On this page of StockholderLetter.com we present the latest annual shareholder letter from MERCURY SYSTEMS INC — ticker symbol MRCY. Reading current and past MRCY letters to shareholders can bring important insights into the investment thesis.
2025 ANNUAL REPORT
MERCURY SYSTEMS BY THE NUMBERS 2,000+ $912M $139M $1.4B 1.13 25+ 300+ 40+ 75% Number of team members globally, ~30% hold DoD security clearances FY25 ending backlog, up over 6% over FY24 Installed base: number of A&D programs with Mercury solutions FY25 revenue, 9.2% year-over-year growth FY25 book-to-bill Years of tech leadership in A&D industry Record FY25 cash flow generated by operations, up 130% year-over-year Prime customers: including virtually all leaders in the A&D industry Of primes consider Mercury their top processing technology provider Cautionary Notice About Forward-Looking Statements This annual report contains certain forward-looking statements, as that term is defined in the Private Securities Litigation Reform Act of 1995, including those relating to the Company s focus on enhanced execution of the Company s strategic plan. You can identify these statements by the words may, will, could, should, would, plans, expects, anticipates, continue, estimate, project, intend, likely, forecast, probable, potential, and similar expressions. These forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those projected or anticipated. Such risks and uncertainties include, but are not limited to, continued funding of defense programs, the timing and amounts of such funding, general economic and business conditions, including unforeseen weakness in the Company s markets, effects of any U.S. federal government shutdown or extended continuing resolution, effects of geopolitical unrest and regional conflicts, competition, changes in technology and methods of marketing, delays in or cost increases related to completing development, engineering and manufacturing programs, changes in customer order patterns, changes in product mix, continued success in technological advances and delivering technological innovations, changes in, or in the U.S. government s interpretation of, federal export control or procurement rules and regulations, including tariffs, changes in, or in the interpretation or enforcement of, environmental rules and regulations, market acceptance of the Company s products, shortages in or delays in receiving components, supply chain delays or volatility for critical components, production delays or unanticipated expenses including due to quality issues or manufacturing execution issues, adherence to required manufacturing standards, capacity underutilization, increases in scrap or inventory write-offs, failure to achieve or maintain manufacturing quality certifications, such as AS9100, failure to achieve or maintain qualified business systems, such as those required by the DFARS, the impact of supply chain disruption, inflation and labor shortages, among other things, on program execution and the resulting effect on customer satisfaction, inability to fully realize the expected benefits from acquisitions, restructurings, and operational efficiency initiatives or delays in realizing such benefits, challenges in integrating acquired businesses and achieving anticipated synergies, effects of shareholder activism, increases in interest rates, changes to industrial security and cyber-security regulations and requirements and impacts from any cyber or insider threat events, changes in tax rates or tax regulations, changes to interest rate swaps or other cash flow hedging arrangements, changes to generally accepted accounting principles, difficulties in retaining key employees and customers, litigation, including the dispute arising with the former CEO over his resignation, unanticipated costs under fixed-price service and system integration engagements, and various other factors beyond our control. These risks and uncertainties also include such additional risk factors as are discussed in the Company s filings with the U.S. Securities and Exchange Commission, including its Annual Report on Form 10-K for the fiscal year ended June 27, 2025 and subsequent Quarterly Reports on Form 10-Q and Current Reports on Form 8-K. The Company cautions readers not to place undue reliance upon any such forward-looking statements, which speak only as of the date made. The Company undertakes no obligation to update any forward-looking statement to reflect events or circumstances after the date on which such statement is made.
