Q2 2026 Mercury Systems Inc Earnings Call Transcript
Key Points
- Mercury Systems Inc (MRCY) reported Q2 results that exceeded expectations, with significant year-over-year growth in backlog, revenue, and adjusted EBITDA.
- The company achieved record first-half revenue, driven by accelerated progress on high-priority customer programs.
- Bookings reached $288 million with a book-to-bill ratio of 1.23, resulting in a record backlog nearing $1.5 billion.
- Adjusted EBITDA margin improved by 300 basis points year over year, reaching 12.9%.
- Free cash flow was $46 million, significantly surpassing expectations, and the company ended Q2 with $335 million in cash on hand.
- Gross margin decreased by 130 basis points to 26% due to execution on lower-margin programs.
- The company continues to work through a backlog of lower-margin contracts, which is expected to persist into FY27.
- Operating expenses decreased, but there were increased costs related to litigation and settlement, impacting overall expenses.
- Despite strong performance, the company maintained a cautious outlook for Q3, expecting revenue to be down year over year.
- The company faces challenges in consistently accelerating deliveries due to supply chain constraints, impacting the ability to pull forward revenue.
Good 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 would like to turn the call over to the company's Vice President of Investor Relations, Tyler Hojo. Please go ahead, Mr. Hojo.
Good afternoon and thank you for joining us. With me today is our Chairman and Chief Executive Officer, Bill Ballhaus; and our Executive Vice President and CFO, Dave Farnsworth. If you have not received a copy of the earnings press release we issued earlier this afternoon, you can find it on our website at mrcy.com. The slide presentation that we will be referencing to is posted on the Investor Relations section of the website under Events and Presentations.
Turning to slide 2 in the presentation. I'd like to remind you that today's presentation includes forward-looking statements, including information regarding Mercury's financial outlook, future plans, objectives,
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