Net loss |
|
$ |
(36,708 |
) |
|
$ |
(14,335 |
) |
Other non-operating adjustments, net |
|
|
731 |
|
|
|
1,797 |
|
Interest expense, net |
|
|
7,760 |
|
|
|
4,518 |
|
Income tax benefit |
|
|
(13,027 |
) |
|
|
(1,022 |
) |
Depreciation |
|
|
10,145 |
|
|
|
9,127 |
|
Amortization of intangible assets |
|
|
12,547 |
|
|
|
14,574 |
|
Restructuring and other charges |
|
|
9,546 |
|
|
|
1,508 |
|
Impairment of long-lived assets |
|
|
— |
|
|
|
— |
|
Acquisition, financing and other third party costs |
|
|
1,332 |
|
|
|
2,864 |
|
Fair value adjustments from purchase accounting |
|
|
177 |
|
|
|
(176 |
) |
Litigation and settlement expense, net |
|
|
503 |
|
|
|
1,305 |
|
COVID related expenses |
|
|
— |
|
|
|
61 |
|
Stock-based and other non-cash compensation expense |
|
|
8,951 |
|
|
|
10,940 |
|
Adjusted EBITDA |
|
$ |
1,957 |
|
|
$ |
31,161 |
|
Free cash flow, a non-GAAP measure for reporting cash flow, is
defined as cash provided by operating activities less capital
expenditures for property and equipment, which includes capitalized
software development costs, and, therefore, has not been calculated
in accordance with GAAP. Management believes free cash flow
provides investors with an important perspective on cash available
for investment and acquisitions after making capital investments
required to support ongoing business operations and long-term value
creation. The Company believes that trends in its free cash flow
are valuable indicators of its operating performance and
liquidity.
Free cash flow is a non-GAAP financial measure and should not be
considered in isolation or as a substitute for financial
information provided in accordance with GAAP. This non-GAAP
financial measure may not be computed in the same manner as
similarly titled measures used by other companies. The Company
expects to continue to incur expenditures similar to the free cash
flow financial adjustment described above, and investors should not
infer from the Company’s presentation of this non-GAAP financial
measure that these expenditures reflect all of the Company's
obligations which require cash.
The following table reconciles the most directly comparable GAAP
financial measure to the non-GAAP financial measure.
|
|
First Quarters Ended |
|
|
September 29, 2023 |
|
September 30, 2022 |
Net cash used in operating activities |
|
$ |
(39,068 |
) |
|
$ |
(66,039 |
) |
Purchases of property and equipment |
|
|
(8,015 |
) |
|
|
(7,328 |
) |
Free cash flow |
|
$ |
(47,083 |
) |
|
$ |
(73,367 |
) |
UNAUDITED
SUPPLEMENTAL INFORMATION RECONCILIATION OF GAAP TO NON-GAAP
MEASURES |
(In thousands, except per
share data) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted income and adjusted earnings per share (“adjusted EPS”)
are non-GAAP measures for reporting financial performance, exclude
the impact of certain items and, therefore, have not been
calculated in accordance with GAAP. Management believes that
exclusion of these items assists in providing a more complete
understanding of the Company’s underlying results and trends and
allows for comparability with its peer company index and industry.
These non-GAAP financial measures may not be computed in the same
manner as similarly titled measures used by other companies. The
Company uses these measures along with the corresponding GAAP
financial measures to manage the Company’s business and to evaluate
its performance compared to prior periods and the marketplace. The
Company defines adjusted income as income before other
non-operating adjustments, amortization of intangible assets,
restructuring and other charges, impairment of long-lived assets,
acquisition, financing and other third party costs, fair value
adjustments from purchase accounting, litigation and settlement
income and expense, COVID related expenses, and stock-based and
other non-cash compensation expense. The impact to income taxes
includes the impact to the effective tax rate, current tax
provision and deferred tax provision(1). Adjusted EPS expresses
adjusted income on a per share basis using weighted average diluted
shares outstanding.