LETTER TO THE SHAREHOLDERS Letter from the CEO Dear Mercury Shareholders, FY25 marked a pivotal year for Mercury Systems. We closed with strong momentum, delivering results that help to validate our strategy and set the stage for continued progress. The fourth quarter, in particular, was a proof point toward demonstrating our ability to ultimately reach our long-term goals: above-market growth, lowto-mid 20% EBITDA margins, and ~50% free cash flow conversion. While we are not there yet, Q4 shows we are on the right path. FY25 Performance and Q4 Highlights Full-year bookings of $1.03B, represented a book-to-bill ratio of 1.13, and included a Q4 bookings record of $341.5M. Full-year revenue of $912.0M, was up over 9.2% Year-over-Year (YoY), and Q4 revenue of $273.1M was up nearly 10.0% YoY. Full-year adjusted EBITDA was $119.4M and included $51.3M in Q4, representing an adjusted EBITDA margin of 18.8%, the highest level achieved in the past 12 quarters. Free cash flow was a record $119.0M in FY25. Ended FY25 with a record backlog of $1.4B. Full-year operating expenses were down $69.5M YoY, driven by actions to streamline and focus operations. We made significant progress against each of our four priority focus areas that are central to unlocking the fundamental value of the business: delivering predictable performance, building a thriving organic growth engine, expanding margins, and driving improved cash release. Delivering predictable performance We delivered ahead of expectations by executing with discipline. We believe our improved delivery rates and a stronger backlog reflect operational rigor and a foundation for sustainable growth. Our enhanced program and product management practices led to improved on-time delivery rates, and we reduced program execution risk through tighter cross-functional coordination. Building a thriving growth engine Growth was fueled by demand across our lines of business and increasing customer confidence in our ability to deliver innovative, high-value content that enables their missions. During FY25 Q4, we generated $341.5 million in bookings, yielding a book-to-bill ratio of 1.25 for the quarter, reflecting strong order momentum and growing customer confidence. In addition, our total backlog for the fiscal year reached a new record of $1.4 billion, of which over $800 million is expected to be recognized as revenue in FY26. This healthy backlog growth not only enhances visibility but we believe positions us well to continue scaling predictably in FY26 and beyond. Our focus remains on high-quality bookings, fueled by investments that align with evolving customer demands. These results reflect stronger execution, improved program management, and a more agile, performancedriven organization. 1
LETTER TO THE SHAREHOLDERS (CONT.) Notable FY25 program wins include: Common Processing Architecture (CPA) programs: numerous production awards that reinforce our scalable, technical leadership. Lower Tier Air and Missile Defense Sensor (LTAMDS): a critical radar program transitioning into production in FY26. KC-46: strategic orders supporting airborne refueling capabilities. Industrial Base Analysis and Sustainment (IBAS): development of a next-generation RF signal conditioning multi-chip package. AV Badger: new hardware production agreement to support the U.S. Space Force s Satellite Communication Augmentation Resource (SCAR) program. European expansion: expanded production agreements with a leading European defense prime contractor. These wins exemplify Mercury s alignment with evolving global defense priorities and trusted partnerships to deliver mission-critical technologies. Also, in FY25, we established the Advanced Concepts Group to bring together innovative solutions from across Mercury and capture positions on new platforms with customers. This agile team of technologists has exceptional insight into our customers missions and identifies solutions that Mercury can uniquely satisfy. This team is driving innovative solutions encompassing the breadth of our capabilities to shape and secure several new and critical wins with long-term potential. Finally, in FY25, Mercury completed the strategic acquisition of Star Lab, a company that provides antitamper and cybersecurity software solutions designed to protect mission-critical processors from advanced attacks. This acquisition enhances a wide range of Mercury products and solutions, such as rugged servers, embedded processing cards, mixed signal cards, avionics, and integrated processing solutions, providing us with a unique competitive advantage