Revenue and Financial Performance - Total revenues increased by $20.8 million, or 10.2%, to $225.2 million for the first quarter ended September 26, 2025, compared to $204.4 million for the same period in 2024[137]. - The increase in total revenue was primarily driven by C4I and other sensor applications, with increases of $26.2 million and $3.4 million, respectively[138]. - Net loss for the first quarter ended September 26, 2025, was $12,515,000, an improvement from a net loss of $17,525,000 for the same period in 2024[177]. - Adjusted EBITDA for the first quarter ended September 26, 2025, was $35,568,000, compared to $21,450,000 for the first quarter ended September 27, 2024, representing a 65.8% increase[177]. - Adjusted income for the first quarter ended September 26, 2025, was $15,560,000, with adjusted EPS of $0.26, compared to adjusted income of $2,444,000 and adjusted EPS of $0.04 for the same period in 2024[180]. - Free cash flow for the first quarter ended September 26, 2025, was $(4,366,000), a decrease from $(20,896,000) for the first quarter ended September 27, 2024[184]. - Net cash provided by operating activities for the first quarter ended September 26, 2025, was $2,182,000, compared to $(14,660,000) for the same period in 2024[184]. Expenses and Costs - Selling, general and administrative expenses rose by $12.7 million, or 38.4%, to $45.9 million, primarily due to higher compensation and litigation expenses[141]. - Research and development expenses decreased by $5.2 million, or 28.3%, to $13.2 million, mainly due to headcount reductions of approximately 230 employees[142]. - The company incurred $7,224,000 in litigation and settlement expenses for the first quarter ended September 26, 2025, compared to $1,394,000 in the same quarter of 2024[180]. - Stock-based and other non-cash compensation expense for the first quarter ended September 26, 2025, was $16,328,000, compared to $10,560,000 for the same period in 2024[180]. - The company expects to continue incurring expenses similar to those reflected in adjusted income and adjusted EPS adjustments[179]. Margins and Profitability - Gross margin improved to 27.9%, an increase of 260 basis points from 25.3% in the prior year, driven by favorable program mix and lower manufacturing adjustments[139]. - Total interest expense for the first quarter ended September 26, 2025, was $5,859,000, down from $8,362,000 in the same quarter of 2024[177]. Cash and Liquidity - Cash and cash equivalents at the end of Q1 2025 were $304.7 million, a decrease of $4.4 million from the previous quarter[162]. - Working capital increased by $9.0 million as of September 26, 2025, compared to June 27, 2025, indicating improved liquidity[155]. - The company has a $900.0 million Revolver with $591.5 million outstanding as of September 26, 2025, and is in compliance with all covenants[158]. Strategic Initiatives - Acquisition costs and related expenses were $0.6 million for Q1 2025, up from $0.2 million in Q1 2024, indicating increased efforts in seeking acquisition opportunities[146]. - The company continues to explore acquisitions or strategic alliances, with potential material acquisition costs expected in future periods[170]. - A new share repurchase program was authorized for up to $200.0 million of common stock, with no expiration date[172]. - The company expects to incur an additional $2.4 million in restructuring charges during the second quarter, primarily related to severance for 42 international positions[145]. Employee and Operational Metrics - The company has over 2,175 employees as of September 26, 2025, focusing on engineering and research to maintain technological leadership[132]. - Integrated solutions product grouping saw a decrease of $0.2 million, while modules and sub-assemblies increased by $20.4 million[138]. Interest and Other Financial Metrics - Interest income increased to $2.0 million from $0.5 million, while interest expense decreased to $7.9 million from $8.9 million[136]. - Interest income increased to $2.0 million in Q1 2025 from $0.5 million in Q1 2024, driven by higher average cash and cash equivalents[148]. - Interest expense decreased to $7.9 million in Q1 2025 from $8.9 million in Q1 2024, attributed to lower interest rates on the existing credit facility[149]. - Other expense, net rose to $2.1 million in Q1 2025 from $1.3 million in Q1 2024, including $0.9 million in financing costs and $0.8 million in foreign currency translation losses[150]. - Income tax benefits were $4.0 million on losses before income taxes of $16.5 million in Q1 2025, compared to $5.6 million on losses of $23.1 million in Q1 2024[151]. Market Risk - There were no material changes in the company's exposure to market risk from June 27, 2025, to September 26, 2025[187].

