0001049521-26-000024
SEC filingMercury Systems reported 11.5% revenue growth in Q3 FY2026, driven by program execution, with gross margin expanding 230 bps to 29.3%.
Mercury Systems reported total revenues of $235.8 million for the third quarter ended March 27, 2026, an increase of 11.5% compared to $211.4 million in the same period last year. The revenue growth was primarily driven by continued execution on the company's program base, with increases across modules and sub-assemblies ($17.5 million) and integrated solutions ($11.0 million), partially offset by a decline in components ($4.1 million).
Gross margin improved significantly by 230 basis points to 29.3% from 27.0% in the prior year quarter. The improvement was attributed to a net favorable impact from estimate-at-completion (EAC) changes of approximately $2.1 million, an $1.6 million improvement over the prior period, lower net manufacturing variances of $4.1 million, partially offset by higher inventory reserves of $3.3 million.
Operating income swung to a positive $5.2 million from a loss of $17.3 million in Q3 FY2025, reflecting both revenue growth and expense control. Selling, general and administrative expenses decreased 9.1% to $39.1 million, driven by lower litigation, depreciation, and consulting costs. Research and development expenses declined 6.1% to $15.0 million, driven by headcount reductions, partially offset by higher engineering utilization. Net loss narrowed to $2.9 million from $19.2 million in the prior year quarter.
The MD&A does not report segment-level financials; however, the revenue breakdown by product grouping and end market provides color on business momentum:
Management provided no forward guidance in the MD&A. The company highlighted its focus on executing against its program base and continuing to manage costs, as evidenced by restructuring actions that reduced headcount by approximately 120 employees across fiscal 2025 and 2026. The company also noted the completion of Amendment No. 7 to its revolving credit facility, extending the maturity to November 4, 2030, and a subsequent $150 million repayment on April 30, 2026. A new $200 million share repurchase program was authorized in November 2025, with $185 million remaining available as of quarter-end. The company expects to continue exploring acquisition opportunities to expand technological capabilities, particularly in sensor and effector and C4I markets.
As of March 27, 2026, Mercury Systems reported total assets of $2.48B. Cash and cash equivalents stood at $331.8M, up from $309.1M at June 27, 2025. The company has $591.5M in long-term debt under its revolving credit facility, unchanged from year-end, with additional capacity of $254.3M (net of $4.2M letters of credit). Total shareholders' equity was $1.478B, reflecting a slight increase despite a net loss of $30.5M in the nine months, primarily due to stock-based compensation and other comprehensive income. Inventory rose to $361.7M from $332.9M, driven by work-in-process increases.
As of March 27, 2026, Mercury had non-cancelable purchase commitments totaling $224.2M for inventory and services. The company also reported remaining performance obligations (RPO) of $859.8M, with approximately 50% expected to be recognized as revenue in the next 12 months. This RPO represents a significant backlog, though it excludes contracts under one year. Additionally, the company has a $75M accounts receivable factoring facility, with $60.9M factored and outstanding at quarter-end.
Mercury's Board authorized a new $200M share repurchase program on November 3, 2025. During the nine months ended March 27, 2026, the company repurchased 221,510 shares for $15.0M at an average price of $67.70, leaving $185.0M available. Capital expenditures totaled $20.7M (3.0% of revenue), including $4.4M of inventory reclassified to property and equipment. No dividends were paid. The company made no debt repayments during the period, but subsequent to quarter-end on April 30, 2026, it repaid $150M of the revolver, reducing drawn debt to $441.5M.
Mercury operates as a single reportable segment. Revenue disaggregation in the notes shows domestic sales of $588.9M (85%) and international/foreign military sales of $105.0M (15%) for the nine months. By end application, C4I contributed $292.1M (42%), Radar $128.8M (19%), Electronic Warfare $78.5M (11%), and Other Sensor & Effector $93.0M (13%). By product grouping, Integrated Solutions generated $351.1M (51%), Modules and Sub-assemblies $202.6M (29%), and Components $140.1M (20%). By platform, Airborne was $262.7M (38%), Land $154.8M (22%), Naval $73.3M (11%), and Space $55.8M (8%). Major customers included RTX (16%), Lockheed Martin (12%), and Northrop Grumman (10%).