in the secure processing space. Expanding margins In FY25, we actively bid and won programs at target margins, supported by a favorable mix shift and the continued roll-off of legacy low-margin programs. In parallel, we improved our performance by simplifying, automating, and optimizing our operations and aligning team composition with our increased production mix. Driving improved cash release FY25 saw consistent cash generation across multiple quarters. Improved working capital, tighter payment cycles, and disciplined capital allocation enabled record free cash flow. These improvements give us flexibility to reinvest in innovation and growth. FY26 Outlook We enter FY26 with confidence in our strategy and clarity around the priorities that will move us closer to our target operating model. Our strategy and priorities remain unchanged with one notable exception. Predictable Performance is now Performance Excellence, reflecting our expectation to further optimize our operations for higher throughput and increased quality. We remain focused on our long-term goal of being the industry s highest performing team. With a record backlog, a sharpened operating model, and a clear vision, we believe we are poised to lead the next era of defense technology and unlock lasting value for our shareholders. Sincerely, Bill Ballhaus Chairman & Chief Executive Officer 2
FY25 SELECT FINANCIAL HIGHLIGHTS Backlog ($M) 6% YOY 1 2% 1,038 909 1,326 1,405 1,140 -17% YOY 555.7 632.2 538.8 448.7 378.4 FY21 We delivered strong results in the fourth quarter that were once again in line with or ahead of our expectations, resulting in solid year-over-year growth in backlog, revenue, net income, adjusted EBITDA, and free cash flow for our full fiscal year 2025. Net Working Capital ($M) R CAG FY22 FY23 FY24 Free Cash Flow ($M) FY25 119.0 FY21 FY22 FY23 FY25 Bookings ($M) 1,063 Revenue ($M) 1,076 1,021 881 51.6 FY24 1,032 9% YOY 924 988 974 FY21 FY22 FY23 835 912 26.1 FY21 (46.5) (60.1) FY22 FY23 FY24 FY25 FY21 FY22 FY23 FY24 FY25 FY24 FY25 CAGR figures for period of FY21 FY25. YoY figures for period of FY24 vs FY25. Numbers are rounded. Per-share data is presented on a fully diluted basis. SELECTED FINANCIAL DATA The following table summarizes certain historical consolidated financial data, which should be read in conjunction with the consolidated financial statements and related notes included elsewhere in this report (in thousands, except per-share data): FISCAL YEARS 2025 2024 2023 2022 2021 $912,020 $835,275 $973,882 $988,197 $923,996 Statement of Operations Data Net revenues (Loss) income from operations $(19,627) $(147,754) $(21,685) $31,610 $81,001 Net (loss) income $(37,904) $(137,640) $(28,335) $11,275 $62,044 $(0.65) $(2.38) $(0.50) $0.20 $1.13 $(0.65) $(2.38) $(0.50) $0.20 $1.12 $119,438 $9,413 $132,253 $200,507 $201,896 $0.64 $(0.69) $1.00 $2.19 $2.42 Net (Loss) Earnings Per Share Basic Diluted Adjusted EBITDA (1) Adjusted EPS (1) AS OF FISCAL YEARS 2025 2024 2023 2022 2021 $448,702 $538,847 $632,191 $555,671 $378,438 Balance Sheet Data Net working capital Total assets $2,434,764 $2,378,905 $2,391,367 $2,304,415 $1,955,137 Long-term obligations $660,926 $671,714 $591,418 $573,303 $320,168 Total shareholders equity $1,473,461 $1,472,775 $1,566,685 $1,537,185 $1,484,146 (1) Adjusted EBITDA and adjusted EPS are key measures that are not calculated according to U.S. generally accepted accounting principles ( GAAP ). Refer to Non-GAAP Financial Measures in Management s Discussion and Analysis of Financial Condition and Results of Operations for our definition of these measures, including reconciliations to our most directly comparable GAAP financial measures. Reconciliations to our most directly comparable GAAP financial measures are included in our Annual Report on Form 10-K for fiscal years 2023, 2024 and 2025. 3
 • shareholder letter icon 9/10/2025 Letter Continued (Full PDF)
 • stockholder letter icon 9/21/2023 MRCY Stockholder Letter
 • stockholder letter icon 9/12/2024 MRCY Stockholder Letter
 • stockholder letter icon More "Electronic Equipment & Products" Category Stockholder Letters
 • Benford's Law Stocks icon MRCY Benford's Law Stock Score = 58


MRCY Shareholder/Stockholder Letter Transcript:

2025
ANNUAL REPORT

MERCURY SYSTEMS BY THE NUMBERS
2,000+
$912M
$139M
$1.4B
1.13
25+
300+
40+
75%
Number of team members
globally, ~30% hold DoD
security clearances
FY25 ending backlog,
up over 6% over FY24
Installed base: number
of A&D programs with
Mercury solutions
FY25 revenue,
9.2% year-over-year growth
FY25 book-to-bill
Years of tech leadership
