What changed in this filing

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Item 1. Financial Statements

2024-05-07 compared with 2024-02-06 · 236 added, 153 removed, 564 unchanged (41% of the section changed)

3 unchanged sentences

(In thousands, except share and per share data)

December 29, 2023 June 30, 2023

March 29, 2024 June 30, 2023

Current assets:

Cash and cash equivalents $ 142,645 $ 71,563

Accounts receivable, net of allowance for credit losses of $ 737 and $ 1,335 at December 29, 2023 and June 30, 2023, respectively

Accounts receivable, net of allowance for credit losses of $ 497 and $ 1,335 at March 29, 2024 and June 30, 2023, respectively

91,785 124,729

Unbilled receivables and costs in excess of billings, net of allowance for credit losses of $ 2,313 and $ 0 at December 29, 2023 and June 30, 2023, respectively

Unbilled receivables and costs in excess of billings, net of allowance for credit losses of $ 8,653 and $ 0 at March 29, 2024 and June 30, 2023, respectively

325,441 382,558

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85,000,000 shares authorized;

57,563,733 and 56,961,665 shares issued and outstanding at December 29, 2023 and June 30, 2023, respectively

57,868,725 and 56,961,665 shares issued and outstanding at March 29, 2024 and June 30, 2023, respectively

Additional paid-in capital 1,230,666 1,196,847

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MERCURY SYSTEMS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE (LOSS) INCOME

(In thousands, except per share data)

Second Quarters Ended Six Months Ended

December 29, 2023 December 30, 2022 December 29, 2023 December 30, 2022

Third Quarters Ended Nine Months Ended

March 29, 2024 March 31, 2023 March 29, 2024 March 31, 2023

Net revenues $ 208,258 $ 263,479 $ 586,712 $ 720,646

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Total operating expenses 86,298 88,335 262,475 262,131

Loss from operations ( 53,929 ) ( 7,547 ) ( 94,130 ) ( 14,741 )

(Loss) income from operations ( 45,656 ) 1,954 ( 139,786 ) ( 12,787 )

Interest income 542 80 674 329

Interest expense ( 9,319 ) ( 6,711 ) ( 25,856 ) ( 17,848 )

Other (expense) income, net ( 1,148 ) 846 ( 2,922 ) ( 2,799 )

Other expense, net ( 2,784 ) ( 613 ) ( 5,706 ) ( 3,412 )

Loss before income tax benefit ( 57,217 ) ( 5,290 ) ( 170,674 ) ( 33,718 )

Income tax benefit ( 12,643 ) ( 10,446 ) ( 43,811 ) ( 13,619 )

Net loss $ ( 45,581 ) $ ( 10,920 ) $ ( 82,289 ) $ ( 25,255 )

Basic net loss per share $ ( 0.79 ) $ ( 0.19 ) $ ( 1.44 ) $ ( 0.45 )

Diluted net loss per share $ ( 0.79 ) $ ( 0.19 ) $ ( 1.44 ) $ ( 0.45 )

Net (loss) income $ ( 44,574 ) $ 5,156 $ ( 126,863 ) $ ( 20,099 )

Basic net (loss) earnings per share $ ( 0.77 ) $ 0.09 $ ( 2.20 ) $ ( 0.36 )

Diluted net (loss) earnings per share $ ( 0.77 ) $ 0.09 $ ( 2.20 ) $ ( 0.36 )

Weighted-average shares outstanding:

1 unchanged sentence

Diluted 57,698 56,896 57,536 56,310

Comprehensive loss:

Net loss $ ( 45,581 ) $ ( 10,920 ) $ ( 82,289 ) $ ( 25,255 )

Comprehensive (loss) earnings:

Net (loss) income $ ( 44,574 ) $ 5,156 $ ( 126,863 ) $ ( 20,099 )

Change in fair value of derivative instruments, net of tax 3,064 ( 2,687 ) ( 1,058 ) 1,275

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Pension benefit plan, net of tax ( 56 ) 46 ( 169 ) 142

Total other comprehensive (loss) income, net of tax ( 5,512 ) ( 445 ) ( 3,406 ) 4,452

Total comprehensive loss $ ( 51,093 ) $ ( 11,365 ) $ ( 85,695 ) $ ( 20,803 )

Total other comprehensive income (loss), net of tax 2,549 ( 2,661 ) ( 857 ) 1,791

Total comprehensive (loss) income $ ( 42,025 ) $ 2,495 $ ( 127,720 ) $ ( 18,308 )

The accompanying notes are an integral part of the consolidated financial statements.

2 unchanged sentences

(In thousands)

For the Second Quarter Ended December 29, 2023

For the Third Quarter Ended March 29, 2024

Common Stock Additional

4 unchanged sentences

Shares Amount

Balance at September 29, 2023 57,274 $ 573 $ 1,205,573 $ 320,731 $ 13,935 $ 1,540,812

Balance at December 29, 2023 57,564 $ 576 $ 1,220,343 $ 275,150 $ 8,423 $ 1,504,492

Issuance of common stock under employee stock incentive plans 166 1 ( 1 ) — — —

Issuance of common stock under employee stock purchase plan 107 1 3,162 — — 3,163

Issuance of common stock under defined contribution plan 139 2 4,220 — — 4,222

Retirement of common stock — — ( 15 ) — — ( 15 )

Stock-based compensation — — 6,104 — — 6,104

Net loss — — — ( 44,574 ) — ( 44,574 )

Other comprehensive loss — — — — ( 5,512 ) ( 5,512 )

Balance at December 29, 2023 57,564 $ 576 $ 1,220,343 $ 275,150 $ 8,423 $ 1,504,492

For the Second Quarter Ended December 30, 2022

Other comprehensive income — — — — 2,549 2,549

Balance at March 29, 2024 57,869 $ 579 $ 1,230,666 $ 230,576 $ 10,972 $ 1,472,793

For the Third Quarter Ended March 31, 2023

Common Stock Additional

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Shares Amount

Balance at September 30, 2022 56,180 $ 562 $ 1,156,501 $ 371,439 $ 10,428 $ 1,538,930

Balance at December 30, 2022 56,365 $ 564 $ 1,173,026 $ 360,519 $ 9,983 $ 1,544,092

Issuance of common stock under employee stock incentive plans 225 2 ( 2 ) — — —

Issuance of common stock under employee stock purchase plan 57 1 2,392 — — 2,393

Issuance of common stock under defined contribution plan 84 1 4,189 — — 4,190

Stock-based compensation — — 10,122 — — 10,122

Net loss — — — ( 10,920 ) — ( 10,920 )

Net income — — — 5,156 — 5,156

Other comprehensive loss — — — — ( 2,661 ) ( 2,661 )

Balance at December 30, 2022 56,365 $ 564 $ 1,173,026 $ 360,519 $ 9,983 $ 1,544,092

For the Six Months Ended December 29, 2023

Balance at March 31, 2023 56,674 $ 567 $ 1,187,335 $ 365,675 $ 7,322 $ 1,560,899

For the Nine Months Ended March 29, 2024

Common Stock Additional

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Other comprehensive loss — — — — ( 857 ) ( 857 )

Balance at December 29, 2023 57,564 $ 576 $ 1,220,343 $ 275,150 $ 8,423 $ 1,504,492

For the Six Months Ended December 30, 2022

Balance at March 29, 2024 57,869 $ 579 $ 1,230,666 $ 230,576 $ 10,972 $ 1,472,793

For the Nine Months Ended March 31, 2023

Common Stock Additional

12 unchanged sentences

Other comprehensive income — — — — 1,791 1,791

Balance at December 30, 2022 56,365 $ 564 $ 1,173,026 $ 360,519 $ 9,983 $ 1,544,092

Balance at March 31, 2023 56,674 $ 567 $ 1,187,335 $ 365,675 $ 7,322 $ 1,560,899

The accompanying notes are an integral part of the consolidated financial statements.

