Financial Data and Key Metrics Changes - Bookings reached $288 million with a book-to-bill ratio of 1.23, resulting in a record backlog of nearly $1.5 billion, an increase of 8.8% year-over-year [7][21] - Revenue for Q2 was $233 million, reflecting a year-over-year increase of 4.4% [21] - Adjusted EBITDA was $30 million, up 36.3% year-over-year, with an adjusted EBITDA margin of 12.9%, an increase of 300 basis points [7][24] - Free cash flow was $46 million, significantly ahead of expectations, with cash on hand totaling $335 million [8][25] Business Line Data and Key Metrics Changes - The company recognized $4 million in net adverse EAC changes, consistent with previous quarters, indicating sound execution on development and production programs [9] - Approximately $30 million of revenue was accelerated from Q3 into Q2, positively impacting adjusted EBITDA by $10 million [9][24] Market Data and Key Metrics Changes - The company experienced solid execution across its broad portfolio, contributing to a record first-half revenue and the highest first-half point-in-time revenue since FY 2021 [9][17] - Bookings included significant awards from both domestic and international customers, reflecting a mix of franchise program extensions and new design wins [11][12] Company Strategy and Development Direction - The company is focused on four priorities: performance excellence, driving organic growth, expanding margins, and improving free cash flow [5][10] - The strategy includes increasing capacity, adding automation, and consolidating subscale sites to drive scalability and efficiency [10] - The company aims for adjusted EBITDA margins in the low-to-mid 20% range and free cash flow conversion of 50% [17][19] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism regarding the market backdrop and the potential for increased global defense budgets to positively impact demand [19][90] - The company maintains its full-year outlook for FY 2026, expecting low single-digit annual revenue growth, with Q3 revenue anticipated to decline year-over-year [18][19] Other Important Information - The company ended Q2 with net debt of $257 million, the lowest level since Q1 FY 2022, and continues to focus on reducing net working capital [16][25] - Operating expenses decreased year-over-year, driven by efficiency improvements and headcount reductions [23] Q&A Session Questions and Answers Question: How much lower margin backlog is left to convert? - Management indicated that the lower margin backlog will continue to flow through over time, with expectations for most of the impact to be resolved by FY 2027 [33][34] Question: What is the current capacity for the Common Processing Architecture (CPA)? - The company is ramping up production in CPA and is confident in meeting increased demand without significant additional investment [41][42] Question: Why is there no upward revision in guidance despite strong performance? - Management explained that while they have outperformed expectations, they are cautious about future accelerations due to uncertainties in material availability [44][48] Question: What is the impact of unbilled receivables on revenue? - Management acknowledged that unbilled balances are still high and represent a drag on revenue, but they did not quantify the exact impact [73] Question: What is the status of the Golden Dome initiative and international orders? - Management noted ongoing conversations regarding Golden Dome and international opportunities, with potential for significant increases in quantities if these materialize [90]

