Mercury lifts FY27 outlook on record $370.5M first-quarter bookings

By Rebecca Stone

Mercury Systems posted record first-quarter bookings of $370.5 million in fiscal 2027, up 48% from a year earlier, and a 1.46 book-to-bill ratio as the defense electronics maker raised its full-year outlook on Tuesday.

Revenue for the quarter ended Oct. 2 rose 12.4% to $253.2 million. GAAP net income reached $13.1 million, or $0.21 a share, compared with a $12.5 million loss a year earlier; adjusted EPS doubled to $0.52.

Mercury now expects adjusted EBITDA of around $210 million for the fiscal year ending in July, up from its earlier view of approaching $200 million. The company also sees double-digit revenue growth to nearly $1.1 billion, compared with growth approaching double digits previously.

Mercury also lifted its free cash flow conversion target to approaching 40% of adjusted EBITDA from approaching 35%. The revised package combines a higher annual adjusted EBITDA target with a higher cash-conversion target.

Adjusted EBITDA rose 59% to $56.4 million, and its margin reached 22.3%. Gross margin widened to 35.2% from 27.9%.

“Our first quarter results reflect robust organic growth and margins that are in-line with our target profile,” Chairman and CEO Bill Ballhaus said.

What does the larger backlog mean?

Backlog reached $2.06 billion, up 45% from $1.42 billion a year earlier. Mercury expects $1.04 billion of that backlog to convert to revenue within 12 months.

The 45% increase in backlog outpaced the quarter’s 12.4% revenue growth. Yet only $1.04 billion of the $2.06 billion total has a stated 12-month conversion schedule.

For the fiscal second quarter, Mercury expects revenue to increase about 10% year over year and adjusted EBITDA margin to expand by roughly 500 basis points.

The full-year outlook does not assume wins on production programs including Common Processing Architecture, effectors, space and missile defense. Mercury therefore treats those potential awards as upside rather than forecast revenue.

Can bookings become cash?

Operating cash flow was negative $14.0 million and free cash flow was negative $24.4 million as inventory increased $32.3 million. Mercury expects free cash flow to turn positive in the fiscal second quarter.

Bookings growth has not yet produced positive cash flow in the reported quarter. The cash reversal now carries as much execution weight as the stronger order book.

Mercury repaid $100 million of debt during the quarter, bringing repayments to $250 million over two quarters. Net debt fell to $232 million.

Cash fell to $109.7 million from $214.3 million at the start of the quarter. Mercury also expanded CFO Dave Farnsworth’s remit by adding the title of chief operating officer.

How do recent quarters compare?

Mercury’s recent results show the step-up from Q1 FY26 and the larger Q4 order intake:

Quarter	Revenue	Bookings	Net income	Adjusted EBITDA
Q1 FY26	$225.2M	$250.2M	($12.5M)	$35.6M
Q4 FY26	$290M	$660M	$0.8M	$49M
Q1 FY27	$253.2M	$370.5M	$13.1M	$56.4M

In sequential terms, Q1 FY27 net income rose to $13.1 million from $0.8 million and adjusted EBITDA increased to $56.4 million from $49 million, even as revenue eased from $290 million to $253.2 million.

Bookings reached $250.2 million in Q1 FY26, $660 million in Q4 FY26 and $370.5 million in Q1 FY27. Mercury’s record designation applies specifically to first-quarter bookings, not the largest quarterly bookings in the three-quarter table.

Mercury enters the fiscal second quarter with $1.04 billion of backlog scheduled for conversion within 12 months and a promise of positive free cash flow. Delivery, cash conversion and any wins excluded from guidance will determine whether the raised outlook holds as bookings become revenue.