2 unchanged sentences

(In thousands)

Six Months Ended

December 29, 2023 December 30, 2022

Nine Months Ended

March 29, 2024 March 31, 2023

Cash flows from operating activities:

Net loss $ ( 126,863 ) $ ( 20,099 )

Adjustments to reconcile net loss to net cash provided by (used in) operating activities:

Adjustments to reconcile net loss to net cash used in operating activities:

Depreciation and amortization expense 66,639 74,827

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Benefit for deferred income taxes ( 17,260 ) ( 34,644 )

Bad debt expense 11,690 92

Other non-cash items 445 629

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Other non-current liabilities ( 1,782 ) ( 2,612 )

Net cash provided by (used in) operating activities 6,426 ( 30,647 )

Net cash used in operating activities ( 11,379 ) ( 33,864 )

Cash flows from investing activities:

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Effect of exchange rate changes on cash and cash equivalents 187 121

Net increase in cash and cash equivalents 97,083 11,290

Net increase (decrease) in cash and cash equivalents 71,082 ( 1,213 )

Cash and cash equivalents at beginning of period 71,563 65,654

12 unchanged sentences

Mercury Systems, Inc.

is a technology company that delivers processing power for the most demanding aerospace and defense missions.

Headquartered in Andover, Massachusetts, the Company's end-to-end processing platform enables a broad range of aerospace and defense programs, optimized for mission success in some of the most challenging and demanding environments.

is a technology company that delivers mission-critical processing power to the edge, making advanced technologies profoundly more accessible for today’s most challenging aerospace and defense missions.

The Mercury Processing Platform allows customers to tap into innovative capabilities from silicon to system scale, turning data into decisions on timelines that matter.

Headquartered in Andover, Massachusetts, the Company's products and solutions are deployed in more than 300 programs and across 35 countries, enabling a broad range of applications in mission computing, sensor processing, command and control, and communications.

Processing technologies that comprise the Company's platform include signal solutions, display, software applications, networking, storage and secure processing.

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These consolidated financial statements should be read in conjunction with the audited consolidated financial statements and related notes for the fiscal year ended June 30, 2023 which are contained in the Company’s Annual Report on Form 10-K filed with the SEC on August 15, 2023.

The results for the second quarter and six months ended December 29, 2023 are not necessarily indicative of the results to be expected for the full fiscal year.

The results for the third quarter and nine months ended March 29, 2024 are not necessarily indicative of the results to be expected for the full fiscal year.

The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries.

All intercompany transactions and balances have been eliminated in consolidation.

All references to the second quarter of fiscal 2024 are to the quarter ended December 29, 2023.

There were 13-weeks during the second quarters ended December 29, 2023 and December 30, 2022, respectively.

There were 26 weeks during the six months ended December 29, 2023 and December 30, 2022, respectively.

All references to the third quarter of fiscal 2024 are to the quarter ended March 29, 2024.

There were 13 weeks during the third quarters ended March 29, 2024 and March 31, 2023, respectively.

There were 39 weeks during the nine months ended March 29, 2024 and March 31, 2023, respectively.

U SE OF E STIMATES

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Gains (losses) resulting from non-U.S.

currency transactions are included in Other expense, net in the Consolidated Statements of Operations and Comprehensive Loss and were immaterial for all periods presented.

currency transactions are included in Other expense, net in the Consolidated Statements of Operations and Comprehensive (Loss) Income and were immaterial for all periods presented.

A CCOUNTS R ECEIVABLE

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The Company typically invoices a customer upon shipment of the product (or completion of a service) for contracts where revenue is recognized at a point in time.

For contracts where revenue is recognized over time, the invoicing events are typically based on specified performance obligation deliverables or milestone events, or quantifiable measures of performance.

For contracts where revenue is recognized over time, the invoicing

events are typically based on specified performance obligation deliverables or milestone events, or quantifiable measures of performance.

A CCOUNTS R ECEIVABLES F ACTORING

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Cash Flows attributable to factoring are reflected as cash flows from operating activities in the Company's Consolidated Statements of Cash Flows.

Factoring fees are included as selling, general and administrative expenses in the Company's Consolidated Statements of Operations and Comprehensive Loss.

The Company had $ 48,205 factored accounts receivables as of December 29, 2023 and incurred factoring fees of approximately $ 953 and $ 1,261 for the second quarter and six months ended December 29, 2023.

The Company had $ 20,000 factored in accounts receivables as of December 30, 2022 and incurred factoring fees of approximately $ 138 for the second quarter and six months ended December 30, 2022.

Factoring fees are included as selling, general and administrative expenses in the Company's Consolidated Statements of Operations and Comprehensive (Loss) Income.

The Company had $ 44,229 factored accounts receivables as of March 29, 2024 and incurred factoring fees of approximately $ 375 and $ 1,636 for the third quarter and nine months ended March 29, 2024.

The Company had $ 24,502 factored in accounts receivables as of March 31, 2023 and incurred factoring fees of approximately $ 179 and $ 317 for the third quarter and nine months ended March 31, 2023.

The Company records the fair value of its derivative financial instruments in its consolidated financial statements in Other non-current assets, or Other non-current liabilities depending on their net position, regardless of the purpose or intent for holding the derivative contract.

Changes in the fair value of the derivative financial instruments are either recognized periodically in earnings or in shareholders’ equity as a component of Other comprehensive income (loss) (“OCI”).

Changes in the fair value of cash flow hedges that qualify for hedge accounting treatment are recorded in OCI and reclassified into earnings in the same line item on the Consolidated Statements of Operations and Comprehensive Loss as the impact of the hedged transaction when the underlying contract matures and, for interest rate exposure derivatives, over the term of the corresponding debt instrument.

Changes in the fair value of cash flow hedges that qualify for hedge accounting treatment are recorded in OCI and reclassified into earnings in the same line item on the Consolidated Statements of Operations and Comprehensive (Loss) Income as the impact of the hedged transaction when the underlying contract matures and, for interest rate exposure derivatives, over the term of the corresponding debt instrument.

Changes in the fair values of derivatives not qualifying for hedge accounting are reported in earnings as they occur.

All derivatives for the Company qualified for hedge accounting as of December 29, 2023.

All derivatives for the Company qualified for hedge accounting as of March 29, 2024.

R EVENUE R ECOGNITION

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Revenue recognized at a point in time generally relates to contracts that include a combination of components, modules and sub-assemblies, integrated subsystems and related system integration or other services.

Contracts with distinct performance obligations recognized at a point in time, with or without an allocation of the transaction price, totaled 47 % and 45 % of revenues for the second quarter and six months ended December 29, 2023, respectively.

Contracts with distinct performance obligations recognized at a point in time, with or without an allocation of the transaction price, totaled 44 % and 40 % of revenues for the second quarter and six months ended and December 30, 2022, respectively.

Contracts with distinct performance obligations recognized at a point in time, with or without an allocation of the transaction price, to taled 42 % and 44 % of revenues for the third quarter and nine months ended March 29, 2024, respectively.

Contracts with distinct performance obligations recognized at a point in time, with or without an allocation of the transaction price, totaled 48 % and 43 % of revenues for the third quarter and nine months ended and March 31, 2023, respectively.