Financial Data and Key Metrics Changes - Bookings reached $288 million with a book-to-bill ratio of 1.23, resulting in a record backlog of nearly $1.5 billion, an increase of 8.8% year-over-year [7][21] - Revenue for Q2 was $233 million, reflecting a year-over-year increase of 4.4% [21] - Adjusted EBITDA was approximately $30 million, up 36.3% year-over-year, with an adjusted EBITDA margin of 12.9%, an increase of 300 basis points [7][24] - Free cash flow for the quarter was $46 million, down from $82 million in the prior year, primarily due to accelerated cash receipts [25][28] Business Line Data and Key Metrics Changes - The company recognized $4 million of net adverse EAC changes, consistent with previous quarters, indicating sound execution on development and production programs [9] - Approximately $30 million of revenue was generated from accelerated progress on high-priority programs, primarily planned for Q3 [22] Market Data and Key Metrics Changes - The company noted increased defense budgets globally and domestic priorities like Golden Dome as potential drivers for higher demand across multiple programs [13][19] - Customer conversations are progressing regarding significant increases in quantities for various programs, indicating optimism for future demand [90] Company Strategy and Development Direction - The company is focused on four priorities: performance excellence, driving organic growth, expanding margins, and improving free cash flow [5][10] - Efforts to increase capacity and automate processes are ongoing, with a new 50,000 sq ft factory space in Phoenix to support ramp production [10][41] - The company aims for adjusted EBITDA margins in the low-to-mid 20% range and free cash flow conversion of 50% [17][19] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the market backdrop and the company's ability to deliver results in line with targeted profiles, despite expecting Q3 revenue to be down year-over-year [18][19] - The company maintains its full-year view for FY 2026, anticipating low single-digit annual revenue growth [18] Other Important Information - The company ended Q2 with $335 million in cash, with net debt reduced to $257 million, the lowest level since Q1 FY 2022 [16][25] - Operating expenses decreased year-over-year, driven by efficiency improvements and headcount reductions [23] Q&A Session Summary Question: How much lower margin backlog is left to convert? - Management indicated that the lower margin backlog will continue to flow through over time, with expectations for improvement as higher margin bookings replace it [33][34] Question: What is the impact of the stop work order on the SCAR program? - Management stated that they do not quantify individual contracts, but the SCAR program is incorporated into their outlook without significant changes [83] Question: What are the potential choke points affecting acceleration? - Management noted that they are actively working with suppliers to address material availability, but cannot guarantee acceleration until materials are confirmed [75][76]

Mercury Systems (NasdaqGS:MRCY) Q2 2026 Earnings call February 03, 2026 05:00 PM ET Speaker7Good day, everyone, and welcome to the Mercury Systems second quarter fiscal 2026 conference call. Today's call is being recorded. At this time, for opening remarks and introductions, I'd like to turn the call over to the company's Vice President of Investor Relations, Tyler Hojo. Please go ahead, Mr. Hojo.Speaker10Good afternoon, and thank you for joining us. With me today is our Chairman and Chief Executive Officer ...