The following table reconciles the most directly comparable GAAP
financial measures to the non-GAAP financial measures.
|
|
First Quarters Ended |
|
|
September 29, 2023 |
|
September 30, 2022 |
Net loss and loss per share |
|
$ |
(36,708 |
) |
|
$ |
(0.64 |
) |
|
$ |
(14,335 |
) |
|
$ |
(0.26 |
) |
Other non-operating adjustments, net |
|
|
731 |
|
|
|
|
|
1,797 |
|
|
|
Amortization of intangible assets |
|
|
12,547 |
|
|
|
|
|
14,574 |
|
|
|
Restructuring and other charges |
|
|
9,546 |
|
|
|
|
|
1,508 |
|
|
|
Impairment of long-lived assets |
|
|
— |
|
|
|
|
|
— |
|
|
|
Acquisition, financing and other third party costs |
|
|
1,332 |
|
|
|
|
|
2,864 |
|
|
|
Fair value adjustments from purchase accounting |
|
|
177 |
|
|
|
|
|
(176 |
) |
|
|
Litigation and settlement expense, net |
|
|
503 |
|
|
|
|
|
1,305 |
|
|
|
COVID related expenses |
|
|
— |
|
|
|
|
|
61 |
|
|
|
Stock-based and other non-cash compensation expense |
|
|
8,951 |
|
|
|
|
|
10,940 |
|
|
|
Impact to income taxes(1) |
|
|
(10,758 |
) |
|
|
|
|
(5,191 |
) |
|
|
Adjusted (loss) income and
adjusted (loss) earnings per share(2) |
|
$ |
(13,679 |
) |
|
$ |
(0.24 |
) |
|
$ |
13,347 |
|
|
$ |
0.24 |
|
|
|
|
|
|
|
|
|
|
Diluted weighted-average
shares outstanding |
|
|
|
|
57,105 |
|
|
|
|
|
56,347 |
|
|
|
|
|
|
|
|
|
|
(1)
Impact to income taxes is calculated by recasting income before
income taxes to include the items involved in determining adjusted
income and recalculating the income tax provision using this
adjusted income from operations before income taxes. The
recalculation also adjusts for any discrete tax expense or benefit
related to the items. (2) Loss per share and adjusted loss per
share is calculated using basic shares whereas earnings per share
and adjusted earnings per share is calculated using diluted shares.
There was a $0.01 impact to the calculation of adjusted earnings
per share as a result of this for the first quarter ended September
30, 2022. |
|
|
UNAUDITED
SUPPLEMENTAL INFORMATION RECONCILIATION OF GAAP TO NON-GAAP
MEASURES |
(In thousands) |
|
|
|
|
|
|
Organic revenue and acquired revenue are non-GAAP measures for
reporting financial performance of the Company’s business.
Management believes this information provides investors with
insight as to the Company’s ongoing business performance. Organic
revenue represents total company revenue excluding net revenue from
acquired companies for the first four full quarters since the
entities’ acquisition date (which excludes intercompany
transactions). Acquired revenue represents revenue from acquired
companies for the first four full quarters since the entities’
acquisition date (which excludes intercompany transactions). After
the completion of four full fiscal quarters, acquired revenue is
treated as organic for current and comparable historical
periods.
The following table reconciles the most directly comparable GAAP
financial measure to the non-GAAP financial measure.
|
|
First Quarters Ended |
|
|
September 29, 2023 |
|
September 30, 2022 |
Organic revenue |
|
$ |
180,991 |
|
$ |
227,579 |
Acquired revenue |
|
|
— |
|
|
— |
Net revenues |
|
$ |
180,991 |
|
$ |
227,579 |
MERCURY
SYSTEMS, INC. |
RECONCILIATION OF
FORWARD-LOOKING GUIDANCE RANGE |
|
|
|
Fiscal Year Ending June 28,
2024 |
|
|
|
(In thousands) |
|
|
|
The Company defines adjusted EBITDA as income before other
non-operating adjustments, interest income and expense, income
taxes, depreciation, amortization of intangible assets,
restructuring and other charges, impairment of long-lived assets,
acquisition, financing and other third party costs, fair value
adjustments from purchase accounting, litigation and settlement
income and expense, COVID related expenses, and stock-based and
other non-cash compensation expense.
