Mercury Systems' March 2026 quarter was a beat-and-raise: revenue $235.8M, up 11.5% organically; adjusted EBITDA $36.1M at 15.3% margin, up 46% and 360 bps; gross margin 29.3%, up 230 bps. Bookings record $348.3M, 1.48 book-to-bill, backlog near $1.6B. Domestic ~88% of revenue, up 17%. Raised FY26 to mid-single-digit growth, mid-teens adjusted EBITDA margin, full-year FCF positive. Targeting above-market growth, low-to-mid-20s margin, 50% FCF conversion. Not done.
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We make the trusted, secure processing that lives inside other people's radars, missiles, EW and space systems - not the platform, the mission-critical computing at the edge. I run the business against four priorities: performance excellence, a growth engine, wider margins, and free cash flow - and I'd rather show you the progression than talk it up. Last quarter organic revenue grew 11.5%, adjusted EBITDA rose 46% to about $36 million, bookings set a record at $348 million on a 1.48 book-to-bill, and backlog approached $1.6 billion. Here are the dynamics under the hood: adjusted EBITDA went from $9.4 million two years ago to about $119 million - and we're still a GAAP net loss, carrying revolver interest and heavy amortization, with cash flow that's lumpy quarter to quarter. We swung the pendulum hard to just-in-time material, pulled roughly $225 million of working capital out, and now we're pulling the supply base to the left to convert backlog faster. The defense tailwinds everyone asks about - Golden Dome, munitions - aren't in my bookings or my outlook; when they land, they're additive. We're not done.
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Our differentiated moat is trusted, secure, onshore microelectronics — certified trusted design and manufacturing, reverse-engineering mitigation, safety-certifiable security IP, and secure chiplets we flag as a large addressable market. On the call I said certain security standards "we're the only ones that can meet — we've got a nice moat around this business." Products run through an onshore trusted supply chain with no disclosed China, Taiwan, or foundry dependence. Positions us as the trusted-domestic pole as the industry de-risks secure microelectronics away from China.
Adjusted EBITDA went from $9.4M in FY24 to $119.4M in FY25 on ~9% revenue growth to $912M and 440bps gross margin expansion to 27.9%. The inflection is real in adjusted terms, but GAAP net loss persists — ~$37.9M for FY25, ~$30.5M over the first nine months of FY26 — driven primarily by ~$33M/year revolver interest and heavy intangible amortization. No going concern, no goodwill impairment, no material weakness. Restructuring largely complete with ~220 positions reduced. The open items: GAAP profitability and a clean run-rate free cash flow. Not done.
Our March 2026 quarter was a beat-and-raise on the operational lines. Revenue $235.8M, up 11.5% organically. Adjusted EBITDA $36.1M, 15.3% margin — up 46% and 360 bps as gross margin expanded 230 bps to 29.3% on legacy backlog conversion and target-margin bookings. Bookings record $348.3M, 1.48 book-to-bill, backlog nearing $1.6B; domestic up 17% to ~88%. We raised FY26 guidance to mid-single-digit revenue growth, mid-teens adjusted EBITDA margin, full-year FCF positive. Longer-term: above-market growth, low-to-mid-20s adjusted EBITDA margin, 50% FCF conversion. Not done.
Mercury's differentiated moat is trusted, secure, on‑shore microelectronics: certified design, assembly, packaging and test, reverse‑engineering‑mitigation and safety‑certifiable security IP, plus secure chiplets we flag as a large addressable market. As I said, we’re the only ones that can meet certain security standards – we’ve got a nice moat around this business. Our products run through an on‑shore trusted supply chain with no disclosed China, Taiwan or foundry dependence (tariff risk only), positioning us as the trusted‑domestic pole as the industry de‑risks away from China.
Adjusted EBITDA went from $9.4M in FY24 to $119.4M in FY25 on ~9% revenue growth to $912M and 440bps gross margin expansion to 27.9%. The turnaround is real and inflecting, but it lives in the adjusted lines — we're still a GAAP net loss, held down by ~$33M/year revolver interest and heavy amortization. GAAP profitability and clean run-rate FCF remain the open items. Not done.
Conversations on higher LTAMDS quantities are public, but they haven't hit our bookings. The tailwinds — Golden Dome, munitions, global budgets — aren't in the outlook either; they're additive if funding aligns to the right priorities. Could start to manifest by end of calendar '26, potentially as early as Q4. We're watching the conversion, not counting on it. Still have work to do on the four priorities.
Swung the pendulum hard to just-in-time three years ago — cut net working capital $225M from a $659M peak to $434M, a 34% drop that drove FY25 free cash flow to ~$119M. Candid: largely a one-time unwind, not a run-rate, and the swing constrained backlog conversion. Now pulling the supply base left to convert faster. FY26 FCF lumpier — $2M outflow in March vs $24M inflow a year ago — full year guided positive. Net debt ~$260M improving after April's $150M revolver paydown. Not done.
Different game. Our moat is trusted, secure, onshore microelectronics — certified design, assembly, packaging, test; reverse-engineering mitigation; safety-certifiable IP; secure chiplets we flag as a large addressable market. CEO said certain security standards "we're the only ones that can meet." Onshore supply chain, no China/Taiwan foundry dependence disclosed. Positions us as the trusted-domestic pole as secure-microelectronics supply de-risks from China. Not custom ASICs; mission-critical computing at the edge.