Mercury Systems, Inc. (NASDAQ: MRCY) recently released its operating results for the fourth quarter and full fiscal year 2024, revealing a combination of challenges and potential. Despite a drop in annual revenue and increased net losses, the company saw a significant rebound in its stock price, reflecting market optimism. Let’s dive into the details of these results and how they compare to broader market trends.
Stock Price Surge Following Earnings Report
On Tuesday, Mercury Systems’ stock closed at $34.00, marking a modest increase of +0.18%. However, the excitement didn’t end there. In after-hours trading, the stock surged by +8.82%, reaching $37.00. This jump in stock price indicates that investors may be looking beyond the immediate financial challenges and focusing on the positive aspects of the company’s performance and outlook.
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Fourth Quarter Fiscal 2024 Financial Highlights
Revenue and Bookings
Mercury Systems reported fourth-quarter revenues of $248.6 million, slightly down from $253.2 million in the same quarter of the previous year. Despite the revenue decline, the company’s bookings improved significantly, totaling $284.4 million for the quarter, resulting in a strong book-to-bill ratio of 1.14. This suggests that Mercury is securing more orders than it is fulfilling, which could be a positive sign for future growth.
Profitability and Adjusted Metrics
The company reported a GAAP net loss of $10.8 million, or $0.19 per share, compared to a net loss of $8.2 million, or $0.15 per share, in Q4 2023. However, adjusted earnings per share (EPS) for the quarter were $0.23, a notable increase from $0.11 in the prior year. This reflects some improvement in operational efficiency and cost management despite the overall loss.
Adjusted EBITDA for the quarter also saw a rise, reaching $31.2 million compared to $21.9 million in Q4 2023. This increase suggests that Mercury has been able to enhance its operational profitability during the quarter.
Cash Flow and Free Cash Flow
Mercury Systems significantly improved its cash flows from operating activities, reporting $71.8 million for the fourth quarter versus $12.6 million in Q4 2023. Free cash flow also saw a considerable boost, amounting to $61.4 million, up from $3.8 million in the previous year. This improvement indicates better cash generation and efficiency in capital expenditures.
Full Year Fiscal 2024 Performance
Revenue and Losses
For the full fiscal year 2024, Mercury’s revenues were $835.3 million, down from $973.9 million in fiscal 2023. The company faced a substantial GAAP net loss of $137.6 million, or $2.38 per share, a significant increase from the $28.3 million loss or $0.50 per share reported in the previous year. Adjusted EPS for the year was a loss of ($0.69), a stark contrast to the $1.00 per share gain in fiscal 2023.
Adjusted EBITDA and Cash Flow
Adjusted EBITDA for the fiscal year plummeted to $9.4 million from $132.3 million in fiscal 2023, highlighting a major drop in operational profitability. However, cash flows from operating activities improved to $60.4 million from a negative $(21.3) million in the previous year. Free cash flow also saw a positive shift to $26.1 million from $(60.1) million, reflecting improved cash management and operational efficiency.
Backlog and Future Outlook
Mercury’s backlog stood at $1.33 billion as of June 28, 2024, marking a $185.9 million increase from the previous year. With $758.9 million of this backlog expected to convert to revenue within the next 12 months, the company appears well-positioned for a potential rebound in revenue growth.
Comparing Mercury Systems to the S&P 500
Year-to-Date Performance
Mercury Systems has faced a challenging year-to-date (YTD) performance, with a decline of -7.03%. In stark contrast, the S&P 500 has enjoyed a robust YTD gain of +13.93%. This disparity highlights the broader market’s resilience compared to the specific hurdles faced by Mercury.
Conclusion: What Lies Ahead for Mercury Systems?
Despite the financial setbacks in fiscal 2024, Mercury Systems has demonstrated resilience with significant improvements in cash flow and operational metrics. The impressive after-hours stock price surge suggests that investors are optimistic about the company’s future potential. As Mercury continues to build its backlog and manage its operational efficiencies, there is hope for a turnaround that could bring its performance more in line with market expectations.
