Mercury Systems soars with 6% revenue growth and stronger margins in Q1
Mercury Systems, a leading provider of secure mission-critical technologies, has reported a robust first quarter, marked by significant improvements in cash flow and revenue growth. The company also extended its Revolving Credit Facility and provided positive outlook for future earnings.
Mercury Systems' first quarter sales surged 6% to $225.2 million, surpassing analyst expectations by $17.93 million. This impressive growth was driven by a $20 million pull forward of sales, which would have resulted in flat year-on-year revenues without it. Despite this, the company's operating cash flow showed a remarkable turnaround, shifting from a $14.7 million cash burn to a $2.2 million cash generation.
The company's adjusted EBITDA grew by a substantial 66% in the first quarter. Excluding the pull forward of revenues, earnings would have been 20% higher. Reported margins rose from 10.5% to 15.8%, and adjusting for the timing of $20 million in revenues, the margins would have been 12.5%.
Mercury Systems has also strengthened its financial position by extending its Revolving Credit Facility. The maturity has been pushed back to November 4, 2030, with a facility size of $850,000, providing the company with additional financial flexibility.
Looking ahead, Mercury Systems expects strong margin growth of more than 20% in FY28. The company anticipates EBITDA to grow annually at a rate of 25.6% on sales growth of 7.5%. This optimism is fueled by high demand for the company's solutions in areas such as missile defense, radar programs, electronic warfare, and communication and intelligence, surveillance and reconnaissance.
Mercury Systems' stock has advanced nearly 12% since receiving a buy rating in August, outperforming the S&P 500's 4.4% gain. The company has adjusted its price target to $84.49, reflecting a $6.9 million decrease in EBITDA performance in 2027. With its strong first quarter performance and positive outlook, Mercury Systems is well-positioned to continue its growth trajectory.
