Core Insights - Mercury Systems reported revenue of $232.87 million for the quarter ended December 2025, reflecting a year-over-year increase of 4.4% and a surprise of +12.29% over the Zacks Consensus Estimate of $207.39 million [1] - The company's EPS for the quarter was $0.16, significantly higher than the $0.07 reported in the same quarter last year, resulting in an EPS surprise of +128.57% compared to the consensus estimate [1] Revenue Performance - Net Revenue from Sensor & Effector - Radar was $53.72 million, exceeding the two-analyst average estimate of $34.55 million, with a year-over-year change of +14% [4] - Net Revenue from Sensor & Effector - Electronic Warfare reached $27.48 million, surpassing the average estimate of $20.07 million, marking a year-over-year increase of +14.9% [4] - Net Revenue from Other was reported at $36.85 million, slightly below the average estimate of $39.5 million, showing a year-over-year decline of -11.2% [4] - Total Net Revenue from Sensor & Effector was $105.16 million, compared to the average estimate of $74.32 million, indicating a year-over-year change of +12.9% [4] - Net Revenue from C4I was $90.87 million, slightly below the average estimate of $93.33 million, with a year-over-year change of +2.7% [4] - Net Revenue from Other Sensor & Effector was $23.95 million, exceeding the average estimate of $19.7 million, representing a year-over-year increase of +8.2% [4] Stock Performance - Shares of Mercury Systems have returned +15.5% over the past month, outperforming the Zacks S&P 500 composite's +1.8% change [3] - The stock currently holds a Zacks Rank 4 (Sell), suggesting potential underperformance relative to the broader market in the near term [3]

Core Insights - The company reported Q2 FY 2026 results that exceeded expectations, showcasing solid year-over-year growth in backlog, revenue, adjusted EBITDA, and free cash flow [1][4][18] - Key priorities include performance excellence, driving organic growth, expanding margins, and improving free cash flow [1][5][12][14] Financial Performance - Bookings for Q2 were $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 [4][10][18] - Revenue for Q2 was $233 million, reflecting a 4.4% increase compared to the previous year, with first-half revenue up 7.1% year-over-year [4][18][19] - 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 [5][23][12] - Free cash flow for Q2 was $46 million, significantly ahead of expectations, with net working capital reduced by $61 million year-over-year [5][14][24] Operational Highlights - The company accelerated progress on high-priority customer programs, generating approximately $30 million of revenue planned for Q3 [6][19] - Efforts to increase capacity and automate processes are ongoing, including the expansion of manufacturing space in Phoenix, Arizona [7][8][39] - The focus on customer deliveries led to record first-half revenue and the highest first-half point-in-time revenue since FY 2021 [7][18] Strategic Initiatives - The company is focused on expanding margins through backlog margin expansion and operational optimization, with a goal of achieving adjusted EBITDA margins in the low to mid-twenty percent range [12][13] - Continued emphasis on reducing net working capital, which is now at its lowest level since Q1 FY 2022, with net debt also reduced to $257 million [14][24] - The company anticipates that increased defense budgets and domestic priorities will positively impact demand across multiple programs [11][73] Future Outlook - The company maintains its full-year view for FY 2026, expecting low single-digit annual revenue growth, with Q3 revenue anticipated to be down year-over-year [16][18] - Adjusted EBITDA margin is expected to approach the mid-teens for the full year, with Q4 anticipated to have the highest margin of the fiscal year [17][18] - The company remains optimistic about potential tailwinds from increased global defense budgets and domestic initiatives like Golden Dome [18][73]

Core Viewpoint - Mercury Systems (MRCY) reported quarterly earnings of $0.16 per share, exceeding the Zacks Consensus Estimate of $0.07 per share, marking a significant earnings surprise of +128.57% compared to $0.07 per share a year ago [1] Financial Performance - The company achieved revenues of $232.87 million for the quarter ended December 2025, surpassing the Zacks Consensus Estimate by 12.29% and showing an increase from $223.13 million year-over-year [2] - Over the last four quarters, Mercury Systems has exceeded consensus EPS estimates three times and topped revenue estimates four times [2] Stock Performance - Mercury Systems shares have increased approximately 28.6% since the beginning of the year, significantly outperforming the S&P 500's gain of 1.9% [3] Future Outlook - The company's earnings outlook will be crucial for determining the sustainability of its stock price movement, with current consensus EPS estimates at $0.22 for the coming quarter and $1.01 for the current fiscal year [4][7] - The Zacks Rank for Mercury Systems is currently 4 (Sell), indicating expectations of underperformance in the near future due to unfavorable estimate revisions prior to the earnings release [6] Industry Context - The Aerospace - Defense Equipment industry, to which Mercury Systems belongs, is currently ranked in the top 26% of over 250 Zacks industries, suggesting a favorable environment for stocks in this sector [8]