in A&D industry
Record FY25 cash flow
generated by operations, up
130% year-over-year
Prime customers:
including virtually all leaders
in the A&D industry
Of primes consider
Mercury their top processing
technology provider
Cautionary Notice About Forward-Looking Statements
This annual report contains certain forward-looking statements, as that term is defined in the Private Securities Litigation Reform Act of 1995, including
those relating to the Company   s focus on enhanced execution of the Company   s strategic plan. You can identify these statements by the words    may,       will,   
   could,       should,       would,       plans,       expects,       anticipates,       continue,       estimate,       project,       intend,       likely,       forecast,       probable,       potential,    and similar
expressions. These forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those projected or
anticipated. Such risks and uncertainties include, but are not limited to, continued funding of defense programs, the timing and amounts of such funding,
general economic and business conditions, including unforeseen weakness in the Company   s markets, effects of any U.S. federal government shutdown
or extended continuing resolution, effects of geopolitical unrest and regional conflicts, competition, changes in technology and methods of marketing,
delays in or cost increases related to completing development, engineering and manufacturing programs, changes in customer order patterns, changes in
product mix, continued success in technological advances and delivering technological innovations, changes in, or in the U.S. government   s interpretation
of, federal export control or procurement rules and regulations, including tariffs, changes in, or in the interpretation or enforcement of, environmental
rules and regulations, market acceptance of the Company   s products, shortages in or delays in receiving components, supply chain delays or volatility
for critical components, production delays or unanticipated expenses including due to quality issues or manufacturing execution issues, adherence to
required manufacturing standards, capacity underutilization, increases in scrap or inventory write-offs, failure to achieve or maintain manufacturing
quality certifications, such as AS9100, failure to achieve or maintain qualified business systems, such as those required by the DFARS, the impact of supply
chain disruption, inflation and labor shortages, among other things, on program execution and the resulting effect on customer satisfaction, inability to
fully realize the expected benefits from acquisitions, restructurings, and operational efficiency initiatives or delays in realizing such benefits, challenges
in integrating acquired businesses and achieving anticipated synergies, effects of shareholder activism, increases in interest rates, changes to industrial
security and cyber-security regulations and requirements and impacts from any cyber or insider threat events, changes in tax rates or tax regulations,
changes to interest rate swaps or other cash flow hedging arrangements, changes to generally accepted accounting principles, difficulties in retaining key
employees and customers, litigation, including the dispute arising with the former CEO over his resignation, unanticipated costs under fixed-price service
and system integration engagements, and various other factors beyond our control. These risks and uncertainties also include such additional risk factors as
are discussed in the Company   s filings with the U.S. Securities and Exchange Commission, including its Annual Report on Form 10-K for the fiscal year ended
June 27, 2025 and subsequent Quarterly Reports on Form 10-Q and Current Reports on Form 8-K. The Company cautions readers not to place undue reliance
upon any such forward-looking statements, which speak only as of the date made. The Company undertakes no obligation to update any forward-looking
statement to reflect events or circumstances after the date on which such statement is made.

LETTER TO THE SHAREHOLDERS
Letter from the CEO
Dear Mercury
Shareholders,
FY25 marked a pivotal year for
Mercury Systems. We closed
with strong momentum,
delivering results that help
to validate our strategy and
set the stage for continued
progress. The fourth quarter,
in particular, was a proof
point toward demonstrating
our ability to ultimately
reach our long-term goals:
above-market growth, lowto-mid 20% EBITDA margins,
and ~50% free cash flow
conversion. While we are not
there yet, Q4 shows we are on
the right path.
