Mercury Systems Q2 2025: Discrepancies in CPA Progress, Demand Outlook, and Revenue Expectations

These are the key contradictions discussed in Mercury Systems' latest 2025Q2 earnings call, specifically including: Common Processing Architecture (CPA) progress and supply chain capabilities, demand environment assessment, and revenue and cash flow expectations:



Strong Financial Performance:
- Mercury Systems reported record revenue of $223 million for Q2 Fiscal 2025, up 13% year-over-year, with adjusted EBITDA of $22 million and a record free cash flow of $82 million, up $44 million year-over-year.
- The growth was driven by increased bookings, improved production execution, and effective cost management.

Bookings and Backlog:
- The company's bookings reached $242 million, leading to a record backlog of $1.4 billion, reflecting a trailing book-to-bill ratio of 1.12.
- The strong bookings were due to competitive wins and increased production capabilities, particularly in military and defense programs.

Focus on Production and Margins:
- Mercury saw point-in-time revenue increase by 31% year-over-year, a significant driver of the quarter's performance.
- This increase was due to accelerated customer deliveries and revenue recognition, aligning with strategic efforts to shift the business towards production and improve margins.

Free Cash Flow Improvement:
- The company achieved a record free cash flow of $82 million, a substantial improvement from the previous year's $38 million.
- This was attributed to better working capital management, improved program execution, and just-in-time material management, leading to a significant reduction in net working capital.