Mercury Systems (MRCY) Q3 2025 earnings summary

Executive summary

• Q3 FY25 revenue reached $211.4 million, up 1.5% year-over-year, with year-to-date revenue growth of 8.9%.

• Backlog grew 4% year-over-year to $1.34 billion, with a trailing twelve-month book-to-bill ratio of 1.1.

• Adjusted EBITDA was $24.7 million (11.7% margin), up from $(2.4) million last year; free cash flow improved to $24.1 million, up $49.8 million year-over-year.

• GAAP net loss narrowed to $19.2 million ($0.33/share) from $44.6 million ($0.77/share) last year.

• Significant contract wins in Common Processing Architecture and F-35 programs, plus acquisition of Star Lab and divestiture of Swiss manufacturing.

Financial highlights

• Q3 FY25 revenue: $211.4 million (vs. $208.3 million Q3 FY24); year-to-date revenue: $638.9 million, up 8.9%.

• Q3 FY25 gross margin: 27.0% (up from 19.5% year-over-year); adjusted EBITDA margin: 11.7%.

• Q3 FY25 adjusted EPS: $0.06 (vs. $(0.26) Q3 FY24); GAAP net loss: $19.2 million.

• Free cash flow for Q3 FY25: $24.1 million (vs. $(25.7) million Q3 FY24); $146 million generated over the last four quarters.

• Cash and cash equivalents at quarter-end: $269.8 million; net debt at $322 million, lowest since Q1 FY22.

Outlook and guidance

• FY25 revenue growth expected to approach mid-single digits, with Q4 revenue flat year-over-year due to accelerated deliveries in Q2.

• Adjusted EBITDA margins for FY25 expected in low double digits, with Q4 margins approaching mid-teens.

• Free cash flow for FY25 projected to exceed prior expectations, with Q4 around break-even.

• Long-term targets: above-market revenue growth, adjusted EBITDA margins in low-to-mid-20% range, and 50% free cash flow conversion.

• Management expects existing cash, revolver, and operations to cover anticipated needs for at least the next 12 months.