Key Highlights

  • Adjusted EPS of USD 0.52 beat the USD 0.30 estimate, and Revenue of USD 253.2 million topped USD 245.0 million.
  • Bookings near USD 370 million lifted Backlog 44.7% year on year to USD 2.1 billion, a 1.46 book-to-bill.
  • Gross Margin widened to 35.2% from 27.9%, and adjusted EBITDA margin rose to 22.3% from 15.8%.
  • Management lifted fiscal 2027 adjusted EBITDA guidance to about USD 210 million, from a prior view nearing USD 200 million.

Mercury Systems (NASDAQ:MRCY) reported fiscal first quarter 2027 results for the quarter ended October 2, with revenue of USD 253.2 million, up from USD 225.2 million a year earlier. Organic growth was 12.4%, and revenue exceeded the USD 245.0 million estimate. Adjusted EPS of USD 0.52 compared with the USD 0.30 estimate and with USD 0.26 a year ago.

On a GAAP basis, Net Income was USD 13.1 million, or USD 0.21 per diluted share, against a prior-year net loss of USD 12.5 million. Management described the period as a record for first quarter bookings, backlog, revenue and adjusted EBITDA.

Bookings reached about USD 370 million, up 48%, and next-12-month backlog topped USD 1 billion, up 27.9%. Management cited higher orders in effectors, radar and electronic warfare.

Gross margin reached 35.2%, against 27.9% a year earlier, as Gross Profit rose to USD 89.2 million from USD 62.9 million. Management attributed this to favorable program mix, a higher average backlog margin and about USD 5 million of lower inventory reserves. Operating expenses edged down to USD 70.7 million from USD 71.5 million, with lower litigation and settlement expense of USD 6.1 million offsetting higher Research and Development spending. Selling, general and administrative expense fell USD 2.9 million, or 6.3%, to USD 43.0 million, helped by headcount reductions of about 30 employees.

Adjusted EBITDA was about USD 56 million, up 58.6%. Free Cash Flow was an outflow of about USD 24 million, against an outflow of USD 4 million a year earlier, as inventory rose about USD 32 million sequentially, which management described as a deliberate investment. Net Debt stood at USD 232 million, down 19.2% from a year earlier, after a USD 100 million revolver repayment in the quarter.

Raised Fiscal 2027 Outlook

Management now projects double-digit revenue growth for fiscal 2027, with revenue approaching USD 1.1 billion. Adjusted EBITDA is guided to about USD 210 million, a high-teens margin and roughly 40% growth, while free cash flow conversion is guided to approach 40%, from approaching 35% previously. For the second quarter, it projects revenue up 10% year on year and an adjusted EBITDA margin about 500 basis points wider, with positive free cash flow.

The outlook excludes potential production-program tailwinds. Fiscal 2028 reference points were left unchanged and are described as not constituting financial guidance.

Legal Matters Disclosed in the Filing

The quarterly filing lists pending legal and regulatory matters. Funds associated with an investor group sued the company and two individuals in June 2026, citing allegations from an earlier securities class action that has since been settled. The company states the claims lack merit and has moved to dismiss. Separately, an internal investigation begun in September 2025 is examining possibly inaccurately reported test results on government-program subcontracts. The filing states the company cited no evidence of product ineffectiveness and cannot estimate any cost, and notes that a finding of noncompliance could bring penalties that could be material. These are allegations and open matters, not findings.

Signposts for the Second Quarter

Management described the first quarter mix as favorable and anticipates some normalization over the rest of the year, so the margin path from 22.3% is one item to follow against the guided second quarter expansion. Inventory trends, conversion of the USD 2.1 billion backlog into revenue and defense budget outcomes are other markers.