mrcy-20220930

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

________________________________________________________________

FORM 10-Q

________________________________________________________________


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2022


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

COMMISSION FILE NUMBER: 0-23599

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MERCURY SYSTEMS, INC.

(Exact name of registrant as specified in its charter)

________________________________________________________________


Massachusetts		04-2741391
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

50 MINUTEMAN ROAD		01810
ANDOVER	MA
(Address of principal executive offices)		(Zip Code)

978-256-1300

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of Each Class	Trading Symbol(s)	Name of Each Exchange on Which Registered
Common Stock, par value $0.01 per share	MRCY	Nasdaq Global Select Market

____________________________________________________________

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Exchange Act). Yes ☐ No x

Shares of Common Stock outstanding as of October 31, 2022: 57,982,430 shares

MERCURY SYSTEMS, INC.

INDEX


		PAGE NUMBER
PART I. FINANCIAL INFORMATION

Item 1.	Financial Statements (unaudited)	3

	Consolidated Balance Sheets as of September 30, 2022 and July 1, 2022	3

	Consolidated Statements of Operations and Comprehensive Loss for the first quarters ended September 30, 2022 and October 1, 2021	4

	Consolidated Statements of Shareholders’ Equity for the first quarters ended Sept ember 30, 2022 and October 1, 2021	5

	Consolidated Statements of Cash Flows for the first quarters ended September 30, 2022 and October 1, 2021	6

	Notes to Consolidated Financial Statements	7

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	22

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	32

Item 4.	Controls and Procedures	32

PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	33

Item 1A.	Risk Factors	33

Item 6.	Exhibits	34

	Signatures	35

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

MERCURY SYSTEMS, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share data)

(Unaudited)


	September 30, 2022		July 1, 2022
Assets
Current assets:
Cash and cash equivalents	$	51,981	$	65,654

Accounts receivable, net of allowance for credit losses of $2,058 and $2,074 at September 30, 2022 and July 1, 2022, respectively	164,210		144,494
Unbilled receivables and costs in excess of billings	330,495		303,356
Inventory	287,578		270,339

Prepaid income taxes	9,743		7,503
Prepaid expenses and other current assets	34,798		23,906

Total current assets	878,805		815,252

Property and equipment, net	125,913		127,191
Goodwill	937,884		937,880
Intangible assets, net	336,968		351,538
Operating lease right-of-use assets, net	63,738		66,366
Other non-current assets	5,734		6,188

Total assets	$	2,349,042	$	2,304,415
Liabilities and Shareholders’ Equity
Current liabilities:
Accounts payable	$	106,645	$	98,673

Accrued expenses	28,204		34,954
Accrued compensation	23,989		44,813

Deferred revenues and customer advances	23,168		15,487


Total current liabilities	182,006		193,927

Deferred income taxes	31,552		32,398
Income taxes payable	8,591		9,112
Long-term debt	511,500		451,500
Operating lease liabilities	67,261		69,888
Other non-current liabilities	9,202		10,405

Total liabilities	810,112		767,230
Commitments and contingencies (Note N)
Shareholders’ equity:
Preferred stock, $0.01 par value; 1,000,000 shares authorized; no shares issued or outstanding	—		—
Common stock, $0.01 par value; 85,000,000 shares authorized; 56,180,255 and 55,679,747 shares issued and outstanding at September 30, 2022 and July 1, 2022, respectively	562		557
Additional paid-in capital	1,156,501		1,145,323
Retained earnings	371,439		385,774
Accumulated other comprehensive income	10,428		5,531
Total shareholders’ equity	1,538,930		1,537,185
Total liabilities and shareholders’ equity	$	2,349,042	$	2,304,415

The accompanying notes are an integral part of the consolidated financial statements.

MERCURY SYSTEMS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(In thousands, except per share data) (Unaudited)


	First Quarters Ended
	September 30, 2022		October 1, 2021
Net revenues	$	227,579	$	225,013
Cost of revenues	149,484		136,604
Gross margin	78,095		88,409
Operating expenses:
Selling, general and administrative	38,943		36,956
Research and development	27,766		28,882
Amortization of intangible assets	14,574		13,734
Restructuring and other charges	1,508		12,274

Acquisition costs and other related expenses	2,498		2,138
Total operating expenses	85,289		93,984
Loss from operations	(7,194)		(5,575)
Interest income	29		9
Interest expense	(4,547)		(595)
Other expense, net	(3,645)		(1,420)
Loss before income taxes	(15,357)		(7,581)
Income tax benefit	(1,022)		(441)



Net loss	$	(14,335)	$	(7,140)





Basic net loss per share	$	(0.26)	$	(0.13)





Diluted net loss per share	$	(0.26)	$	(0.13)

Weighted-average shares outstanding:
Basic	55,931		55,376
Diluted	55,931		55,376

Comprehensive loss:
Net loss	$	(14,335)	$	(7,140)
Change in fair value of derivative instruments, net of tax	4,420		—
Foreign currency translation adjustments	429		244
Pension benefit plan, net of tax	48		48
Total other comprehensive income, net of tax	4,897		292
Total comprehensive loss	$	(9,438)	$	(6,848)

The accompanying notes are an integral part of the consolidated financial statements.

MERCURY SYSTEMS, INC.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(In thousands)

(Unaudited)

For the First Quarter Ended September 30, 2022

Common Stock

Additional
Paid-in
Capital

Retained
Earnings

Accumulated
Other
Comprehensive
Income

Total
Shareholders’
Equity

Amount

Balance at July 1, 2022

55,680

557

SEC Form 10-Q filed by Mercury Systems Inc