Q1 FY2027
Filed Nov 10, 2026Mercury Systems reports record Q1 FY2027 bookings of $370 million (up 48.0% year-over-year), record backlog approaching $2.1 billion, revenue of $253,153 thousand (up 12.4%), and adjusted EBITDA of $56,395 thousand (up 58.6%); company states it is raising its FY2027 outlook
Revenue rose 12.4% year-over-year, the release prints bookings up 48.0% and a 1.46 book-to-bill, and GAAP net income of $13,088 thousand compares with a net loss of $(12,515) thousand a year earlier. Operating cash flow of $(13,966) thousand and free cash flow of $(24,379) thousand were negative, which tempers the read. The company states it is raising its FY2027 outlook, but the filing prints no outlook figures.
Key metrics
shortened, hover for the filing’s print| Metric | Value | q/q | y/y |
|---|---|---|---|
| Net revenues, Q1 FY2027GAAP | $253.2M | – | 12.4% |
| Total bookings, Q1 FY2027other | $370M | – | 48.0% |
| Book-to-bill ratio, Q1 FY2027other | 1.46 | – | – |
| Total backlog at October 2, 2026other | approaching $2.1 billion | – | 44.7% |
| Next-12-month backlog at October 2, 2026other | over $1.0 billion | – | – |
| Cost of revenues, Q1 FY2027GAAP | $164.0M | – | – |
| Gross margin, Q1 FY2027GAAP | $89.19M | – | – |
| Selling, general and administrative, Q1 FY2027GAAP | $43.03M | – | – |
| Research and development, Q1 FY2027GAAP | $16.05M | – | – |
| Amortization of intangible assets, Q1 FY2027GAAP | $9.30M | – | – |
| Restructuring and other charges, Q1 FY2027GAAP | $2.02M | – | – |
| Acquisition costs and other related expenses, Q1 FY2027GAAP | $253K | – | – |
| Total operating expenses, Q1 FY2027GAAP | $70.65M | – | – |
| Income (loss) from operations, Q1 FY2027GAAP | $18.53M | – | – |
| Interest income, Q1 FY2027GAAP | $1.33M | – | – |
| Interest expense, Q1 FY2027GAAP | −$5.41M | – | – |
| Other expense, net, Q1 FY2027GAAP | −$1.15M | – | – |
| Income (loss) before income tax provision (benefit), Q1 FY2027GAAP | $13.31M | – | – |
| Income tax provision (benefit), Q1 FY2027GAAP | $220K | – | – |
| Net income (loss), Q1 FY2027GAAP | $13.09M | – | – |
| Diluted net earnings (loss) per share, Q1 FY2027GAAP | $0.21 | – | – |
| Basic net earnings (loss) per share, Q1 FY2027GAAP | $0.22 | – | – |
| Adjusted earnings per share (adjusted EPS), Q1 FY2027non-GAAP | $0.52 per share | – | – |
| Adjusted EBITDA, Q1 FY2027non-GAAP | $56.40M | – | 58.6% |
| Adjusted EBITDA margin, Q1 FY2027non-GAAP | 22.3% | – | – |
| Net cash (used in) provided by operating activities, Q1 FY2027GAAP | −$13.97M | – | – |
| Purchases of property and equipment, Q1 FY2027GAAP | −$10.41M | – | – |
| Free cash flow, Q1 FY2027non-GAAP | −$24.38M | – | – |
| Net debt at end of Q1 FY2027other | $232M | – | down 19% |
| Cash and cash equivalents at October 2, 2026GAAP | $109.7M | – | – |
| Long-term debt at October 2, 2026GAAP | $341.5M | – | – |
| Total assets at October 2, 2026GAAP | $2.26B | – | – |
| Total shareholders' equity at October 2, 2026GAAP | $1.55B | – | – |
FY2027 outlook
- NoteThe company states that, based on solid execution, it is raising its outlook for fiscal year 2027. No outlook figures are printed in this release.
Capital returns
- No share repurchases or dividends are reported in this filing.
- Cash flow statement prints proceeds from stock option exercise of $19,848 thousand in Q1 FY2027 (none printed for Q1 FY2026).
What drove it
- Company states that its first quarter results reflect robust organic growth and margins that are in-line with its target profile.
- Net revenues rose to $253,153 thousand from $225,209 thousand. Gross margin rose to $89,188 thousand from $62,899 thousand, and income from operations moved to $18,534 thousand from $(8,597) thousand.
- Interest expense fell to $(5,406) thousand from $(7,886) thousand. The release does not state a cause for this change.
- Litigation and settlement expense, net in the adjusted EBITDA reconciliation was $545 thousand, compared with $7,224 thousand in Q1 FY2026.
- Stock-based and other non-cash compensation expense in the adjusted EBITDA reconciliation was $17,191 thousand, compared with $16,328 thousand.
Concerns
- Operating cash flow was negative at $(13,966) thousand, and free cash flow was $(24,379) thousand. Changes in operating assets and liabilities were $(61,939) thousand.
- Inventory and unbilled receivables both increased over the quarter, as shown in the balance sheet.
- Research and development expense rose to $16,051 thousand from $13,184 thousand.
- Due to factoring facility increased from $391 thousand to $6,979 thousand.
- The release provides no outlook figures, so the raised FY2027 outlook cannot be measured against a number.
What to watch
- Conversion of the $2.1 billion backlog and the over $1.0 billion next-12-month backlog into revenue in coming quarters.
- Whether operating cash flow and free cash flow turn positive, given the quarter's outflow and the $(61,939) thousand change in operating assets and liabilities.
- The FY2027 outlook figures, which the company has not printed in this release.
- Inventory and unbilled receivables levels relative to revenue.