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]

Financial Data and Key Metrics Changes - Bookings for Q2 were $288 million, resulting in a book-to-bill ratio of 1.23 and a record backlog approaching $1.5 billion, which is up 8.8% year-over-year [5][19] - Revenue for Q2 was $233 million, reflecting a year-over-year increase of approximately 4.4% [19] - Adjusted EBITDA for Q2 was $30 million, up 36.3% year-over-year, with an adjusted EBITDA margin of 12.9%, an increase of 300 basis points [5][23] - Free cash flow for Q2 was $46 million, significantly ahead of expectations, although down from $82 million in the prior year [6][24] Business Line Data and Key Metrics Changes - The company recognized $4 million of net adverse EAC changes across its portfolio, consistent with previous quarters, indicating sound execution on development and production programs [7] - Approximately $30 million of revenue was generated from accelerated progress on customer programs, primarily planned for Q3 [20] - The gross margin for Q2 decreased to 26%, down approximately 130 basis points year-over-year, primarily due to a higher mix of lower-margin backlog [20] Market Data and Key Metrics Changes - The company experienced solid execution across its broad portfolio, with backlog growth reflecting increased demand driven by global defense budgets and domestic priorities [12] - Customer conversations indicate potential for higher demand across multiple programs, which could positively impact the demand environment if funding is allocated [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 [4] - Efforts to increase capacity and automate operations are ongoing, with significant investments in manufacturing facilities to support ramp production [9] - The company aims to achieve adjusted EBITDA margins in the low-to-mid 20% range and free cash flow conversion of 50% over time [16] Management's Comments on Operating Environment and Future Outlook - Management remains optimistic about the market backdrop and the company's ability to deliver results in line with its target profile, despite expecting Q3 revenue to be down year-over-year [17][18] - The company maintains its full-year view for FY 2026, expecting low single-digit annual revenue growth, with Q4 anticipated to be the highest margin quarter of the year [17][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 [15][24] - The company continues to focus on reducing net working capital, which is down $61 million year-over-year [15][27] 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 most of the impact to be resolved by FY 2027 [31][33] Question: What is the impact of the pull forward on revenue? - The pull forward of approximately $30 million in revenue positively impacted EBITDA by about $10 million, reflecting ongoing acceleration in deliveries [34] Question: What is the current capacity situation for the Common Processing Architecture (CPA)? - Management confirmed that production in the CPA area is ramping up as planned, with additional capacity being added to meet demand [39][40] Question: Why is there no upward revision in guidance despite strong performance? - Management explained that while they have outperformed expectations, they are cautious about setting future expectations based on uncertain material availability [42][45] Question: What is the status of international orders and the Golden Dome initiative? - Management noted ongoing conversations regarding international orders and the Golden Dome initiative, with multiple programs showing potential for significant increases in quantities [84][85]

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. " ...

Core Insights - Mercury Systems, Inc. reported strong second quarter results for fiscal year 2026, exceeding expectations with significant year-over-year growth in backlog, revenue, and adjusted EBITDA, alongside robust free cash flow [2][9] Financial Performance - Revenue for the second quarter of fiscal 2026 was $233 million, a 4.5% increase from $223 million in the same quarter of fiscal 2025 [3][9] - Total bookings for the quarter reached $288 million, resulting in a book-to-bill ratio of 1.23, contributing to a record backlog of approximately $1.5 billion, which is an 8.8% increase year-over-year [3][9] - The GAAP net loss for the quarter was $15 million, or $0.26 per share, an improvement from a net loss of $18 million, or $0.30 per share, in the prior year [4][9] - Adjusted EBITDA for the quarter was $30 million, up 36.3% from $22 million in the same quarter of the previous year, with an adjusted EBITDA margin of 12.9% [5][9] Cash Flow and Backlog - Operating cash flow for the second quarter was $52 million, while free cash flow was $46 million, both significantly ahead of expectations [2][5] - The total backlog as of December 26, 2025, was $1.5 billion, with $807 million expected to be recognized as revenue within the next 12 months, reflecting a $119 million increase from the previous year [6][9]