Mercury Systems, Inc.
- Company Name
- Mercury Systems, Inc.
- Stock Symbol
- Class Period
- October 24, 2017 to April 24, 2018
- Motion Deadline
- September 8, 2018
- District of Massachusetts
The complaint charges Mercury and certain of its officers with violations of the Securities Exchange Act of 1934. Mercury is a leading commercial provider of secure sensor and safety-critical processing subsystems that power a wide variety of critical defense and intelligence programs.
The complaint alleges that throughout the Class Period, defendants made false and misleading statements and/or failed to disclose adverse information regarding Mercury’s business model and financial condition, including that Mercury’s decision to insource processing was adversely impacting its operating margins and free cash-flow generation and conversion, and Mercury’s business model was becoming structurally more working-capital intensive. As a result of these false statements and/or omissions, the price of Mercury common stock was artificially inflated during the Class Period to more than $53 per share.
Then, contrary to defendants’ Class Period representations that the Company expected improvement in its free cash flow for the year, on April 24, 2018, Mercury announced its third quarter 2018 financial results, stating that for the quarter, Mercury’s “[f]ree cash flow . . . was a net outflow of $(2.6) million in the third quarter of fiscal 2018, compared to a net inflow of $11.9 million in the third quarter of fiscal 2017,” due to its “continued investment in the business as [it] insource[s] [its] manufacturing and integrate[s] [its] acquisitions.” In a conference call to discuss Mercury’s third quarter results, the Company’s new CFO disclosed that they had been aware for the “last couple quarters” of customer trends in managing cash in their accounts payable and of Mercury’s need to reduce accounts payable related to its inventory builds, which both directly impacted Mercury’s cash flow for the third quarter and nine months ended March 31, 2018. And when asked by an analyst about Mercury’s unpredictable free cash flow, the Company’s CEO responded that Mercury would not begin to see “improvements” until the 2019 fiscal year. On this news, the price of Mercury stock declined $8.02 per share, or nearly 19%, to close at $34.91 per share on April 25, 2018.