Mercury Systems Inc (MRCY)

Short-term

Turnover ratios

The activity ratios of Mercury Systems Inc. over the period from June 30, 2021, to June 30, 2024, reveal notable trends in inventory management, receivables collection, payables utilization, and working capital efficiency.

Inventory Turnover:
The inventory turnover ratio demonstrates a consistent decline, decreasing from 2.43 in 2021 to 1.91 in 2024. This downward trend indicates that the company is holding inventory for longer periods before selling it. A declining ratio may reflect a slowdown in sales, increased inventory levels, or strategic changes in inventory management. The reduction suggests a potential inefficiency in inventory turnover, which could impact liquidity and working capital management.

Receivables Turnover:
The receivables turnover ratio displays a fluctuating pattern. It decreased sharply from 3.17 in 2021 to 2.21 in 2022, then slightly improved to 1.92 in 2023. Subsequently, it increased modestly to 2.01 in 2024 and further to 2.35 in 2025. The initial decline indicates a lengthening of the receivables collection period, potentially impacting cash flow. The subsequent recovery suggests efforts to improve collections are underway, though the ratio remains lower than levels observed in 2021.

Payables Turnover:
The payables turnover ratio increased significantly from 11.24 in 2021 to 8.31 in 2025. Initially, there was a substantial decrease from 11.24 to 6.01 in 2022, reflecting an extension in the time taken to pay suppliers. The gradual increase thereafter indicates a strategic shift toward paying suppliers more frequently or timely, which could improve supplier relationships or reflect better cash management practices.

Working Capital Turnover:
The working capital turnover ratio shows a declining trend from 1.88 in 2021 to 1.38 in 2023, with no data available for 2025. This decline suggests that the efficiency of utilizing working capital to generate sales is decreasing over time. A lower ratio may point to a build-up in working capital relative to sales, or reduced sales productivity relative to working capital investment.

Overall, Mercury Systems Inc.’s activity ratios reflect a pattern of elongating inventory and receivables periods amidst improving payables turnover, indicating shifting operational efficiencies and working capital management strategies. These trends suggest cautious or potentially reactive management of inventory and receivables, alongside an effort to optimize payables, which collectively influence the company’s operational liquidity and efficiency profile.

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Average number of days

The activity ratios for Mercury Systems Inc., as reflected in the provided data, exhibit notable trends over the analyzed fiscal periods.

Days of Inventory on Hand (DOH):
The DOH increased consistently from approximately 150.14 days on June 30, 2021, to 166.33 days on June 30, 2022. This upward trajectory continued through 2023 and into 2024, reaching 187.30 days and then 191.41 days respectively. The lengthening of inventory holding periods suggests that inventory turnover has decreased, potentially indicating slower sales, accumulation of excess inventory, or changes in inventory management strategies. The absence of data for June 30, 2025, precludes further analysis beyond 2024.

Days of Sales Outstanding (DSO):
The DSO illustrates a fluctuating pattern over the period. Starting at 115.24 days in 2021, there was a significant increase to 165.42 days in 2022 and further to 190.13 days in 2023, implying that the company took longer to collect receivables. However, in the subsequent year, 2024, DSO decreased to 181.55 days, and further to 155.31 days in 2025, indicating an improvement in receivables collection efficiency. The overall trend from 2023 to 2025 suggests the company has been taking steps to shorten its receivables cycle after a period of extended collection times.

Number of Days of Payables:
The data shows variability in the days payable outstanding. An increase from 32.48 days in 2021 to 60.71 days in 2022 signifies a tendency to delay payments to suppliers, potentially optimizing cash flow. This was followed by a slight decrease to 57.76 days in 2023 and further reduction to 46.28 days in 2024, with a modest decline to 43.92 days projected for 2025. The decreasing trend indicates a trend towards paying suppliers more promptly in recent years, which could impact liquidity and working capital management.

Summary of Trends:
Overall, Mercury Systems Inc. has experienced an elongation in inventory holding periods and receivables collection times through 2023, which may reflect changes in sales cycles, product mix, or operational strategies. Notably, in recent years, particularly from 2023 onward, there is evidence of improvements in receivables collection efficiency and shortening of payables periods, suggesting adjustments in working capital management aimed at enhancing liquidity and operational efficiency. The balance between these activity ratios indicates ongoing efforts to optimize inventory management, receivables, and payables to align with strategic financial objectives.

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Long-term

The analysis of Mercury Systems Inc.'s long-term activity ratios indicates notable trends over the period from June 30, 2021, to June 30, 2023, with data for subsequent years not available.

The Fixed Asset Turnover ratio experienced a steady increase, rising from 4.74 in 2021 to 5.11 in 2022, and further improving to 8.15 in 2023. This upward trajectory suggests an enhanced efficiency in utilizing fixed assets to generate revenue. The significant increase from 2022 to 2023 highlights the company's ability to generate higher sales relative to its fixed asset base, potentially reflecting operational improvements or capital investments that have become more productive.

In contrast, the Total Asset Turnover ratio exhibits a declining trend over the same period, decreasing from 0.47 in 2021 to 0.43 in 2022, and further to 0.41 in 2023. This decline indicates a decreasing efficiency in generating sales from the total asset base. The juxtaposition of rising Fixed Asset Turnover and declining Total Asset Turnover suggests that while the fixed assets themselves are being used more efficiently, the overall asset base may have expanded or become less productive, possibly due to increased investments in non-fixed assets or other asset classes that have not yet contributed proportionally to sales growth.

Overall, the data imply that Mercury Systems Inc. has optimized its fixed asset utilization, gaining efficiency within its core asset base, but has experienced reduced effectiveness in leveraging its total assets to generate revenue. This shift may reflect strategic asset reallocations or operational adjustments affecting non-fixed assets. Further analysis would be necessary to elucidate the underlying causes, especially considering missing data beyond June 2023.