The Company also engages in contracts for development, production and service activities and recognizes revenue for performance obligations over time.

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The Company’s cost reimbursable contracts typically include cost-plus fixed fee and time and material contracts.

Total revenue recognized over time was 53 % and 55 % of total revenues for the second quarters and six months ended December 29, 2023, respectively.

Total revenue recognized over time was 56 % and 60 % of total revenues for the second quarters and six months ended December 30, 2022, respectively.

Accounting for contracts recognized over time requires significant judgment relative to estimating total contract revenues and costs.

In particular, this includes assumptions relative to the amount of time to complete the contract and the assessment of the nature and complexity of the work to be performed.

The Company's estimates are based upon the professional knowledge and experience of its engineers, operations, program managers and other personnel, who review each over time contract monthly to assess the contract’s schedule, performance, technical matters and estimated cost at completion.

Changes in estimates are applied retrospectively and when adjustments in estimated contract costs are identified, such revisions may result in current period adjustments to earnings applicable to performance in prior periods.

The aggregate effects of these favorable and unfavorable changes across the Company’s portfolio of programs can have a significant effect upon its reported Loss from operations, Net loss and Diluted net loss per share in each of the reporting periods.

The net impact of changes in estimates had the following impact on the Company’s operating results:

Third Quarters Ended Nine Months Ended

(In thousands, except per share data) March 29, 2024 March 31, 2023 March 29, 2024 March 31, 2023

Loss from operations $ ( 15,977 ) $ ( 7,306 ) $ ( 63,950 ) $ ( 27,327 )

Net loss (1) $ ( 11,663 ) $ ( 5,333 ) $ ( 46,684 ) $ ( 19,949 )

Diluted net loss per share $ ( 0.20 ) $ ( 0.09 ) $ ( 0.81 ) $ ( 0.35 )

Diluted Shares 57,698 56,896 57,536 56,310

(1) Federal and state statutory rate of 27%

Total revenue recognized over time was 58 % and 56 % of total revenues for the third quarters and nine months ended March 29, 2024, respectively.

Total revenue recognized over time was 52 % and 57 % of total revenues for the third quarters and nine months ended March 31, 2023, respectively.

The Company generally does not provid e its customers with rights of product return other than those related to assurance warranty provisions that permit repair or replacement of defective goods generally over a period of 12 to 36 months.

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Instead, while the Company has an enforceable right to payment as progress is made over performance obligations, billings to customers are generally predicated on (i) completion of defined milestones, (ii) monthly costs incurred or (iii) final delivery of goods or services.

Contract assets are presented as Unbilled receivables and costs in excess of billings on the Company’s Consolidated Balance Sheets.

Contract assets are presented as Unbilled receivables and costs in excess of billings, net of allowance for credit losses on the Company’s Consolidated Balance Sheets.

Contract liabilities consist of deferred product revenue, billings in excess of revenues, deferred service revenue and customer advances.

5 unchanged sentences

Contract balances are reported in a net position on a contract-by-contract basis.

The contract asset balances were $ 351,003 and $ 382,558 as of December 29, 2023 and June 30, 2023, respectively.

The contract asset balance decreased due to the successful execution and billings across multiple programs, as well as, cumulative adjustments from the cost growth impact and contract settlements during the six months ended December 29, 2023.

The contract liability balances were $ 81,596 and $ 57,142 as of December 29, 2023 and June 30, 2023, respectively.

The contract liability increased due to a higher volume of advanced milestone billing events as well as timing of revenue conversion across multiple programs.

Revenue recognized for the second quarter and six months ended December 29, 2023 that was included in the contract liability balance at June 30, 2023 was $ 10,228 and $ 31,243 , respectively.

Revenue recognized for the second quarter and six months ended December 30, 2022 that was included in the contract liability balance at July 1, 2022 was $ 3,068 and $ 7,737 , respectively.

The contract asset balances were $ 325,441 and $ 382,558 as of March 29, 2024 and June 30, 2023, res pectively.

The contract asset balance decreased due to $ 386,749 of billings and offset by revenue recognized under over time contracts of $ 329,632 during the nine months ended March 29, 2024.

During the nine months ended March 29, 2024, the Company's contract assets were impacted by changes in estimates for contracts recognized over time and write-offs and reserves as a result of ongoing negotiations of settlement terms with its customers.

The contract liability balances were $ 71,218 and $ 57,142 as of March 29, 2024 and June 30, 2023, respectively.

The contract liability increased due to a higher volume of advanced milestone billing events as well as timing of revenue recognized across multiple programs.

Revenue recognized for the third quarter and nine months ended March 29, 2024 that was included in the contract liability balance at June 30, 2023 was $ 10,170 and $ 41,413 , respectively.

Revenue recognized for the third quarter and nine months ended March 31, 2023 that was included in the contract liability balance at July 1, 2022 was $ 2,681 and $ 10,418 , respectively.

R EMAINING P ERFORMANCE O BLIGATIONS

The Company includes in its computation of remaining performance obligations customer orders for which it has accepted signed sales orders.

The Company includes in its computation of remaining performance obligations customer orders for which it has accepted executed sales orders.

The definition of remaining performance obligations excludes contracts with original expected durations of less than one year, as well as those contracts that provide the customer with the right to cancel or terminate the order with no substantial penalty, even if the Company’s historical experience indicates the likelihood of cancellation or termination is remote.

As of December 29, 2023, the aggregate amount of the transaction price allocated to remaining performance obligations was $ 657,598 .

As of March 29, 2024, the aggregate amount of the transaction price allocated to remaining performance obligations was $ 793,458 .

The Company expects to recognize approximately 53 % of its remaining performance obligations as revenue in the next 12 months and the balance thereafter.

5 unchanged sentences

If impairment is indicated, the asset is written down to its estimated fair value.

G OODWILL AND I NTANGIBLE A SSETS

Goodwill is the amount by which the purchase price of a business acquisition exceeded the fair values of the net identifiable assets on the date of purchase (see Note E).

In accordance with the requirements of Intangibles-Goodwill and Other (“ASC 350”), goodwill is not amortized.

Goodwill is assessed for impairment at least annually, on a reporting unit basis, or when events and circumstances (“triggering event”) occur indicating that the recorded goodwill may be impaired.

Potential triggering events include macroeconomic conditions, industry and market considerations, financial performance and expectations of projected financial performance and cash flows, and changes in the Company's stock price in relation to the carrying value of its reporting units, among other relevant factors.

Adverse changes to these events and circumstances could require the Company to perform an interim impairment test.

Intangible assets result from the Company’s various business acquisitions and certain licensed technologies, and consist of identifiable intangible assets, including completed technology, licensing agreements, patents, customer relationships, trademarks, backlog and non-compete agreements.

Intangible assets are reported at cost, net of accumulated amortization and are either amortized on a straight-line basis over their estimated useful lives of up to 12.5 years or over the period the economic benefits of the intangible asset are consumed.

P RODUCT W ARRANTY A CCRUAL

The Company’s product sales generally include a 12 to 36 month standard hardware warranty.

At time of product shipment, the Company accrues for the estimated cost to repair or replace potentially defective products.

Estimated warranty costs are based upon prior actual warranty costs for substantially similar transactions and any specifically identified warranty requirements.

Product warranty accrual is included as part of accrued expenses in the accompanying Consolidated Balance Sheets.

The following table presents the changes in the Company's product warranty accrual.

