Mercury Systems Q2 Earnings Beat Estimates, Revenues Rise Y/Y

Core Insights - Mercury Systems (MRCY) reported adjusted earnings of 16 cents per share for Q2 fiscal 2026, exceeding the Zacks Consensus Estimate by 128.6% and significantly up from 7 cents per share in the same quarter last year [1] - Revenues for the second quarter reached $232.87 million, marking a 4.4% year-over-year increase and surpassing the Zacks Consensus Estimate by 12.29% [1] Q2 Details - Total bookings for Q2 fiscal 2026 were $288 million, resulting in a book-to-bill ratio of 1.23 [2] - The company achieved a record backlog of $1.5 billion, which is an 8.8% increase year over year [2] Q2 Operating Details - Adjusted EBITDA for Q2 fiscal 2026 was $30 million, a 36.3% increase from $22 million in Q2 fiscal 2025 [3] - The adjusted EBITDA margin improved to 12.9% year over year [3] - GAAP net loss for the quarter was $15.1 million, with a diluted loss per share of 26 cents, compared to a net loss of $17.6 million and a loss per share of 30 cents in the prior year [3] Balance Sheet & Cash Flow - As of December 26, 2025, cash and cash equivalents were $335 million, up from $304.7 million as of September 26, 2025 [4] - Long-term debt remained unchanged at $591.5 million [4] - Cash flow from operations was $51.6 million, a significant increase from $2.2 million in the previous quarter [4] - Free cash flow for Q2 fiscal 2026 was $45.7 million, compared to negative $4.4 million in Q1 fiscal 2026 [4] Fiscal 2026 Outlook - The company maintains its full-year fiscal 2026 outlook, expecting low single-digit annual revenue growth and an adjusted EBITDA margin approaching the mid-teens [5] - Anticipates positive free cash flow for the year, with Q3 revenues expected to decline year over year, followed by a ramp-up in Q4 [5] - Q3 adjusted EBITDA margin is projected to approach double digits, while Q4 is expected to have the highest adjusted EBITDA margin of the fiscal year [5] Zacks Rank & Stocks to Consider - MRCY currently holds a Zacks Rank 4 (Sell) [6] - Other stocks in the aerospace sector with better rankings include CAE (Rank 2), Innovative Solution (Rank 1), and Bae Systems (Rank 2) [6]