What changed in this filing

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Item 1. Financial Statements

2024-11-05 compared with 2024-05-07 · 190 added, 278 removed, 522 unchanged (47% of the section changed)

3 unchanged sentences

(In thousands, except share and per share data)

March 29, 2024 June 30, 2023

September 27, 2024 June 28, 2024

Current assets:

Cash and cash equivalents $ 158,123 $ 180,521

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

Accounts receivable, net of allowance for credit losses of $ 1,989 and $ 2,020 at September 27, 2024 and June 28, 2024, respectively

124,546 111,441

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

Unbilled receivables and costs in excess of billings, net of allowance for credit losses of $ 5,311 and $ 6,340 at September 27, 2024 and June 28, 2024, respectively

298,270 304,029

Inventory 351,088 335,300

Prepaid income taxes 27,967 —

Prepaid expenses and other current assets 22,289 22,493

4 unchanged sentences

Operating lease right-of-use assets, net 58,359 60,860

Deferred tax asset 44,366 27,099

Deferred tax assets 66,362 58,612

Other non-current assets 7,486 6,691

20 unchanged sentences

85,000,000 shares authorized;

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

58,454,728 and 58,093,528 shares issued and outstanding at September 27, 2024 and June 28, 2024, respectively

Additional paid-in capital 1,253,249 1,242,402

5 unchanged sentences

MERCURY SYSTEMS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE (LOSS) INCOME

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(In thousands, except per share data)

Third Quarters Ended Nine Months Ended

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

First Quarters Ended

September 27, 2024 September 29, 2023

Net revenues $ 204,431 $ 180,991

8 unchanged sentences

Total operating expenses 65,208 90,728

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

Loss from operations ( 13,418 ) ( 40,201 )

Interest income 544 103

3 unchanged sentences

Income tax benefit ( 5,594 ) ( 13,027 )

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 )

Net loss $ ( 17,525 ) $ ( 36,708 )

Basic net loss per share $ ( 0.30 ) $ ( 0.64 )

Diluted net loss per share $ ( 0.30 ) $ ( 0.64 )

Weighted-average shares outstanding:

1 unchanged sentence

Diluted 58,260 57,105

Comprehensive (loss) earnings:

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

Comprehensive loss:

Net loss $ ( 17,525 ) $ ( 36,708 )

Change in fair value of derivative instruments, net of tax ( 5,885 ) 1,742

1 unchanged sentence

Pension benefit plan, net of tax ( 54 ) ( 56 )

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 )

Total other comprehensive (loss) income, net of tax ( 6,259 ) 2,106

Total comprehensive loss $ ( 23,784 ) $ ( 34,602 )

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

2 unchanged sentences

(In thousands)

For the Third Quarter Ended March 29, 2024

For the First Quarter Ended September 27, 2024

Common Stock Additional

4 unchanged sentences

Shares Amount

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

Balance at June 28, 2024 58,094 $ 581 $ 1,242,402 $ 219,799 $ 9,993 $ 1,472,775

Issuance of common stock under employee stock incentive plans 235 2 ( 2 ) — — —

2 unchanged sentences

Net loss — — — ( 17,525 ) — ( 17,525 )

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

Capital Retained

Earnings Accumulated

Comprehensive

Shareholders’

Shares Amount

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 defined contribution plan 84 1 4,189 — — 4,190

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

Net income — — — 5,156 — 5,156

Other comprehensive loss — — — — ( 6,259 ) ( 6,259 )

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

Balance at September 27, 2024 58,455 $ 584 $ 1,253,249 $ 202,274 $ 3,734 $ 1,459,841

For the First Quarter Ended September 29, 2023

Common Stock Additional

6 unchanged sentences

Issuance of common stock under employee stock incentive plans 187 2 ( 2 ) — — —

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

Issuance of common stock under defined contribution plan 125 1 4,637 — — 4,638

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

Stock-based compensation — — 4,091 — — 4,091

Net loss — — — ( 36,708 ) — ( 36,708 )

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

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

Capital Retained

Earnings Accumulated

Comprehensive Income Total

Shareholders’

Shares Amount

Balance at July 1, 2022 55,680 $ 557 $ 1,145,323 $ 385,774 $ 5,531 $ 1,537,185

Issuance of common stock under employee stock incentive plans 702 7 ( 7 ) — — —

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

Issuance of common stock under defined contribution plan 236 2 11,580 — — 11,582

Retirement of common stock ( 1 ) — ( 63 ) — — ( 63 )

Stock-based compensation — — 28,110 — — 28,110

Net loss — — — ( 20,099 ) — ( 20,099 )

Other comprehensive income — — — — 2,106 2,106

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

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

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

2 unchanged sentences

(In thousands)

Nine Months Ended

March 29, 2024 March 31, 2023

First Quarters Ended

September 27, 2024 September 29, 2023

Cash flows from operating activities:

5 unchanged sentences

Benefit for deferred income taxes ( 7,847 ) ( 12,795 )

Bad debt expense 11,690 92

Provision for bad debt 218 36

Other non-cash items 2,707 150

13 unchanged sentences

Purchases of property and equipment ( 6,236 ) ( 8,015 )

Other investing activities — 150

Net cash used in investing activities ( 6,236 ) ( 8,015 )

Cash flows from financing activities:

Proceeds from employee stock plans 3,163 2,393

Borrowings under credit facilities — 65,000

Payments under credit facilities — ( 40,000 )

Purchase and retirement of common stock ( 15 ) ( 63 )

Payments of deferred financing and offering costs ( 2,249 ) —

Net cash provided by financing activities 106,217 62,330

Net cash (used in) provided by financing activities ( 2,249 ) 65,000

Effect of exchange rate changes on cash and cash equivalents 747 ( 111 )

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

Net (decrease) increase in cash and cash equivalents ( 22,398 ) 17,806

Cash and cash equivalents at beginning of period 180,521 71,563

Cash and cash equivalents at end of period $ 158,123 $ 89,369

Cash paid during the period for:

Cash paid (received) during the period for:

Interest $ 8,898 $ 6,417

Income taxes, net of refunds $ 14,451 $ 21,928

Income taxes (refunded) paid, net $ ( 923 ) $ 14,568

Supplemental disclosures—non-cash activities:

7 unchanged sentences

Mercury Systems, Inc.