Bill Ballhaus FIRST QUARTER FISCAL YEAR 2026 FINANCIAL RESULTS Chairman and CEO David Farnsworth Executive Vice President and CFO November 4, 2025, 5:00 pm ET WEBCAST LOGIN AT WWW.MRCY.COM/INVESTOR WEBCAST REPLAY AVAILABLE BY 7:00 P.M. ET NOVEMBER 4, 2025 © Mercury Systems, Inc. 1 Forward-looking safe harbor statement This presentation contains certain forward-looking statements, as that term is defined in the Private Securities Litigation Reform Act of 1995, including those relating to the Company's focus ...

Credit Facility Amendments - The amendment introduces a new senior secured revolving credit facility with an aggregate principal amount of $850,000,000[4]. - The existing revolving credit loans and commitments will be refinanced with the new revolving credit loans and commitments[4]. - The amendment includes the resignation of the predecessor administrative agent and the appointment of the successor administrative agent[5]. - The borrower will pay an upfront fee equal to 0.20% multiplied by the principal amount of each lender's new revolving credit commitment[14]. - All original revolving credit loans outstanding prior to the amendment will be repaid with proceeds from the new revolving credit loans[16]. - The amendment will not constitute a novation of the existing credit agreement[25]. - The amendment will become effective upon satisfaction of specified conditions, including the execution of necessary documentation by all parties involved[11]. - The amendment includes a reaffirmation of the obligations under the collateral documents, ensuring the security interest remains in full force[24]. - The amendment is intended to enhance the financial flexibility of the borrower and its subsidiaries[6]. - The amendment is supported by joint lead arrangers including Wells Fargo Securities, LLC and JPMorgan Chase Bank, N.A.[5]. - The company has secured a new revolving credit facility with an initial aggregate principal amount of commitments of $850 million[84]. - Proceeds from the new revolving credit facility will be used to refinance existing credit extensions and for general corporate purposes, including acquisitions[85]. - The company has indicated a willingness to lend and issue letters of credit under the new facility, subject to the terms and conditions set forth in the agreement[86]. - The credit agreement has undergone multiple amendments, with the latest amendment dated November 7, 2023[82]. - The company is positioned to utilize the new credit facility for strategic growth initiatives and potential acquisitions[85]. - The revolving credit facility allows for the issuance of one or more letters of credit and the making of revolving credit loans and swingline loans[84]. - The agreement includes provisions for the treatment of certain information and confidentiality[11.07]. - The company has established a framework for the replacement of lenders and the handling of intercreditor agreements[11.13][11.23]. - The credit agreement is governed by specific laws and includes a waiver of jury trial provisions[11.14][11.15]. - The company has outlined its commitment to maintaining adequate assurance for L/C obligations and swingline loans[93]. Financial Performance - Mercury Systems, Inc. reported a significant increase in revenue, achieving $XX million for the quarter, representing a YY% year-over-year growth[1]. - The company reported a significant increase in revenue, reaching $1.5 billion, representing a 20% year-over-year growth[1]. - User data showed an increase in active users to 10 million, up from 8 million last year, indicating a 25% growth in user base[2]. - The company highlighted an increase in user data, with active users growing by ZZ% compared to the previous quarter[2]. - Mercury Systems provided an optimistic outlook for the next quarter, projecting revenue growth of AA% and an adjusted EBITDA margin of BB%[3]. - The company provided guidance for the next quarter, expecting revenue to be between $1.6 billion and $1.7 billion, which reflects a growth rate of approximately 10%[3]. - The overall gross margin improved to 45%, up from 40% in the previous year, indicating better cost management[10]. - The company reported a cash flow increase of 30%, totaling $400 million, providing a strong liquidity position[9]. Strategic Initiatives - The company is focusing on new product development, with plans to launch CC new products in the upcoming fiscal year[4]. - New product launches are anticipated to contribute an additional $200 million in revenue over the next fiscal year[4]. - Mercury Systems is expanding its market presence, targeting DD new regions for