Balance at June 30, 2023 $ 1,282

Accruals for warranties issued during the period 6,153

Settlements made during the period ( 1,424 )

Balance at March 29, 2024 $ 6,011

W EIGHTED -A VERAGE S HARES

Weighted-average shares were calculated as follows:

Second Quarters Ended Six Months Ended

December 29, 2023 December 30, 2022 December 29, 2023 December 30, 2022

Third Quarters Ended Nine Months Ended

March 29, 2024 March 31, 2023 March 29, 2024 March 31, 2023

Basic weighted-average shares outstanding 57,698 56,511 57,536 56,310

1 unchanged sentence

Diluted weighted-average shares outstanding 57,698 56,896 57,536 56,310

Equity instruments to purchase 2,865 and 2,460 shares of common stock were not included in the calculation of diluted net loss per share for the second quarters and six months ended December 29, 2023, respectively, because the equity instruments were anti-dilutive.

Equity instruments to purchase 511 and 300 shares of common stock were not included in the calculation of diluted net earnings per share for the second quarter and six months ended December 30, 2022, respectively, because the equity instruments were anti-dilutive.

Equity instruments to purchase 2,711 and 2,551 shares of common stock were not included in the calculation of diluted net loss per share for the third quarters and nine months ended March 29, 2024, respectively, because the equity instruments were anti-dilutive.

Equity instruments to purchase 792 and 1,873 shares of common stock were not included in the calculation of diluted net earnings per share for the third quarter and nine months ended March 31, 2023, respectively, because the equity instruments were anti-dilutive.

R ECENTLY I SSUED A CCOUNTING P RONOUNCEMENTS

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The Company is currently evaluating the effect that this standard will have on its consolidated financial statements and related disclosures.

In March 2024, the FASB issued ASU No.

2024-01, Compensation - Stock Compensation (Topic 718) , an amendment of the FASB Accounting Standards Codification.

The amendments in this ASU address improvements to clarify the accounting treatment of profits interest awards.

The amendments provide illustrative examples for entities to evaluate whether profits interest awards should be accounted for are share based compensation (Topic 718) or as cash bonus or profit-sharing arrangement (Topic 710).

This ASU is effective for fiscal years beginning after December 15, 2023, as well as all interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted, including adoption in an interim

The Company does not believe this standard will have an impact on its consolidated financial statements and related disclosures.

In March 2024, the FASB issued ASU No.

2024-02, Codification Improvements - Amendments to Remove References to the Concepts Statements , an amendment of the FASB Accounting Standards Codification.

The amendments in this ASU are related to the removal of various references to FASB Concept Statements from the codification to make clear distinctions between authoritative and non-authoritative literature in the codification.

This ASU is effective for fiscal years beginning after December 15, 2024, with early adoption permitted.

The Company does not believe this standard will have an impact on its consolidated financial statements and related disclosures.

R ECENTLY A DOPTED A CCOUNTING P RONOUNCEMENTS

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Fair Value of Financial Instruments

The following table summarizes the Companies' financial instruments measured at fair value on a recurring basis as of December 29, 2023:

The following table summarizes the Companies' financial instruments measured at fair value on a recurring basis as of March 29, 2024:

Fair Value Measurements

December 29, 2023 Level 1 Level 2 Level 3

March 29, 2024 Level 1 Level 2 Level 3

Interest rate swap $ 3,626 $ — $ 3,626 $ —

4 unchanged sentences

The fair value of the September 2023 Swap is estimated using a discounted cash flow analysis based on the contractual terms of the derivative, leveraging observable inputs other than quoted prices, such as interest rates.

As of December 29, 2023, the fair value of the September 2023 Swap was a liability of $ 8,710 and is included within Other non-current liabilities in the Company's Consolidated Balance Sheets.

As of March 29, 2024, the fair value of the September 2023 Swap was a liability of $ 3,626 and is included within Other non-current liabilities in the Company's Consolidated Balance Sheets.

The following table summarizes the Companies' financial instruments measured at fair value on a recurring basis as of June 30, 2023:

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Inventory was comprised of the following:

December 29, 2023 June 30, 2023

March 29, 2024 June 30, 2023

Raw materials $ 206,222 $ 229,984

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Accordingly, these were determined to be the Company's reporting units.

The Company performs its annual goodwill impairment test in the fourth quarter of each fiscal year, and also assesses potential triggering events during interim reporting periods.

During the second quarter ended December 29, 2023, the Company assessed events and circumstances to consider its reporting units for a potential triggering event, including:

The Company performs its annual goodwil l impairment test in the fourth quarter of each fiscal year.

The Company estimates its fair value and compares the fair value with the carrying value of its reporting units, including goodwill using an income approach based upon a discounted cash flow (“DCF”) model to calculate the present value of cash flows to estimate its implied fair value.

The future cash flows for the Company’s reporting units are projected based on the Company’s estimates, at that time, of future revenues, expenses, capital expenditures, and working capital.

The discount rates used in the Company’s DCF model were based on a weighted-average cost of capital (“WACC”) determined from relevant market comparisons, adjusted upward for specific reporting unit risks (primarily the uncertainty of achieving projected operating cash flows).

A terminal value growth rate is applied to the final year of the projected period, which reflects the Company’s estimate of stable, perpetual growth.

The Company then calculated a present value of the respective cash flows for each reporting unit to arrive at an estimate of fair value under the income approach.

In addition, the Company uses the market approach, which compares the reporting unit to publicly traded companies and transactions involving similar businesses, to support the conclusions of the income approach.

Finally, the Company compared its estimates of fair values to its total market capitalization to assess the reasonableness of the reporting units combined determined fair value.

The Company also assesses potential triggering events during interim reporting periods.

During the third quarter ended March 29, 2024, the Company assessed events and circumstances to consider its reporting units for a potential triggering event, including:

macroeconomic conditions, industry and market considerations, financial performance and expectations of projected financial performance and cash flows, changes in the Company's stock price in relation to the carrying value of its reporting units, among other relevant factors.

The Company concluded that there was no triggering event during the second quarter ended December 29, 2023 that would require an interim impairment test.

The Company will continue to monitor these events and circumstances in future periods and adverse changes to these events and circumstances could require the Company to perform an interim impairment test.

There has been no change to the carrying amount of goodwill during the six months ended December 29, 2023.

As a result of the sustained decline in the Company's stock and overall market capitalization during the third quarter ended March 29, 2024, along with other qualitative considerations the Company concluded that there was a triggering event for its Mission Systems reporting unit that would require an interim impairment test.

As of March 29, 2024, the Company completed a quantitative goodwill impairment analysis related to its Mission Systems reporting unit by comparing the fair value of the reporting unit with its carrying amount.

In making this assessment, management relies on a number of factors including expected future operating results, business plans, economic projections, anticipated future cash flows, business trends, and declines in the Company's market capitalization.

The Company determined the fair value of the reporting unit by using a DCF approach.

Under the DCF approach, the Company estimated the future cash flows, as well as selected a risk-adjusted WACC of 8.5% to measure the present value of the anticipated cash flows.

When determining future cash flow estimates, the Company considered historical results adjusted to reflect current and anticipated future operating conditions.

The Company estimated cash flows for the reporting unit over a discrete period and a terminal period (considering expected long-term growth rates and trends).

The Company then used the market approach to corroborate the results of the DCF approach.

Under the market approach, the Company used revenue and earnings multiples based on comparable industry multiples to estimate the fair value of the reporting unit.

If the carrying amount of a reporting unit exceeds the reporting unit’s fair value, the amount by which the carrying value exceeds the fair value is recognized as an impairment loss.

Based on the interim quantitative evaluation, the Company determined that the Mission Systems reporting unit had an estimated fair value in excess of their carrying value of 2.5 %.

