Mercury Systems Bookings Nearly Double as Backlog Hits Record $1.9 Billion
Mercury Systems (MRCY) closed fiscal 2026 with fourth-quarter bookings of $660 million, up 93.1% from a year earlier, even as revenue growth slowed to 6.1%.
Mercury Systems (MRCY) reported fourth-quarter bookings of $660 million, up 93.1% from a year earlier and nearly double the company's previous record, producing a book-to-bill ratio of 2.28. The defense electronics maker's order intake has now accelerated for three straight quarters, climbing from $288 million in the second quarter to $348 million in the third before the fourth-quarter surge. Backlog followed the same trajectory, reaching a record $1.9 billion as of July 3, 2026, up 38.4% from a year earlier and marking four consecutive quarters of accelerating backlog growth.
Revenue has not kept pace with those order trends. Fourth-quarter revenue grew 6.1% to $290 million, a deceleration from 11.5% organic growth in the third quarter and 10.2% in the first quarter. For the full fiscal year, revenue rose 7.9% to $984 million from $912 million, while adjusted EBITDA improved to $150 million from $119 million and the GAAP net loss narrowed to $30 million from $38 million. Adjusted EBITDA margin expanded through the year, from 15.8% in the first quarter to 16.7% in the fourth, the highest of the year, though fourth-quarter adjusted EBITDA of $49 million came in below the $51 million reported a year earlier. GAAP net income of $1 million in the fourth quarter reversed three consecutive quarterly losses earlier in the year but fell short of the $16 million reported in the same period a year ago.
Costs grew faster than sales. Fourth-quarter SG&A expense rose 26.9% to $47.8 million from $37.7 million, driven in part by stock-based compensation that jumped to $9.3 million from $0.7 million within that line, while R&D expense climbed 35.6% to $16.2 million. Gross margin slipped to roughly 30.6% from about 31.0% a year earlier.
The more pronounced divergence showed up in cash generation. Full-year free cash flow fell to $68 million from $119 million, and operating cash flow declined to $102 million from $139 million, even as earnings and EBITDA improved. The weakness traced in part to a soft third quarter, when free cash flow was negative $2 million and operating cash flow totaled just $6 million, down from $30 million a year earlier. Fourth-quarter free cash flow of $29 million also lagged the $34 million generated a year earlier, despite operating cash flow rising to $42 million from $38 million.
Mercury used part of that cash to pay down debt, repaying $150 million on its credit facility during the fourth quarter and cutting long-term debt to $441.5 million as of July 3, 2026, from $591.5 million a year earlier. Cash and equivalents fell to $214.3 million from $309.1 million over the same period, a decline attributed largely to the debt paydown. The deleveraging move was not flagged in any of the prior three quarterly releases.
Management said it is "increasing our outlook for organic growth" for fiscal 2027, citing "enhanced visibility" into demand—the first explicit guidance-raise language across the year's releases. The company's $200 million share repurchase program, authorized by the board in November 2025, went unmentioned in the second-, third- and fourth-quarter releases, leaving its status through the record-bookings quarter undisclosed.