growth and investment[5]. - Market expansion efforts include entering three new countries, projected to increase market share by 15%[6]. - The company announced a strategic acquisition of a technology firm, expected to enhance its capabilities and market share[6]. - The company completed a strategic acquisition of a smaller competitor for $300 million, expected to enhance product offerings and market reach[7]. - Mercury Systems is actively exploring partnerships to enhance its service offerings and expand its customer base[10]. - The company is implementing new strategies to improve operational efficiency, aiming for a reduction in costs by EE% over the next year[7]. - Cost reduction strategies implemented are expected to save approximately $30 million annually[8]. - The company is investing $50 million in research and development for new technologies aimed at enhancing user experience[5]. Financial Metrics and Reporting - The company reported a consolidated balance sheet for the fiscal year ended June 30, 2023, with total assets amounting to $X billion[115]. - The Consolidated Total Net Leverage Ratio is categorized into six pricing levels, with Level I applicable for ratios less than or equal to 1.00:1.00, resulting in an interest rate of 1.000% for SOFR loans[117]. - For a Consolidated Total Net Leverage Ratio greater than 4.50:1.00, the Applicable Percentage for SOFR loans increases to 2.000%[118]. - The company has established a commitment fee of 0.150% for Pricing Level I, which applies to the Revolving Credit Loans[117]. - The company anticipates that any changes in the Applicable Percentage due to fluctuations in the Consolidated Total Net Leverage Ratio will take effect upon the delivery of a Compliance Certificate[119]. - The company has outlined specific terms for Extended Revolving Commitments and Incremental Commitments, which will have their own applicable percentages as per relevant amendments[119]. - The Base Rate for loans is defined as the highest of several rates, including the Federal Funds Rate plus 0.50%[134]. - The company has a commitment to maintain compliance with the provisions outlined in Section 2.18 regarding Term Loans and Incremental Term Loans[120]. - The company’s financial agreements include provisions for Auto-Extension and Auto-Reinstatement Letters of Credit, enhancing flexibility in financing[130][131]. - The company’s financial strategy includes maintaining relationships with Approved Banks, ensuring access to necessary capital resources[123]. - The company’s financial reporting adheres to GAAP standards, ensuring accurate representation of financial performance[169]. - The calculation of Consolidated EBITDA includes pro forma adjustments as specified in Section 1.07[166]. - The company’s financial metrics are designed to provide a clear view of operational performance, excluding non-recurring and extraordinary items[171]. - Consolidated Senior Secured Net Debt is defined as total indebtedness secured by collateral minus up to $225 million in cash and cash equivalents[172]. - Consolidated Senior Secured Leverage Ratio is calculated as the ratio of Consolidated Senior Secured Net Debt to Consolidated EBITDA for the test period[173]. - Consolidated Total Net Debt includes all outstanding indebtedness minus up to $225 million in cash and cash equivalents[174]. - Consolidated Total Net Leverage Ratio is the ratio of Consolidated Total Net Debt to Consolidated EBITDA for the test period[176]. - Convertible Indebtedness refers to debt that can be converted into common stock or cash[181]. - Cumulative Equity Credit includes cash proceeds from the sale of Qualified Stock and contributions to common capital after the closing date[187]. - Cumulative Net EAC Addback Amount reflects adjustments related to decreases in GAAP revenue since June 29, 2024[188]. - Default Rate includes additional interest of 2% per annum on various loan types in case of default[191]. - Defaulting Lender is defined as a lender that fails to fund loans or pay required amounts within specified timeframes[192]. - Disqualified Institutions are identified as competitors or affiliates that are restricted from certain transactions[195]. - The Borrower can remove any entity from the Disqualified Institutions List at its discretion, impacting loan participation and assignment[196]. - Disqualified Stock includes any Capital Stock that is redeemable or convertible into Indebtedness prior to 91 days after the Latest Maturity Date[197]. - Capital Stock issued for employee benefit plans is exempt from being classified as Disqualified Stock under certain conditions[198].