The following table reconciles the most directly comparable GAAP
financial measures to the non-GAAP financial measures.
|
|
Fiscal Year Ending |
|
|
June 28, 2024(1) |
|
|
Range |
|
|
Low |
|
High |
GAAP expectation -- Net loss (income) |
|
$ |
(15,900 |
) |
|
$ |
3,800 |
|
|
|
|
|
|
Adjust for: |
|
|
|
|
Other non-operating adjustments, net |
|
|
— |
|
|
|
— |
|
Interest expense, net |
|
|
31,600 |
|
|
|
31,600 |
|
Income tax benefit |
|
|
(7,400 |
) |
|
|
(2,200 |
) |
Depreciation |
|
|
42,000 |
|
|
|
42,000 |
|
Amortization of intangible assets |
|
|
47,600 |
|
|
|
47,600 |
|
Restructuring and other charges |
|
|
9,500 |
|
|
|
9,500 |
|
Impairment of long-lived assets |
|
|
— |
|
|
|
— |
|
Acquisition, financing and other third party costs |
|
|
3,100 |
|
|
|
3,100 |
|
Fair value adjustments from purchase accounting |
|
|
700 |
|
|
|
700 |
|
Litigation and settlement expense, net |
|
|
500 |
|
|
|
500 |
|
Stock-based and other non-cash compensation expense |
|
|
48,300 |
|
|
|
48,300 |
|
Adjusted EBITDA
expectation |
|
$ |
160,000 |
|
|
$ |
185,000 |
|
|
|
|
|
|
(1) Rounded amounts used. |
|
|
|
|
MERCURY
SYSTEMS, INC. |
RECONCILIATION OF
FORWARD-LOOKING GUIDANCE RANGE |
|
|
|
Fiscal Year Ending June 28,
2024 |
|
|
|
(In thousands, except per
share data) |
|
|
|
The Company defines adjusted income as income before other
non-operating adjustments, amortization of intangible assets,
restructuring and other charges, impairment of long-lived assets,
acquisition, financing and other third party costs, fair value
adjustments from purchase accounting, litigation and settlement
income and expense, COVID related expenses and stock-based and
other non-cash compensation expense. The impact to income taxes
includes the impact to the effective tax rate, current tax
provision and deferred tax provision(3). Adjusted EPS expresses
adjusted income on a per share basis using weighted average diluted
shares outstanding.
The following tables reconcile the most directly comparable GAAP
financial measures to the non-GAAP financial measures.
|
|
Fiscal Year Ending June 28, 2024(1) |
|
|
Range |
|
|
Low |
|
High |
GAAP expectation -- Net (loss) income and (loss) earnings per
share(2) |
|
$ |
(15,900 |
) |
|
$ |
(0.28 |
) |
|
$ |
3,800 |
|
|
$ |
0.07 |
Other non-operating adjustments, net |
|
|
— |
|
|
|
|
|
— |
|
|
|
Amortization of intangible assets |
|
|
47,600 |
|
|
|
|
|
47,600 |
|
|
|
Restructuring and other charges |
|
|
9,500 |
|
|
|
|
|
9,500 |
|
|
|
Impairment of long-lived assets |
|
|
— |
|
|
|
|
|
— |
|
|
|
Acquisition, financing and other third party costs |
|
|
3,100 |
|
|
|
|
|
3,100 |
|
|
|
Fair value adjustments from purchase accounting |
|
|
700 |
|
|
|
|
|
700 |
|
|
|
Litigation and settlement expense, net |
|
|
500 |
|
|
|
|
|
500 |
|
|
|
Stock-based and other non-cash compensation expense |
|
|
48,300 |
|
|
|
|
|
48,300 |
|
|
|
Impact to income taxes(3) |
|
|
(24,500 |
) |
|
|
|
|
(24,200 |
) |
|
|
Adjusted income and adjusted
earnings per share expectation |
|
$ |
69,300 |
|
|
$ |
1.19 |
|
|
$ |
89,300 |
|
|
$ |
1.54 |
|
|
|
|
|
|
|
|
|
Diluted weighted-average
shares outstanding expectation |
|
|
|
|
58,000 |
|
|
|
|
|
58,000 |
|
|
|
|
|
|
|
|
|
(1) Rounded
amounts used. |
(2) Loss per share
is calculated using basic shares whereas earnings per share and
adjusted earnings per share is calculated using diluted shares.
There was a $0.01 impact to the calculation of the low-end of
adjusted earnings per share forward-looking guidance as
a result of this for the fiscal year ending June 28,
2024. |
(3)
Impact to income taxes is calculated by recasting income before
income taxes to include the items involved in determining adjusted
income and recalculating the income tax provision using this
adjusted income from operations before income taxes. The
recalculation also adjusts for any discrete tax expense or benefit
related to the items. |
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