Financial Performance - Total revenues increased by $9.7 million, or 4.4%, to $232.9 million for the second quarter ended December 26, 2025, compared to $223.1 million for the same period in 2024[140] - Total revenues increased by $30.5 million, or 7.1%, to $458.1 million for the six months ended December 26, 2025, compared to $427.6 million for the same period in 2024[158] - The net loss for the second quarter ended December 26, 2025, was $15.1 million, compared to a net loss of $17.6 million for the same period in 2024[139] - Net loss for the six months ended December 26, 2025, was $27.6 million, compared to a net loss of $35.1 million for the same period in 2024[157] - Net loss for the second quarter ended December 26, 2025, was $15,095 thousand, compared to a net loss of $17,579 thousand for the same period in 2024, representing a 8.4% improvement[196] - For the six months ended December 26, 2025, the net loss was $27,610 thousand, compared to $35,104 thousand for the same period in 2024, showing a 21.2% improvement[201] Margins and Expenses - Gross margin was 26.0% for the second quarter ended December 26, 2025, a decrease of 130 basis points from 27.3% in the prior year[142] - Gross margin improved to 27.0%, up 70 basis points from 26.3% in the prior year, driven by lower manufacturing variances and net estimate at completion changes[160] - Research and development expenses decreased by $6.0 million, or 28.0%, to $15.4 million during the second quarter ended December 26, 2025, primarily due to efficiency improvements and headcount reductions[145] - Research and development expenses decreased by $11.2 million, or 28.1%, to $28.6 million, attributed to efficiency improvements and headcount reductions[163] - Selling, general and administrative expenses increased by $1.6 million, or 4.0%, to $42.1 million during the second quarter ended December 26, 2025, driven by higher litigation and settlement expenses[144] - Selling, general and administrative expenses rose by $14.4 million, or 19.5%, to $88.0 million, primarily due to higher litigation and settlement expenses[162] Cash Flow and Capital Management - Net cash provided by operating activities was $53.8 million for the six months ended December 26, 2025, down from $70.8 million in the same period of the previous year[184] - Net cash provided by operating activities for the second quarter ended December 26, 2025, was $51,611 thousand, compared to $85,462 thousand for the same period in 2024, reflecting a decrease of 39.7%[205] - Cash and cash equivalents increased by $25.9 million from June 27, 2025, resulting in a total of $334.99 million at the end of the period[183] - The company incurred $15.0 million in cash for the purchase and retirement of common stock during the six months ended December 26, 2025[186] - The company has a 5-year Revolver with a borrowing capacity of $850.0 million, with outstanding borrowings of $591.5 million as of December 26, 2025[178] Strategic Initiatives - The company is committed to investing in R&D and maintaining a diverse workforce to drive innovation and meet customer needs[135] - The company is exploring acquisitions or strategic alliances as part of its growth strategy, which may incur significant costs[190] - A new share repurchase program was authorized for up to $200.0 million, with $185.0 million available for future repurchases as of December 26, 2025[181] Employee and Workforce Information - The company had 2,135 employees as of December 26, 2025, focusing on engineering and research to maintain technological leads[135] - The company incurred $4.1 million in restructuring and other charges during the second quarter ended December 26, 2025, primarily related to severance for workforce reductions[147] - Restructuring and other charges increased to $5.6 million, primarily related to severance costs from workforce reductions[165] Other Financial Metrics - Adjusted EBITDA for the second quarter ended December 26, 2025, was $30,015 thousand, up 36.4% from $22,029 thousand in the prior year[196] - Adjusted income for the second quarter ended December 26, 2025, was $9,437 thousand, or $0.16 per share, compared to $3,940 thousand, or $0.07 per share, in the same quarter of 2024[199] - The effective tax rate for the six months ended December 26, 2025, was impacted by federal and state research and development credits and non-deductible compensation[172] - Interest income increased to $3.7 million for the six months ended December 26, 2025, compared to $1.0 million in the prior year, driven by higher average cash and cash equivalents[168] - Interest expense decreased to $15.7 million from $17.3 million, reflecting lower interest rates on the Revolver[169] - The company reported an impact to income taxes of $(8,135) thousand for the second quarter ended December 26, 2025, compared to $(7,022) thousand for the same period in 2024[199] - Free cash flow for the second quarter ended December 26, 2025, was $45,709 thousand, compared to $81,907 thousand for the same period in 2024, indicating a decrease of 44.3%[205] - Total commitments and contractual obligations amounted to $277.7 million as of December 26, 2025, including $203.7 million in purchase obligations[187] - Acquisition costs and other related expenses were $0.7 million for the six months ended December 26, 2025, compared to $0.4 million in the prior year[166] - Point in time revenue and over time revenue represented 55% and 45% of total revenues, respectively, for the second quarter ended December 26, 2025[140]

SECOND QUARTER FISCAL YEAR 2026 FINANCIAL RESULTS Bill Ballhaus Chairman and CEO David Farnsworth Executive Vice President and CFO February 3, 2026, 5:00 pm ET WEBCAST LOGIN AT WWW.MRCY.COM/INVESTOR WEBCAST REPLAY AVAILABLE BY 7:00 P.M. ET FEBRUARY 3, 2026 © 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 ...

Exhibit 99.1 FOR IMMEDIATE RELEASE Mercury Systems Reports Second Quarter Fiscal 2026 Results ANDOVER, Mass. February 3, 2026 Mercury Systems, Inc. (NASDAQ: MRCY, www.mrcy.com), reported operating results for the second quarter of fiscal year 2026, ended December 26, 2025. "We delivered second quarter fiscal 2026 results that were ahead of our expectations, with solid year-over-year growth in backlog, revenue, and adjusted EBITDA, and robust free cash flow," said Bill Ballhaus, Mercury's Chairman and CEO. " ...