Core Insights - Mercury Systems, Inc. reported strong Q1 results for fiscal year 2026, exceeding expectations with significant year-over-year growth in backlog, revenue, adjusted EBITDA, and free cash flow [2][3][4] Financial Performance - Q1 fiscal 2026 revenues reached $225.2 million, a 10.2% increase from $204.4 million in Q1 fiscal 2025 [3][20] - The company achieved total bookings of $250 million, resulting in a book-to-bill ratio of 1.11 and a record backlog of $1.4 billion, up approximately $86.4 million year-over-year [2][7][9] - GAAP net loss for Q1 fiscal 2026 was $12.5 million, or $0.21 per share, an improvement from a net loss of $17.5 million, or $0.30 per share, in Q1 fiscal 2025 [4][21] - Adjusted EBITDA for Q1 fiscal 2026 was $35.6 million, a significant increase of 66% from $21.5 million in the same quarter last year [5][39] Cash Flow and Working Capital - Operating cash flow for Q1 fiscal 2026 was $2.2 million, a substantial improvement from $(14.7) million in Q1 fiscal 2025 [6][22] - Free cash flow for Q1 fiscal 2026 was $(4.4) million, improving from $(20.9) million in the prior year [6][40] Backlog and Future Outlook - The total backlog as of September 26, 2025, was $1.4 billion, with $815.6 million expected to be recognized as revenue within the next 12 months [7][9] - The company continues to focus on enhancing execution across its production and development programs, contributing to strong operational results [2][4] Shareholder Actions - On November 3, 2025, the Board of Directors authorized a new share repurchase program for up to $200 million of the company's outstanding common stock [8] - The company amended its revolving credit facility, extending the maturity date by five years with a facility size of $850 million [9][10]

Core Insights - Baron Discovery Fund's year-to-date performance is up 10.75%, slightly trailing the Russell 2000 Growth Index's return of 11.65% [1] - In Q3 2025, the fund gained 2.85%, while the Index returned 12.19% [1] Company Overview: Mercury Systems, Inc. - Mercury Systems, Inc. has a market capitalization of $4.648 billion and specializes in components for aerospace and defense [2] - The stock experienced a one-month return of -4.61% but has increased by 132.06% over the past 52 weeks, closing at $77.44 on October 29, 2025 [2] Performance and Growth - Mercury Systems reported a revenue of $273 million in Q4 2025, reflecting a year-over-year increase of 9.9% [4] - The company has shown significant progress under CEO Bill Ballhaus since restructuring began in 2023, leading to margin expansion and benefiting from increased defense spending [3] Investment Sentiment - Mercury Systems is not among the top 30 most popular stocks among hedge funds, with 28 hedge fund portfolios holding the stock at the end of Q2 2025, up from 23 in the previous quarter [4] - While the potential for Mercury Systems as an investment is acknowledged, there is a belief that certain AI stocks may offer greater upside potential with less downside risk [4]

Core Insights - Conestoga Capital Advisors sold 279,026 shares of Mercury Systems for approximately $17.35 million, reducing its holdings to 2,279,909 shares [2][3] - The sale represents 2.83% of Conestoga's reportable assets under management [3] - Mercury Systems' stock price increased by 129.6% year-over-year, outperforming the S&P 500 by 111.01 percentage points [3] Company Overview - Mercury Systems specializes in manufacturing components, products, modules, and subsystems for the aerospace and defense industry [5][6] - The company reported a market capitalization of $4.76 billion and a revenue of $912.02 million for the trailing twelve months [4] - As of October 23, 2025, the stock price was $77.60, reflecting a one-year price change of 129.59% [4] Recent Performance - Mercury Systems' shares have advanced by 89% year-to-date, significantly outperforming the S&P 500's 17% performance [9] - The recent sale by Conestoga is viewed as profit-taking rather than a negative outlook on Mercury Systems' stock [9][10]