FY25 Performance and Q4 Highlights
    Full-year bookings of $1.03B, represented a book-to-bill
ratio of 1.13, and included a Q4 bookings record of $341.5M.
    Full-year revenue of $912.0M, was up over 9.2%
Year-over-Year (YoY), and Q4 revenue of $273.1M was up
nearly 10.0% YoY.
    Full-year adjusted EBITDA was $119.4M and included
$51.3M in Q4, representing an adjusted EBITDA margin of
18.8%, the highest level achieved in the past 12 quarters.
    Free cash flow was a record $119.0M in FY25.
    Ended FY25 with a record backlog of $1.4B.
    Full-year operating expenses were down $69.5M YoY,
driven by actions to streamline and focus operations.
We made significant progress against each of
our four priority focus areas that are central to
unlocking the fundamental value of the business:
delivering predictable performance, building a
thriving organic growth engine, expanding margins,
and driving improved cash release.
Delivering predictable performance
We delivered ahead of expectations by executing
with discipline. We believe our improved delivery
rates and a stronger backlog reflect operational
rigor and a foundation for sustainable growth.
Our enhanced program and product management
practices led to improved on-time delivery rates,
and we reduced program execution risk through
tighter cross-functional coordination.
Building a thriving growth engine
Growth was fueled by demand across our lines of
business and increasing customer confidence in
our ability to deliver innovative, high-value content
that enables their missions. During FY25 Q4, we
generated $341.5 million in bookings, yielding a
book-to-bill ratio of 1.25 for the quarter, reflecting
strong order momentum and growing customer
confidence. In addition, our total backlog for
the fiscal year reached a new record of $1.4
billion, of which over $800 million is expected to
be recognized as revenue in FY26. This healthy
backlog growth not only enhances visibility but
we believe positions us well to continue scaling
predictably in FY26 and beyond. Our focus remains
on high-quality bookings, fueled by investments
that align with evolving customer demands.
These results reflect stronger execution, improved
program management, and a more agile, performancedriven organization.
1

LETTER TO THE SHAREHOLDERS (CONT.)
Notable FY25 program wins include:
    Common Processing Architecture (CPA) programs:
numerous production awards that reinforce our scalable,
technical leadership.
    Lower Tier Air and Missile Defense Sensor (LTAMDS):
a critical radar program transitioning into production
in FY26.
    KC-46: strategic orders supporting airborne refueling
capabilities.
    Industrial Base Analysis and Sustainment (IBAS):
development of a next-generation RF signal conditioning
multi-chip package.
    AV Badger: new hardware production agreement to
support the U.S. Space Force   s Satellite Communication
Augmentation Resource (SCAR) program.
    European expansion: expanded production agreements
with a leading European defense prime contractor.
These wins exemplify Mercury   s alignment with
evolving global defense priorities and trusted
partnerships to deliver mission-critical technologies.
Also, in FY25, we established the Advanced Concepts
Group to bring together innovative solutions
from across Mercury and capture positions on
new platforms with customers. This agile team
of technologists has exceptional insight into our
customers    missions and identifies solutions that
Mercury can uniquely satisfy. This team is driving
innovative solutions encompassing the breadth of
our capabilities to shape and secure several new and
critical wins with long-term potential.
Finally, in FY25, Mercury completed the strategic
acquisition of Star Lab, a company that provides antitamper and cybersecurity software solutions designed
to protect mission-critical processors from advanced
attacks. This acquisition enhances a wide range
of Mercury products and solutions, such as rugged
servers, embedded processing cards, mixed signal
cards, avionics, and integrated processing solutions,
providing us with a unique competitive advantage in
the secure processing space.
Expanding margins
In FY25, we actively bid and won programs at target
margins, supported by a favorable mix shift and the
continued roll-off of legacy low-margin programs.
In parallel, we improved our performance by simplifying,
automating, and optimizing our operations and aligning
team composition with our increased production mix.