Q2 FY26 Bookings of $288 million grew 18.6% year-over-year; book-to-bill of 1.23Record backlog of $1.5 billion; up 8.8% year-over-yearRecord first-half revenue with Q2 FY26 Revenue of $233 million; GAAP net loss of $15 million; and adjusted EBITDA of $30 million, up 36.3% year-over-yearQ2 FY26 Operating Cash Flow of $52 million with Free Cash Flow of $46 million ANDOVER, Mass., Feb. 03, 2026 (GLOBE NEWSWIRE) -- Mercury Systems, Inc. (NASDAQ: MRCY, www.mrcy.com), reported operating results for the second qua ...

Core Viewpoint - Mercury Systems, Inc. has secured contract awards exceeding $60 million for two significant U.S. space and strategic weapons programs, highlighting the company's growing role in national security initiatives [1]. Group 1: Contract Awards - In December, Mercury was awarded a development contract extension for a large strategic weapons program, extending its work through 2031 and including additional flight-testing units [2]. - Mercury received a new contract from a space systems prime contractor to produce subsystems for a U.S. national security space program, marking the second adoption of its radiation-tolerant wideband storage and processing subsystem [3]. Group 2: Technology and Capabilities - The Mercury Processing Platform offers unique capabilities that enhance performance and resiliency for space and strategic weapons programs, reflecting the increasing demand for the company's technology [4]. - Mercury's products and solutions are utilized in over 300 programs across 35 countries, supporting various applications in mission computing, sensor processing, command and control, and communications [4].

Core Viewpoint - Mercury Systems Inc. is set to release its second quarter fiscal year 2026 financial results on February 3, 2026, after market close [1] Financial Results Announcement - The company will host a conference call and webcast at 5:00 p.m. ET on the same day to discuss the quarterly financial results, business highlights, and outlook [2] - Company representatives may address questions regarding business and financial developments, earnings forecasts, and other relevant matters, which may include previously undisclosed information [2] Participation Details - Participants interested in attending the conference call or webcast should register online at ir.mrcy.com/events-presentations, ideally a day in advance or at least 15 minutes before the call starts [3] - A replay of the webcast will be available two hours after the call and archived for six months on the same webpage [3] Company Overview - Mercury Systems is a global technology company focused on delivering mission-critical processing to the edge, particularly for aerospace and defense missions [4] - The Mercury Processing Platform enables customers to leverage innovative capabilities from silicon to system scale, facilitating timely data-driven decisions [4] - The company's products and solutions are utilized in over 300 programs across 35 countries, covering applications in mission computing, sensor processing, command and control, and communications [4] - Mercury is headquartered in Andover, Massachusetts, with more than 20 locations worldwide [4]

Group 1: Market Performance - In the third quarter of 2025, small-cap equities performed well, with the Russell 2000 Index reaching its first all-time high since November 2021, driven by a favorable macroeconomic backdrop [1] - The Aristotle Small Cap Equity Fund (Class I-2) delivered a return of 3.16%, underperforming the Russell 2000 Index's total return of 12.39% [1] Group 2: Company Overview - Mercury Systems, Inc. - Mercury Systems, Inc. (NASDAQ:MRCY) is a technology company with a market capitalization of $4.14 billion, specializing in components and products for the aerospace and defense industries [2] - The company reported a one-month return of 3.30% and a significant 73.50% increase in share value over the last 52 weeks, closing at $68.88 per share on December 18, 2025 [2] Group 3: Financial Performance and Outlook - Mercury Systems, Inc. reported strong earnings that exceeded analyst expectations, benefiting from its position as a supplier to the defense sector [3] - The company has a current order backlog of $1.4 billion, which is expected to contribute to future revenue growth, alongside increased national defense spending [3] - In the fiscal first quarter of 2026, Mercury Systems generated revenue of $225 million, reflecting a year-over-year increase of 10.2% [4] Group 4: Hedge Fund Interest - Mercury Systems, Inc. was held by 26 hedge fund portfolios at the end of the third quarter, a decrease from 28 in the previous quarter [4]