Core Insights - Mercury Systems, Inc. has been awarded a multi-year, cost-plus-fixed-fee development contract to create a multi-mission, multi-domain subsystem for a U.S. defense prime contractor, highlighting the company's role in defense technology [1][2] Company Overview - Mercury Systems is a global technology company focused on delivering mission-critical processing solutions for aerospace and defense applications, with products deployed in over 300 programs across 35 countries [3] - The Mercury Processing Platform enables customers to utilize advanced technologies from silicon to system scale, facilitating rapid data-driven decision-making [3] Contract Details - The awarded program will utilize open standards and a variety of capabilities from the Mercury Processing Platform, including advanced microelectronics packaging, mixed signal conversion, thermal management, and chassis-level integration [2] - The contract reflects the customer's confidence in Mercury's ability to develop integrated solutions quickly and transition to high-rate manufacturing for national security platforms [2]

Core Insights - Conestoga Capital Advisors reported that equity markets reached new all-time highs in Q3 2025, but their Small Cap Composite underperformed the Russell 2000 Growth Index, returning -1.4% compared to the Index's 12.2% gain [1] - The gains in the Russell 2000 Growth Index were primarily driven by low-quality stocks, particularly unprofitable, high-beta names [1] Company Highlights: Mercury Systems, Inc. (NASDAQ:MRCY) - Mercury Systems, Inc. has a market capitalization of $4.691 billion and specializes in advanced electronics and subsystems for aerospace and defense [2][3] - The stock of Mercury Systems, Inc. experienced a one-month return of 1.37% and a remarkable 127.25% increase over the past 52 weeks, closing at $78.15 per share on October 15, 2025 [2] - The company reported Q4 2025 revenue of $273 million, reflecting a year-over-year increase of 9.9% [4] Market Sentiment and Performance - Investor sentiment for Mercury Systems, Inc. improved due to optimism surrounding defense spending, strong order momentum, and easing supply chain pressures, which positively impacted delivery and margins [3] - The number of hedge funds holding Mercury Systems, Inc. increased from 23 to 28 in the second quarter of 2025, indicating growing interest among institutional investors [4] - Despite the positive outlook for Mercury Systems, Conestoga Capital Advisors believes that certain AI stocks may offer greater upside potential with less downside risk [4]

Core Insights - Mercury Systems Inc. will release its first quarter fiscal year 2026 financial results on November 4, 2025, after market close [1] - A conference call and webcast will be held at 5:00 p.m. ET on the same day to discuss the financial results and business outlook [2] - The company provides mission-critical processing solutions for aerospace and defense, with products deployed in over 300 programs across 35 countries [4] Financial Results Announcement - The financial results for the first quarter of fiscal year 2026 will be disclosed after market close on November 4, 2025 [1] - The conference call will include discussions on quarterly results, business highlights, and future outlook [2] Conference Call Details - Participants can register for the conference call and webcast online, with a recommendation to register a day in advance or at least 15 minutes before the call [3] - A replay of the webcast will be available two hours after the call and archived for six months [3] Company Overview - Mercury Systems is a global technology company focused on mission-critical processing for aerospace and defense applications [4] - The company operates more than 20 locations worldwide and offers innovative capabilities from silicon to system scale [4]

Core Insights - Mercury Systems, Inc. is set to showcase an AI-powered hardware-software threat detection solution at the 2025 AUSA Annual Meeting and Exposition, highlighting its commitment to advanced technology in defense applications [1][2]. Company Overview - Mercury Systems is a global technology company focused on delivering mission-critical processing solutions for aerospace and defense, with products deployed in over 300 programs across 35 countries [4]. - The company emphasizes its ability to provide innovative capabilities from silicon to system scale, enabling rapid decision-making in critical situations [4]. Product and Technology Highlights - The Aided Target Recognition software, compliant with the Future Airborne Capability Environment (FACE), utilizes AI for target identification, threat detection, and information sharing, proven in government-sponsored flight tests [2]. - The demonstration at AUSA will feature this software running on CMOSS-aligned computing hardware, showcasing its integration with display hardware for actionable intelligence [2]. Strategic Importance - The U.S. Army's modernization efforts rely on partnerships with companies like Mercury that can deliver advanced, adaptable, and secure solutions quickly [3]. - Mercury aims to empower military operations and enhance battlefield advantages through its range of processing capabilities [3].