The Company concluded that the Mission Systems reporting unit's goodwill was not impaired.

In order to evaluate the sensitivity of the estimated fair value for Mission Systems, the Company assessed an increase of 1.0% in the WACC under the DCF approach would have a material impact to the Mission Systems reporting unit's fair value determination.

If there are adverse trends in the Mission Systems reporting unit's expected future operating results, business plans, economic projections, anticipated future cash flows, business trends, and Company's market capitalization, then it could result in the carrying value of the Mission Systems reporting unit exceeding its estimated fair value and impairment charges.

Restructuring

For the six months ended December 29, 2023, the Company initiated several immediate cost savings measures that simplify the Company’s organizational structure, facilitate clearer accountability, and align to the Company’s priorities, including:

For the nine months ended March 29, 2024, the Company initiated several immediate cost savings measures that simplify the Company’s organizational structure, facilitate clearer accountability, and align to the Company’s priorities, including:

(i) embedding the 1MPACT value creation initiatives and execution into the Company’s operations;

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and (iii) reducing selling, general, and administrative headcount and rebalancing discretionary and third party spending to better align with the Company’s priority areas.

On July 20, 2023, the Company executed the plan to embed the 1MPACT value creation initiatives into operations, and on August 9, 2023, the Company approved and initiated a workforce reduction that, together with the 1MPACT related action, eliminated approximately 150 positions resulting in $ 9,548 of severance costs for the six months ended December 29, 2023.

On July 20, 2023, the Company executed the plan to embed the 1MPACT value creation initiatives into operations.

On August 9, 2023 the Company approved and initiated a workforce reduction that, together with the 1MPACT related action, eliminated approximately 150 positions resulting in $ 9,548 of severance costs for the nine months ended March 29, 2023.

On January 12, 2024, the Company approved and initiated workforce reductions that eliminated approximately 100 positions resulting in an additional $ 9,841 of severance costs for the nine months ended March 29, 2024.

The Company incurs restructuring and other charges in connection with management's decision to undertake certain actions to realign operating expenses through workforce reductions and the closure of certain Company facilities, businesses and product lines.

The Company's adjustments reflected in restructuring and other charges are typically related to acquisitions and organizational redesign programs initiated as part of discrete post acquisition integration activities.

All of the restructuring and other charges are classified as Operating expenses in the Consolidated Statements of Operations and Comprehensive Loss and any remaining restructuring obligations are expected to be paid within the next twelve months.

All of the restructuring and other charges are classified as Operating expenses in the Consolidated Statements of Operations and Comprehensive (Loss) Income and any remaining restructuring obligations are expected to be paid within the next twelve months.

The restructuring liability is classified as Accrued expenses in the Consolidated Balance Sheets.

Refer to Note N for further information regarding the workforce reduction announced during the third quarter of fiscal 2024.

The following table presents the detail of charges included in the Company’s liability for restructuring and other charges:

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Cash paid ( 14,139 )

Balance at December 29, 2023 $ 3,687

The Company recorded an income tax benefit of $ 18,141 and $ 2,151 on a loss before income taxes of $ 63,722 and $ 13,071 for the second quarters ended December 29, 2023 and December 30, 2022, respectively.

The Company recorded an income tax benefit of $ 31,168 and $ 3,173 on a loss before income taxes of $ 113,457 and $ 28,428 for the six months ended December 29, 2023 and December 30, 2022, respectively.

During the second quarter and six months ended December 29, 2023, the Company recognized a tax provision of $ 431 and $ 1,646 related to stock compensation shortfalls, respectively, and during the second quarter and six months ended December 30, 2022 the Company recognized a tax provision of $ 134 and $ 1,745 related to stock compensation shortfalls, respectively.

During the second quarter ended December 30, 2022, the Company recognized a tax benefit of $ 2,348 related to a release of income tax reserves for unrecognized income tax benefits due to the expiration of the statute of limitations.

The effective tax rate for the second quarters and six months ended December 29, 2023 and December 30, 2022 differed from the federal statutory rate primarily due to federal and state research and development credits, non-deductible compensation, stock compensation shortfalls and state taxes.

The effective tax rate for the second quarter and six months ended December 30, 2022 also differed from the federal statutory rate due to the release of income tax reserves for previously unrecognized income tax benefits.

Balance at March 29, 2024 $ 6,779

The Company recorded an income tax benefit of $ 12,643 and $ 10,446 on a loss before income taxes of $ 57,217 and $ 5,290 for the third quarters ended March 29, 2024 and March 31, 2023, respectively.

The Company recorded an income tax benefit of $ 43,811 and $ 13,619 on a loss before income taxes of $ 170,674 and $ 33,718 for the nine months ended March 29, 2024 and March 31, 2023, respectively.

During the third quarter and nine months ended March 29, 2024, the Company recognized a tax provision of $ 772 and $ 2,419 related to stock compensation shortfalls, respectively.

During the third quarter and nine months ended March 31, 2023 the Company recognized a tax (benefit) provision of $( 91 ) and $ 1,655 related to stock compensation shortfalls, respectively.

During the third quarter ended March 31, 2023, the Company concluded its income tax audit with the Internal Revenue Service for fiscal years 2016 through 2018 and subsequently recognized a tax benefit of $ 1,335 related to a release of income tax reserves for unrecognized income tax benefits.

The effective tax rate for the third quarters and nine months ended March 29, 2024 and March 31, 2023 differed from the federal statutory rate primarily due to federal and state research and development credits, non-deductible compensation, stock compensation shortfalls and state taxes.

The effective tax rate for the third quarter and nine months ended March 31, 2023 also differed from the federal statutory rate due to the release of income tax reserves for previously unrecognized income tax benefits.

The Tax Cuts and Jobs Act of 2017 requires companies to capitalize and amortize domestic research and development expenditures over five years for tax purposes, and foreign research and development expenditures over fifteen years for tax purposes, effective for the Company beginning in the fiscal year ended June 30, 2023.

As a result, the Company has recorded a deferred tax asset through the second quarter ended December 29, 2023 of $ 88,949 .

During the six months ended December 29, 2023, the Company has made $ 15,314 of tax payments related to this requirement.

Based on guidance issued during the year, the Company refined the amount of research and development expenditures capitalized and recorded certain current and deferred tax adjustments in the third quarter ended March 29, 2024.

The Company will continue to monitor guidance and any proposed regulations and adjust the estimates as necessary.

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On February 28, 2022, the Company amended the revolving credit facility (the "Revolver") to increase and extend the borrowing capacity to a $ 1,100,000 , 5-year revolving credit line, with the maturity extended to February 28, 2027.

As of December 29, 2023, the Company's outstanding balance of unamortized deferred financing costs was $ 4,811 , which is being amortized to Other expense, net in the Consolidated Statements of Operations and Comprehensive Loss on a straight line basis over the term of the Revolver and includes the costs incurred in conjunction with the November 2023 amendment to the Revolver.

29, 2024, the Company's outstanding balance of unamortized deferred financing costs was $ 4,431 , which is being amortized to Other expense, net in the Consolidated Statements of Operations and Comprehensive (Loss) Income on a straight line basis over the term of the Revolver and includes the costs incurred in conjunction with the November 2023 amendment to the Revolver.

On November 7, 2023, due to the uncertainty surrounding a government shutdown or prolonged continuing resolution and the potential impact on the second quarter and fiscal 2024 results, the Company proactively executed Amendment No.

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In conjunction with Amendment No.

5 to the Revolver, the Company incurred $ 1,931 of new unamortized deferred financing costs that will be amortized over the remaining term of the Revolver.

