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C ONCENTRATION O F C REDIT R ISK
−Removed: Financial instruments that potentially expose the Company to concentrations of credit risk consist principally of cash, cash equivalents and accounts receivable.
+Added: Financial instruments that potentially expose the Company to concentrations of credit risk consist principally of cash, cash equivalents, accounts receivable, unbilled receivables and costs in excess of billings.
We place our cash and cash equivalents with financial institutions with high credit quality.
−Removed: As of June 30, 2023 and July 1, 2022, we had $71.6 million and $65.7 million, respectively, of cash and cash equivalents on deposit or invested with our financial and lending institutions.
+Added: As of June 28, 2024 and June 30, 2023, we had $180.5 million and $71.6 million, respectively, of cash and cash equivalents on deposit or invested with our financial and lending institutions.
We provide credit to customers in the normal course of business.
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As of June 28, 2024, five customers accounted for 51% of our receivables, unbilled receivables and costs in excess of billings.
−Removed: As of July 1, 2022, five customers accounted for 45% of our receivables, unbilled receivables and costs in excess of billings.
+Added: As of June 30, 2023, five customers accounted for 48% of our receivables, unbilled receivables and costs in excess of billings.
F OREIGN C URRENCY R ISK
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We have audited the accompanying consolidated balance sheets of Mercury Systems, Inc.
−Removed: and subsidiaries (the Company) as of June 30, 2023 and July 1, 2022, the related consolidated statements of operations and comprehensive income, shareholders’ equity, and cash flows for each of the fiscal years in the three-year period ended June 30, 2023, and the related notes and financial statement schedule II (collectively, the consolidated financial statements).
+Added: and subsidiaries (the Company) as of June 28, 2024 and June 30, 2023, the related consolidated statements of operations and comprehensive (loss) income, shareholders’ equity, and cash flows for each of the fiscal years in the three-year period ended June 28, 2024, and the related notes and financial statement schedule II - valuation and qualifying accounts (collectively, the consolidated financial statements).
We also have audited the Company’s internal control over financial reporting as of June 28, 2024, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
−Removed: In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of June 30, 2023 and July 1, 2022, and the results of its operations and its cash flows for each of the fiscal years in the three-year period ended June 30, 2023, in conformity with U.S.
+Added: In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of June 28, 2024 and June 30, 2023, and the results of its operations and its cash flows for each of the fiscal years in the three-year period ended June 28, 2024, in conformity with U.S.
generally accepted accounting principles.
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Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
−Removed: Critical Audit Matter
−Removed: The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that:
−Removed: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments.
−Removed: The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
+Added: Critical Audit Matters
+Added: The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that:
+Added: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments.
+Added: The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
Estimate of total contract costs to be incurred for certain fixed price contract revenue recognized over time
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We inspected correspondence, if any, between the Company and the customers for the selected contracts as part of our evaluation of contract progress.
+Added: Valuation of goodwill for the Mission Systems reporting unit as of an interim period
+Added: As discussed in Notes B and F to the consolidated financial statements, the Company’s consolidated goodwill balance as of June 28, 2024 was 938.1 million, which included goodwill related to the Mission Systems reporting unit.
+Added: Annually, or whenever events or changes in circumstances indicate potential asset impairment has occurred, the Company assesses goodwill for impairment.
+Added: As a result of the sustained decline in the Company’s stock price and overall market capitalization during the third quarter ended March 29, 2024, along with other qualitative considerations, management concluded that there was a triggering event for its Mission Systems reporting unit that required an interim impairment test.
+Added: We identified the evaluation of the fair value of Mission Systems reporting unit goodwill as a critical audit matter.
+Added: Subjective and challenging auditor judgment and specialized skills and knowledge were required to evaluate certain assumptions used to determine the fair value of the reporting unit in the Company’s third quarter impairment test.
+Added: These assumptions included forecasted revenue growth rates including the terminal growth rate, margin rates, and net working capital adjustments used in determining the forecasted cash flows, and the discount rate.
+Added: Minor changes to these assumptions could have had a significant effect on the fair value determined and the resulting assessment of the carrying value of the Mission Systems reporting unit goodwill.
+Added: The following are the primary procedures we performed to address this critical audit matter.
+Added: We evaluated the design and tested the operating effectiveness of certain internal controls related to the Company’s goodwill impairment process, including certain controls related to management’s determination of the above assumptions.
+Added: We evaluated the Company’s ability to forecast cash flows by comparing historical forecasts to actual results.
+Added: We also assessed the current industry, macroeconomic and market conditions and trends, and the Company’s historical results in evaluating the assumptions described above.
+Added: We involved valuation professionals with specialized skills and knowledge, who assisted in:
+Added: • evaluating the terminal growth rate by comparing to publicly available market data
+Added: • evaluating the discount rate used by the Company by comparing the Company’s inputs to the discount rate to publicly available data for comparable entities and assessing the resulting discount rate
We have served as the Company’s auditor since 2006.
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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.