- The conference call at 5:00 p.m. ET on November 10, 2026, where management may discuss outlook.
Balance sheet and cash flow
- Net cash used in operating activities was $(13,966) thousand, compared with $2,182 thousand provided in Q1 FY2026. The release prints changes in operating assets and liabilities of $(61,939) thousand, compared with $(16,936) thousand.
- Net cash used in financing activities was $(80,152) thousand, including payments under credit facilities of $(100,000) thousand.
- Cash and cash equivalents fell from $214,306 thousand at July 3, 2026 to $109,679 thousand at October 2, 2026.
- Long-term debt fell from $441,500 thousand to $341,500 thousand. Due to factoring facility rose from $391 thousand to $6,979 thousand.
- Inventory rose from $366,968 thousand to $398,570 thousand. Unbilled receivables and costs in excess of billings rose from $285,760 thousand to $290,348 thousand. Accounts receivable, net rose from $69,222 thousand to $80,772 thousand.
- Accrued compensation fell from $54,537 thousand to $32,270 thousand. Deferred revenues and customer advances rose from $149,565 thousand to $150,181 thousand.
- Goodwill was $941,637 thousand, compared with $942,419 thousand at July 3, 2026. Intangible assets, net were $166,517 thousand, compared with $175,820 thousand.
Analysis
Mercury Systems reported first quarter fiscal 2027 results for the period ended October 2, 2026. Net revenues were $253,153 thousand, up from $225,209 thousand a year earlier, and the release prints a 12.4% year-over-year increase. Total bookings were $370 million, with a book-to-bill of 1.46. The release prints bookings up 48.0% year-over-year, and backlog approaching $2.1 billion, up 44.7% year-over-year. Next-12-month backlog is over $1.0 billion. The company describes these as records. The filing does not break revenue out by segment, product line or geography.
Profitability moved from a loss to a profit on a GAAP basis. Income from operations was $18,534 thousand, against $(8,597) thousand a year earlier. Net income was $13,088 thousand, and diluted EPS was $0.21, compared with a diluted loss of $(0.21). Gross margin was $89,188 thousand against $62,899 thousand, and total operating expenses were $70,654 thousand against $71,496 thousand. Selling, general and administrative expense fell to $43,029 thousand from $45,906 thousand, while research and development expense rose to $16,051 thousand from $13,184 thousand. Interest expense fell to $(5,406) thousand from $(7,886) thousand. The release does not state a cause for this change. On a non-GAAP basis, adjusted EPS was $0.52 against $0.26, and adjusted EBITDA was $56,395 thousand, up 58.6% from $35,568 thousand. The release prints an adjusted EBITDA margin of 22.3%, but does not print the prior-year margin.
Cash generation was weak in the quarter. Operating cash flow was $(13,966) thousand against $2,182 thousand, and free cash flow was $(24,379) thousand against $(4,366) thousand. The release attributes no cause to this beyond the cash flow statement, which shows changes in operating assets and liabilities of $(61,939) thousand. Inventory rose from $366,968 thousand to $398,570 thousand, and unbilled receivables and costs in excess of billings rose from $285,760 thousand to $290,348 thousand. Cash fell from $214,306 thousand to $109,679 thousand, mainly because of $100,000 thousand of payments under credit facilities and the operating outflow. Long-term debt fell from $441,500 thousand to $341,500 thousand, and the release reports net debt of $232 million, down 19% year-over-year.
On guidance, the company states that it is raising its outlook for fiscal year 2027. The release prints no revenue, margin, expense or tax figures for that outlook, so no comparison to a prior range is possible. The filing also states, under Item 5.02, that Dave Farnsworth's role as Chief Operating Officer was formalized on November 10, 2026, in addition to his role as Chief Financial Officer, and the release says he has been operating in that capacity for some time.
Taken together, the reported figures show strong top-line growth in revenue, bookings and backlog, and a swing to GAAP profit. Operating cash flow and free cash flow were negative in the quarter and need to be weighed against the working capital build shown in the cash flow statement. The company's own characterizations of 'robust' growth and margins 'in-line with our target profile' are management statements and are not verified by the printed figures beyond the numbers above.
Management, verbatim
We delivered strong first quarter fiscal 2027 results, with record first quarter bookings, revenue, and adjusted EBITDA, and record backlog,
Bill Ballhaus, Chairman and CEO
Based on this solid execution, we are raising our outlook for fiscal year 2027.
Bill Ballhaus, Chairman and CEO
Not in the filing
stated, not guessed- FY2027 outlook figures (revenue, gross margin, operating expenses, tax rate) are not printed; the release only states the outlook is being raised.
- No previous release outlook was provided, so no comparison against prior guidance is possible.
- Prior-year total bookings amount, prior-year total backlog and prior-year book-to-bill are not printed.
- Gross margin percentage is not printed for either period.
- Prior-year adjusted EBITDA margin is not printed.
- Prior-year net debt amount is not printed; only the 19% decline is stated.
- Prior-year adjusted EPS change percentage, prior-year operating income change and prior-year cost of revenues change are not printed.
- No segment, product line or geographic revenue breakdown is provided in the filing.
- Revenue in the text is rounded to $253 million; the exact figure is taken from the statement of operations.
Written by an AI language model from the company’s SEC earnings filing (Form 8-K Item 2.02, or Form 6-K for a foreign private issuer). Every figure is checked against the filing text, and a metric the filing does not print, or whose value, prior period and change do not add up, is dropped from the metrics. The model can still misread a table, in the metrics or in the text, so check a number in the filing before you rely on it. Consensus estimates, price targets and share-price reactions are not shown because they are not in the filing. AI-generated research, not investment advice.