5 to the Revolver, the Company incurred $ 1,931 of new deferred financing costs that will be amortized over the remaining term of the Revolver.

Refer to exhibit 10.1 on Form 8-K filed by the Company with the SEC on November 7, 2023.

During the second quarter and six months ended December 29, 2023, the Company borrowed $ 40,000 and $ 105,000 , respectively.

As of December 29, 2023, the Company was in compliance with all covenants and conditions under the Revolver and there were outstanding borrowings of $ 616,500 against the Revolver, resulting in interest expense of $ 8,674 and $ 16,537 for the second quarter and six months ended December 29, 2023.

The borrowing capacity as defined under the Revolver as of December 29, 2023 is approximately $ 750,000 , less outstanding borrowings of $ 616,500 .

There were outstanding letters of credit of $ 963 as of December 29, 2023.

During the third quarter ended March 29, 2024, the Company did not have any additional borrowings.

During the nine months ended March 29, 2024, the Company borrowed $ 105,000 .

As of March 29, 2024, the Company was in compliance with all covenants and conditions under the Revolver and there were outstanding borrowings of $ 616,500 against the Revolver, resulting in interest expense of $ 9,319 and $ 25,856 for the third quarter and nine months ended March 29, 2024.

The borrowing capacity as defined under the Revolver as of March 29, 2024 is approximately $ 750,000 less outstanding borrowings of $ 616,500 .

There were outstanding letters of credit of $ 963 as of March 29, 2024.

Employee Benefit Plan

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The funded status may vary from year to year due to changes in the fair value of the Plan’s assets and variations on the underlying assumptions of the projected benefit obligation of the Plan.

The Plan's funded status at December 29, 2023 was a net liability of $ 4,431 , which is recorded in Other non-current liabilities on the Consolidated Balance Sheet.

The Company recorded a net loss of $ 57 and $ 113 in AOCI during the second quarter and six months ended December 29, 2023.

The Company recorded a net gain of $ 48 and $ 96 in AOCI during the second quarter and six months ended December 30, 2022.

The Company recognized net periodic benefit costs of $ 208 and $ 415 associated with the Plan for the second quarter and six months ended December 29, 2023, respectively.

The Company recognized net periodic benefit costs of $ 220 and $ 441 associated with the Plan for the second quarter and six months ended December 30, 2022, respectively.

The Plan's funded status at March 29, 2024 was a net liability of $ 4,156 , which is recorded in Other non-current liabilities on the Consolidated Balance Sheet.

The Company recorded a net loss of $ 56 and $ 169 in AOCI during the third quarter and nine months ended March 29, 2024.

The Company recorded a net gain of $ 46 and $ 142 in AOCI during the third quarter and nine months ended March 31, 2023.

The Company recognized net periodic benefit costs of $ 213 and $ 628 associated with the Plan for the third quarter and nine months ended March 29, 2024, respectively.

The Company recognized net periodic benefit costs of $ 230 and $ 671 associated with the Plan for the third quarter and nine months ended March 31, 2023, respectively.

The Company's total expected employer contributions to the Plan during fiscal 2024 are $ 1,155 .

The Company maintains a qualified 401(k) plan (the “401(k) Plan”) for its U.S.

employees and matches participants' eligible annual compensation up to 6 % in Company stock.

employees and matches participants' contributions to the plan of up to 6 % of their eligible annual compensation in Company stock.

The Company may also make optional contributions to the plan for any plan year at its discretion.

The Company had $ 3,270 and $ 2,705 of capitalized stock-based 401(k) matching compensation expense on the Consolidated Balance Sheet at December 29, 2023 and June 30, 2023, respectively.

The Company had $ 2,963 and $ 2,705 of capitalized stock-based 401(k) matching compensation expense on the Consolidated Balance Sheets at March 29, 2024 and June 30, 2023, respectively.

Stock-based 401(k) matching compensation cost is measured based on the value of the matching amount and is recognized as expense as incurred.

During the second quarter and six months ended December 29, 2023, the Company recognized share-based matching contributions related to the 401(k) plan of $ 2,811 and $ 7,652 , as compared to $ 3,822 and $ 6,427 during the second quarter and six months ended December 30, 2022.

During the third quarter and nine months ended March 29, 2024, the Company recognized share-based matching contributions related to the 401(k) plan of $ 4,528 and $ 12,180 , as compared to $ 3,288 and $ 9,715 during the third quarter and nine months ended March 31, 2023.

Deferred Compensation Plan

The Company implemented a nonqualified deferred compensation plan as of January 1, 2024, under which eligible employees may defer up to 50% of their base salaries and up to 100% of their annual incentive bonuses.

The Company may also make employer contributions to participant accounts in its sole discretion, and for calendar year 2024, will match participants’ deferrals under the plan of up to 6% of their eligible annual compensation in the form of deferred stock units (or at the Company’s election, a cash deferral credited to participants’ account balances).

The Company’s matching obligation for 2024 is subject to the satisfaction of a financial performance condition for the 2024 calendar year.

Participant deferrals under the plan are held in a Rabbi trust and are subject to the claims of the Company’s creditors.

Assets held by the rabbi trust are classified as trading securities and are recorded at fair value, with changes in value recorded as adjustments to other income.

All deferrals or employer contributions under the plan, and all earnings thereon, are fully vested as and when made or credited to plan participants..

As of March 29, 2024, the Company held assets under the rabbi trust of $ 52 , and was subject to liabilities for amounts payable under the plan to participants (including accrued employer matching contributions not yet credited to plan participants) of $ 52 .

Assets related to this plan are included in Other assets, and liabilities related to this plan are included in Other long-term liabilities in the Consolidated Balance Sheets.

During the third quarter and nine months ended March 29, 2024, the Company recognized an immaterial value of compensation expense as a result of changes in the value of notional investments selected by plan participants for the investment of their plan account balances, with the same amount being recorded as other income attributable to changes in the market value of the assets held by the Rabbi trust.

The nonqualified deferred compensation plan was not in place as of the third quarter and nine months ended March 31, 2023.

Stock-Based Compensation

S TOCK I NCENTIVE P LANS

At December 29, 2023, the aggregate number of shares authorized for issuance under the Company’s Amended and Restated 2018 Stock Incentive Plan (the “2018 Plan”) is 7,862 shares, including 3,000 shares approved by the Company's shareholders on October 28, 2020 and 2,000 shares approved for future grant under the 2018 Plan by the Company's shareholders on October 26, 2022.

At March 29, 2024, the aggregate number of shares authorized for issuance under the Company’s Amended and Restated 2018 Stock Incentive Plan (the “2018 Plan”) is 7,862 shares, including 3,000 shares approved by the Company's shareholders on October 28, 2020 and 2,000 shares approved for future grant under the 2018 Plan by the Company's shareholders on October 26, 2022.

On October 25, 2023, the Company's shareholders approved an additional 3,450 shares to be added to the 2018 plan.

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Stock options must be granted with an exercise price of not less than 100 % of the fair value of the Company’s common stock on the date of grant and the options generally have a term of seven years .

There were 4,110 available shares for future grant under the 2018 Plan at December 29, 2023.

There were 4,623 available shares for future grant under the 2018 Plan at March 29, 2024.

As part of the Company's ongoing annual equity grant program for employees, the Company grants performance-based restricted stock awards to certain executives and employees pursuant to the 2018 Plan.

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The performance targets generally include the achievement of financial performance goals, either on an absolute basis or relative to a peer group of companies.

Payouts under performance-based restricted stock awards may also be subject to modification based on Mercury’s total shareholder return relative to the component companies within the Spade Defense Index.

