Key Highlights

  • Revenue rose 12.4% to USD 253.2 million in the fiscal first quarter ended October 2, 2026, while GAAP Net Income was USD 13.1 million, or USD 0.21 per share, against a loss of USD 12.5 million a year earlier.
  • Adjusted Earnings Per Share doubled to USD 0.52 from USD 0.26, and adjusted EBITDA reached USD 56.4 million, a Margin of 22.3% against 15.8% in the same quarter last year.
  • Bookings were about USD 370 million, a book-to-bill ratio of 1.46, and Backlog rose 44.7% to a record above USD 2 billion, which management said improves visibility.
  • Management raised its fiscal 2027 outlook to adjusted EBITDA of about USD 210 million, Revenue approaching USD 1.1 billion and free Cash Flow conversion approaching 40%, up from approaching 35%.

Record First Quarter Flips the Bottom Line to a Profit

Mercury Systems (NASDAQ:MRCY) filed its Quarterly Report on November 10, 2026 and held its Earnings Call on November 11, 2026. The aerospace and defense electronics maker sells processing, radio frequency and mission computing hardware to defense prime contractors and the U.S. government. Revenue of USD 253.2 million compared with USD 225.2 million, led by radar, electronic warfare and effector applications, partly offset by a USD 23.2 million fall in command, control and communications work. Gross margin widened to 35.2% from 27.9% on program mix and USD 5.4 million lower inventory reserves. Operating Income was USD 18.5 million against a loss of USD 8.6 million, helped by USD 6.1 million less litigation and settlement expense in selling, general and administrative costs.

Backlog Growth and a Raised Fiscal 2027 Outlook

Management said record first-quarter bookings of USD 370 million were up 48% year over year, with strength in effectors, radar and electronic warfare, including a competitive takeaway on the F-35 program. Backlog rose USD 637 million, and the portion due over the next 12 months passed USD 1 billion. On the call, management said it now expects fiscal 2027 revenue growth of double digits, adjusted EBITDA margin in the high teens and adjusted EBITDA of about USD 210 million, about 40% growth, up from a prior view of approaching USD 200 million. It expects second-quarter revenue to be up 10% and the margin to expand by roughly 500 basis points year over year. Fiscal 2028 reference points were left unchanged.

Cash Outflow, Inventory Build and Debt Paydown

Free cash flow was an outflow of USD 24 million versus USD 4 million a year earlier, which management tied to a deliberate inventory build. Inventory rose about USD 32 million from the prior quarter, and net Working Capital was about USD 491 million, up USD 33 million year over year. The company repaid USD 100 million on its revolving Credit Facility in the quarter, USD 250 million over two quarters, and net debt fell 19.2% to USD 232 million. Cash stood at USD 110 million. Risks cited in the filing include defense funding timing, Supply chain delays, a possible Government Shutdown and fixed-price overruns, and the company also took USD 2.0 million of restructuring charges, mainly severance for about 35 positions.

Where Things Stand

Possibly, though the evidence is one quarter. Mercury Systems (NASDAQ:MRCY) reached a 22.3% adjusted EBITDA margin, ahead of its own expectation and, in management's words, driven by favorable mix in the quarter, so mix could swing it. Backlog, a raised outlook and a USD 24 million cash outflow all sit side by side, with free cash flow guided to improve in the second half. Next markers are second-quarter revenue growth of about 10%, the margin step-up of roughly 500 basis points and any update to the fiscal 2028 reference points later in the year.