Driving improved cash release
FY25 saw consistent cash generation across multiple
quarters. Improved working capital, tighter payment
cycles, and disciplined capital allocation enabled record
free cash flow. These improvements give us flexibility to
reinvest in innovation and growth.
FY26 Outlook
We enter FY26 with confidence in our strategy and
clarity around the priorities that will move us closer to
our target operating model. Our strategy and priorities
remain unchanged with one notable exception.
Predictable Performance is now Performance
Excellence, reflecting our expectation to further
optimize our operations for higher throughput and
increased quality. We remain focused on our long-term
goal of being the industry   s highest performing team.
With a record backlog, a sharpened operating model,
and a clear vision, we believe we are poised to lead the
next era of defense technology and unlock lasting value
for our shareholders.
Sincerely,
Bill Ballhaus
Chairman & Chief Executive Officer
2

FY25 SELECT FINANCIAL HIGHLIGHTS
Backlog ($M)
6%
YOY
1 2%
1,038
909
1,326
1,405
1,140
-17%
YOY
555.7
632.2
538.8
448.7
378.4
FY21
We delivered strong results in
the fourth quarter that were
once again in line with or ahead
of our expectations, resulting in
solid year-over-year growth in
backlog, revenue, net income,
adjusted EBITDA, and free cash
flow for our full fiscal year 2025.
Net Working Capital ($M)
R
CAG
FY22
FY23
FY24
Free Cash Flow ($M)
FY25
119.0
FY21
FY22
FY23
FY25
Bookings ($M)
1,063
Revenue ($M)
1,076
1,021
881
51.6
FY24
1,032
9%
YOY
924
988
974
FY21
FY22
FY23
835
912
26.1
FY21
(46.5)
(60.1)
FY22
FY23
FY24 FY25
FY21
FY22
FY23
FY24
FY25
FY24 FY25
CAGR figures for period of FY21   FY25. YoY figures
for period of FY24 vs FY25. Numbers are rounded.
Per-share data is presented on a fully diluted basis.
SELECTED FINANCIAL DATA
The following table summarizes certain historical consolidated financial data, which should be read in conjunction with the consolidated
financial statements and related notes included elsewhere in this report (in thousands, except per-share data):
FISCAL YEARS
2025
2024
2023
2022
2021
$912,020
$835,275
$973,882
$988,197
$923,996
Statement of Operations Data
Net revenues
(Loss) income from operations
$(19,627)
$(147,754)
$(21,685)
$31,610
$81,001
Net (loss) income
$(37,904)
$(137,640)
$(28,335)
$11,275
$62,044
$(0.65)
$(2.38)
$(0.50)
$0.20
$1.13
$(0.65)
$(2.38)
$(0.50)
$0.20
$1.12
$119,438
$9,413
$132,253
$200,507
$201,896
$0.64
$(0.69)
$1.00
$2.19
$2.42
Net (Loss) Earnings Per Share
Basic
Diluted
Adjusted EBITDA
(1)
Adjusted EPS (1)
AS OF FISCAL YEARS
2025
2024
2023
2022
2021
$448,702
$538,847
$632,191
$555,671
$378,438
Balance Sheet Data
Net working capital
Total assets
$2,434,764
$2,378,905
$2,391,367
$2,304,415
$1,955,137
Long-term obligations
$660,926
$671,714
$591,418
$573,303
$320,168
Total shareholders    equity
$1,473,461
$1,472,775
$1,566,685
$1,537,185
$1,484,146
(1) Adjusted EBITDA and adjusted EPS are key measures that are not calculated according to U.S. generally accepted accounting principles (   GAAP   ).
Refer to    Non-GAAP Financial Measures    in Management   s Discussion and Analysis of Financial Condition and Results of Operations for our
definition of these measures, including reconciliations to our most directly comparable GAAP financial measures. Reconciliations to our most
directly comparable GAAP financial measures are included in our Annual Report on Form 10-K for fiscal years 2023, 2024 and 2025.
3


shareholder letter icon 9/10/2025 Letter Continued (Full PDF)
 

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