Payouts under performance-based restricted stock awards may also be

subject to modification based on Mercury’s total shareholder return relative to the component companies within the Spade Defense Index.

E MPLOYEE S TOCK P URCHASE P LAN

At December 29, 2023, the aggregate number of shares authorized for issuance under the Company’s 1997 Employee Stock Purchase Plan, as amended and restated (“ESPP”), is 2,300 shares, including 500 shares approved by the Company's shareholders on October 28, 2020.

At March 29, 2024, the aggregate number of shares authorized for issuance under the Company’s 1997 Employee Stock Purchase Plan, as amended and restated (“ESPP”), is 2,300 shares, including 500 shares approved by the Company's shareholders on October 28, 2020.

Under the ESPP, rights are granted to purchase shares of common stock at 85 % of the lesser of the market value of such shares at either the beginning or the end of each six-month offering period.

The ESPP permits employees to purchase common stock through payroll deductions, which may not exceed 10 % of an employee’s compensation as defined in the ESPP.

There were 107 and 57 shares issued under the ESPP during the six months ended December 29, 2023 and December 30, 2022, respectively.

Shares available for future purchase under the ESPP totaled 60 at December 29, 2023.

There were 107 and 57 shares issued under the ESPP during the nine months ended March 29, 2024 and March 31, 2023, respectively.

Shares available for future purchase under the ESPP totaled 60 at March 29, 2024.

S TOCK O PTION A ND A WARD A CTIVITY

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Exercised — —

Outstanding at December 29, 2023 934 $ 12.71 $ 45.00 3.18 —

Exercisable at December 29, 2023 — $ — $ — — —

There were no options vested or exercised during the second quarter ended December 29, 2023.

Outstanding at March 29, 2024 934 $ 12.71 $ 45.00 2.93 years —

Exercisable at March 29, 2024 — $ — $ — — —

There were no options vested or exercised during the third quarter ended March 29, 2024.

Non-vested stock options are subject to the risk of forfeiture until the fulfillment of specified conditions.

As of December 29, 2023, there was $ 10,609 of total unrecognized compensation cost related to non-vested options granted that is expected to be recognized over a weighted-average period 3.18 years from December 29, 2023.

As of March 29, 2024, there was $ 10,024 of total unrecognized compensation cost related to non-vested options granted that is expected to be recognized over a weighted-average period 2.93 years from March 29, 2024.

The Company uses the Black-Scholes valuation model for estimating the fair value on the date of grant of stock options.

The Company calculated the fair values of the options grants using the following weighted-average assumptions:

Second Quarter Ended

December 29, 2023

Third Quarter Ended

March 29, 2024

Expected volatility 45 %

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The expected life of options has been determined using the average of the contractual term and the weighted average vesting term of the options.

The risk-free interest rate is based on a

zero-coupon U.S.

The risk-free interest rate is based on a zero-coupon U.S.

treasury instrument whose term is consistent with the expected life of the stock options.

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Forfeited ( 557 ) 47.90

Outstanding at December 29, 2023 1,931 $ 43.57

Outstanding at March 29, 2024 1,681 $ 41.66

S TOCK -B ASED C OMPENSATION E XPENSE

The Company recognizes expense for its share-based payment plans in the Consolidated Statements of Operations and Comprehensive Loss in accordance with ASC 718, Compensation - Stock Compensation (“ASC 718”).

The Company had $ 1,848 and $ 1,215 of capitalized stock-based compensation expense on the Consolidated Balance Sheets for the periods ended December 29, 2023 and June 30, 2023, respectively.

The Company recognizes expense for its share-based payment plans in the Consolidated Statements of Operations and Comprehensive (Loss) Income in accordance with ASC 718, Compensation - Stock Compensation (“ASC 718”).

The Company had $ 1,033 and $ 1,215 of capitalized stock-based compensation expense on the Consolidated Balance Sheets for the periods ended March 29, 2024 and June 30, 2023, respectively.

Under the fair value recognition provisions of ASC 718, stock-based compensation cost is measured at the grant date based on the value of the award and is recognized as expense over the service period, net of estimated forfeitures.

The following table presents share-based compensation expenses included in the Company’s Consolidated Statements of Operations and Comprehensive Loss:

Second Quarters Ended Six Months Ended

December 29, 2023 December 30, 2022 December 29, 2023 December 30, 2022

The following table presents share-based compensation expenses included in the Company’s Consolidated Statements of Operations and Comprehensive (Loss) Income:

Third Quarters Ended Nine Months Ended

March 29, 2024 March 31, 2023 March 29, 2024 March 31, 2023

Cost of revenues $ 1,299 $ 630 $ 2,119 $ 1,666

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Europe Asia Pacific Eliminations Total

SECOND QUARTER ENDED DECEMBER 29, 2023

THIRD QUARTER ENDED MARCH 29, 2024

Net revenues to unaffiliated customers $ 199,834 $ 8,418 $ 6 $ — $ 208,258

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Net revenues $ 201,082 $ 8,629 $ 6 $ ( 1,459 ) $ 208,258

SECOND QUARTER ENDED DECEMBER 30, 2022

THIRD QUARTER ENDED MARCH 31, 2023

Net revenues to unaffiliated customers $ 252,945 $ 10,525 $ 9 $ — $ 263,479

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Net revenues $ 254,739 $ 10,551 $ 9 $ ( 1,820 ) $ 263,479

SIX MONTHS ENDED DECEMBER 29, 2023

NINE MONTHS ENDED MARCH 29, 2024

Net revenues to unaffiliated customers $ 554,877 $ 31,817 $ 18 $ — $ 586,712

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Net revenues $ 559,130 $ 32,324 $ 18 $ ( 4,760 ) $ 586,712

SIX MONTHS ENDED DECEMBER 30, 2022

NINE MONTHS ENDED MARCH 31, 2023

Net revenues to unaffiliated customers $ 690,922 $ 29,708 $ 16 $ — $ 720,646

14 unchanged sentences

The following table presents the Company's net revenue by end user for the periods presented:

Second Quarters Ended Six Months Ended

December 29, 2023 December 30, 2022 December 29, 2023 December 30, 2022

Third Quarters Ended Nine Months Ended

March 29, 2024 March 31, 2023 March 29, 2024 March 31, 2023

$ 177,973 $ 238,159 $ 506,262 $ 648,948

8 unchanged sentences

The following table presents the Company's net revenue by end application for the periods presented:

Second Quarters Ended Six Months Ended

December 29, 2023 December 30, 2022 December 29, 2023 December 30, 2022

Third Quarters Ended Nine Months Ended

March 29, 2024 March 31, 2023 March 29, 2024 March 31, 2023

$ 26,647 $ 83,853 $ 68,460 $ 180,968

13 unchanged sentences

The following table presents the Company's net revenue by product grouping for the periods presented:

Second Quarters Ended Six Months Ended

December 29, 2023 December 30, 2022 December 29, 2023 December 30, 2022

Third Quarters Ended Nine Months Ended

March 29, 2024 March 31, 2023 March 29, 2024 March 31, 2023

Components (1)

16 unchanged sentences

The following table presents the Company's net revenue by platform for the periods presented:

Second Quarters Ended Six Months Ended

December 29, 2023 December 30, 2022 December 29, 2023 December 30, 2022

Third Quarters Ended Nine Months Ended

March 29, 2024 March 31, 2023 March 29, 2024 March 31, 2023

$ 97,092 $ 126,674 $ 329,661 $ 373,878

8 unchanged sentences

The geographic distribution of the Company’s identifiable long-lived assets is summarized as follows:

December 29, 2023 $ 112,008 $ 2,353 $ 114,361

March 29, 2024 $ 111,055 $ 2,852 $ 113,907

June 30, 2023 $ 116,381 $ 3,173 $ 119,554

1 unchanged sentence

Customers comprising 10% or more of the Company’s revenues for the periods shown are as follows:

Second Quarters Ended Six Months Ended

December 29, 2023 December 30, 2022 December 29, 2023 December 30, 2022

Navy 10 % 11 % * 11 %

RTX Corporation * 12 % 10 % 12 %

L3Harris * * 10 % *

Third Quarters Ended Nine Months Ended

March 29, 2024 March 31, 2023 March 29, 2024 March 31, 2023

Lockheed Martin Corporation 15 % 13 % 11 % 14 %

L3Harris 13 % * 11 % *

RTX Corporation 11 % 18 % 10 % 14 %

Northrop Grumman 10 % 11 % * 11 %

Navy * * * 10 %

49 % 42 % 32 % 49 %

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While the Company typically has customers from which it derives 10% or more of its revenue, the sales to each of these customers are spread across multiple programs and platforms.

There were no programs comprising 10% or more of the Company's revenues for the second quarters and six months ended December 29, 2023 and December 30, 2022.

There were no programs comprising 10% or more of the Company's revenues for the third quarters and nine months ended March 29, 2024 and March 31, 2023.

Commitments and Contingencies

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In April 2022, the Company engaged in a meet and confer session with NTS pursuant to Massachusetts General Laws Chapter 21E, Section 4A to discuss the status of the environmental review performed by NTS and its licensed site professional.

In April 2024, counsel for NTS sent additional communications on their demand that the Company participate in their environmental monitoring and remediation planning.

In addition, in November 2021, the Company responded to a request for information from MassDEP regarding the detection of PFAS (per- and polyfluoroakyl substances) in the Acton, Massachusetts Water District’s Conant public water supply wells near the former facility at 531 Main Street, Acton, Massachusetts at a level above standard that MassDEP published for PFAS in October 2020.

The Company has not been contacted by NTS or MassDEP since the dates discussed above.

It is too early to determine what responsibility, if any, the Company may have for these environmental matters.

The Company believes the claims from NTS are without merit and intend to defend our self vigorously.

It is too early to determine what responsibility, if any, Mercury will have for these matters.

On June 19, 2023, the Board of Directors received notice of the Company’s former CEO’s resignation from the positions of President and Chief Executive Officer.

4 unchanged sentences

An arbitrator was appointed on November 29, 2023, and the arbitration trial has been scheduled for mid-December 2024.

On March 25, 2024, the arbitrator denied Mr.

Aslett's motion for compensation during the dispute and payment of his legal fees, preserving those matters for the arbitration trial.

The Company intends to contest vigorously the claims under the CIC Agreement and believes that the Company has strong arguments that the former CEO’s claims lack merit.

5 unchanged sentences

District Court for the District of Massachusetts.

The complaint asserts Section 10(b) and 20(a) securities fraud claims on behalf of a purported class of purchasers and sellers of the Company's stock from December 7, 2020, through June 23, 2023.

The complaint alleges that the Company's public disclosures in SEC filings and on earnings calls were false and/or misleading.

The complaint asserted Section 10(b) and 20(a) securities fraud claims on behalf of a purported class of purchasers and sellers of the Company's stock from December 7, 2020, through June 23, 2023.

The complaint alleged that the Company's public disclosures in SEC filings and on earnings calls were false and/or misleading.

On February 27, 2024, the Court entered an order appointing Carpenter's Pension Trust Fund for Northern California as lead plaintiff.

On April 18, 2024, the lead plaintiff filed an amended complaint including William Ballhaus and David Farnsworth as additional defendants and amended the class period to February 3, 2021 through February 6, 2024.

Subject to the terms of the Company's by-laws and applicable Massachusetts law, Mr.

Aslett, the Company's former Chief Executive Officer, and Mr.

Ruppert, the Company's former Chief Financial Officer, are indemnified by the Company for this matter.

Ruppert, the Company's former Chief Financial Officer, Mr.

Ballhaus, the Company's current Chief Executive Officer, and Mr.

Farnsworth, the Company's current Chief Financial officer, are indemnified by the Company for this matter.

The Company believes the claims in the complaint are without merit and intends to defend itself vigorously.

It is too early to determine what responsibility, if any, the Company will have for this matter.

On January 31, 2024, a former employee at the Company's Torrance, CA location, filed a wage and hour class action lawsuit in California state court in Los Angeles County, along with a companion Private Attorneys General Act (“PAGA”) lawsuit, to act in a representative capacity for other Mercury employees in California, alleging a range of violations of California wage and hour regulations.

The Company believes the claims in the complaints are without merit and intend to defend itself self vigorously.

It is too early to determine what responsibility, if any, the Company will have for this matter.

I NDEMNIFICATION O BLIGATIONS

3 unchanged sentences

P URCHASE C OMMITMENTS

As of December 29, 2023, the Company has entered into non-cancelable purchase commitments for certain inventory components and services used in its normal operations.

As of March 29, 2024, the Company has entered into non-cancelable purchase commitments for certain inventory components and services used in its normal operations.

The purchase commitments covered by these agreements are for less than one year and aggregate to $ 138,555 .

15 unchanged sentences

The September 2023 Swap matures on February 28, 2027, coterminous with the maturity of the Revolver.

As of December 29, 2023, the fair value of the September 2023 Swap was a liability of $ 8,710 and is included within Other non-current liabilities in the Company's Consolidated Balance Sheets.

During the second quarter and six months ended December 29, 2023, the Company amortized a total of $ 881 and $ 1,220 , respectively, of the gain associated with the interest swaps terminated on September 29, 2022 and September 28, 2023, which is included within Other comprehensive loss.

As of March 29, 2024, the fair value of the September 2023 Swap was a liability of $ 3,626 and is included within Other non-current liabilities in the Company's Consolidated Balance Sheets.

During the third quarter and nine months ended March 29, 2024, the Company amortized a total of $ 881 and $ 2,101 , respectively, of the gain associated with the interest swaps terminated on September 29, 2022 and September 28, 2023, which is included within Other comprehensive loss.

The market risk associated with the Company’s derivative instrument is the result of interest rate movements that are expected to offset the market risk of the underlying arrangement.

The counterparty to the September 2023 Swap is JPMorgan.

Based on the credit ratings of the Company’s counterparty as of December 29, 2023, nonperformance is not perceived to be a material risk.

Based on the credit ratings of the Company’s counterparty as of March 29, 2024, nonperformance is not perceived to be a material risk.

Furthermore, none of the Company’s derivatives are subject to collateral or other security arrangements and none contain provisions that are dependent on the Company’s credit ratings from any credit rating agency.

3 unchanged sentences

Subsequent Events

The Company has evaluated subsequent events from the date of the Consolidated Balance Sheet through the date the consolidated financial statements were issued.

On January 12, 2024, the Company initiated and approved a workforce reduction that will eliminate approximately 100 positions, resulting in expected restructuring charges of approximately $ 10,000 - $ 12,000 .

These charges are for employee separation costs and will be classified as Restructuring and other charges within the Consolidated Statements of Operations and Comprehensive Loss for the fiscal quarter ending March 29, 2024.

The Company has evaluated subsequent events from the date of the Consolidated Balance Sheet through the date the consolidated financial statements were issued and noted no items requiring adjustment of the financial statements or additional disclosures.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements