Mercury Systems (MRCY) Q1 2025 earnings summary

Executive summary

• Q1 FY25 revenue rose 13% year-over-year to $204.4M, with bookings of $247.7M, a 29% increase and a book-to-bill ratio of 1.21.

• Net loss narrowed to $17.5M from $36.7M year-over-year, with adjusted EBITDA at $21.5M and adjusted EPS at $0.04.

• Record backlog reached over $1.3B, up 16% year-over-year, with $777M expected to convert to revenue within 12 months.

• Operating expenses and net working capital decreased year-over-year, supporting margin expansion and improved free cash flow.

• Cost reductions from workforce actions led to lower SG&A and R&D expenses.

Financial highlights

• Revenue: $204.4M, up $23.4M (13%) year-over-year.

• Bookings: $247.7M, up 29% year-over-year; book-to-bill ratio 1.21.

• Adjusted EBITDA: $21.5M (10.5% margin), up from $2.0M (1.1%) year-over-year.

• Free cash flow: $(20.9)M, improved from $(47.1)M year-over-year.

• GAAP net loss: $17.5M ($0.30 per share), improved from $36.7M ($0.64 per share) last year.

• Adjusted EPS: $0.04, up from $(0.24) last year.

• Gross margin: 25.3%, down from 27.9% year-over-year.

Outlook and guidance

• FY25 revenue expected to be relatively flat year-over-year, with a stronger exit run rate.

• Adjusted EBITDA margins anticipated in the low double digits for FY25, expanding in the second half.

• Free cash flow expected to be positive for FY25, with stronger performance in the second half.

• Management expects predictable organic growth, expanding margins, and robust free cash flow.

• No specific quantitative guidance provided this early in the year.