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.

The Company's innovative solutions are mission-ready, trusted and secure, software-defined and open and modular (the Company's differentiators), to meet customers’ most-pressing high-tech needs, including those specific to the defense community.

(the Company) is a technology company that delivers mission-critical processing power to the edge - where signals and data are collected - to solve the most pressing aerospace and defense challenges.

Mercury’s products and solutions are deployed in more than 300 programs and across 35 countries.

The Company is headquartered in Andover, Massachusetts, and has over 20 locations worldwide.

The Mercury Processing Platform is the unique advantage the Company provides to its customers.

It comprises the innovative technologies the Company has developed and acquired for more than 40 years that brings integrated, mission-critical processing capabilities to the edge.

The Company's processing platform spans the full breadth of signal processing—from RF front end to the human-machine interface—to rapidly convert meaningful data, gathered in the most remote and hostile environments, into critical decisions.

It allows the Company to offer standard products and custom solutions from silicon to system scale, including components, modules, subsystems, and systems, and it embodies the customer-centric approach the Company takes to delivering capabilities that are mission-ready, trusted and secure, software-defined, and open and modular.

Summary of Significant Accounting Policies

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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 28, 2024, which are contained in the Company’s Annual Report on Form 10-K filed with the SEC on August 13, 2024.

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 results for the first quarter ended September 27, 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 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.

All references to the first quarter of fiscal 2025 are to the quarter ended September 27, 2024.

There were 13 weeks during the first quarters ended September 27, 2024 and September 29, 2023, respectively.

U SE OF E STIMATES

6 unchanged sentences

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

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.

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

A CCOUNTS R ECEIVABLE

3 unchanged sentences

The Company performs ongoing credit evaluations of its customers’ financial condition and limits the amount of credit extended as necessary.

The allowance is based upon an assessment of the customer's credit worthiness, reasonable forecasts about the future, history with the customer, and the age of the receivable balance.

The allowance is based upon an assessment of the customer's credit worthiness, reasonable forecasts about the future, history with the customer, and the age of

the receivable balance.

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

On September 27, 2022, the Company executed an uncommitted receivables purchase agreement (“RPA”) with Bank of the West, as purchaser, pursuant to which the Company may offer to sell certain customer receivables, subject to the terms and conditions of the RPA.

The RPA is an uncommitted arrangement such that the Company is not obligated to sell any receivables and Bank of the West has no obligation to purchase any receivables from the Company.

Pursuant to the RPA, Bank of the West may pu rchase certain of the Company's customer receivables at a discounted rate, subject to a limit that as of any date, the total amount of purchased receivables held by Bank of the West, less the amount of all collections received on such receivables, may not exceed $ 20,000 .

On September 27, 2022, the Company executed an uncommitted receivables purchase agreement (“RPA”), pursuant to which the Company may offer to sell certain customer receivables, subject to the terms and conditions of the RPA.

The RPA is an uncommitted arrangement such that the Company is not obligated to sell any receivables and the party has no obligation to purchase any receivables from the Company.

Pursuant to the RPA, the party may purchase certain of the Company's customer receivables at a discounted rate, subject to a limit that as of any date, the total amount of purchased receivables held by the party, less the amount of all collections received on such receivables, may not exceed $ 20,000 .

The RPA has an indefinite term and the agreement remains in effect until it is terminated by either party.

2 unchanged sentences

On March 14, 2023, the Company amended the RPA to increase the capacity from $ 20,000 to $ 30,600 .

On June 21, 2023, the Company further amended the RPA with BMO Harris Bank (as successor in interest to Bank of the West) to increase the capacity from $ 30,600 to $ 60,000 .

On June 21, 2023, the Company further amended the RPA to increase the capacity from $ 30,600 to $ 60,000 .

On August 13, 2024, the Company terminated the RPA in conjunction with entering into a new receivables purchase and service agreement.

On August 13, 2024, the Company entered into a $ 60,000 committed receivables purchase and servicing agreement (“RPSA”) with a new party.

The RPSA has an initial term of two years.

Pursuant to the RPSA, the new party has committed to purchase receivables from a certain number of agreed upon customers, maintaining a balance of purchased receivables at or below $ 60,000 .

Under the RPSA, a portion of the factored receivables is paid by the counterparty in cash and classified as a deferred purchase price receivable, which is paid as receivables are collected by the Company.

Proceeds for amounts factored by the Company are recorded as an incr ease to cash and a reduction to accounts receivable outstanding in the Consolidated Balance Sheets.

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) 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.

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

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

The Company had $ 43,659 and $ 362 of factored accounts receivables and factoring fees, respectively, for the first quarter ended September 27, 2024.

At September 27, 2024, the Company had $ 18,835 of factored receivables included in Accounts receivable, net allowance for credit losses on Consolidated Balance Sheet.

The Company had $ 28,826 and $ 308 of factored accounts receivables and factoring fees, respectively, for the first quarter ended September 29, 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) 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 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 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 March 29, 2024.

All derivatives for the Company qualified for hedge accounting as of September 27, 2024.

R EVENUE R ECOGNITION

3 unchanged sentences

(ii) modules and sub-assemblies;

and (iii) integrated subsystems.

and (iii) integrated solutions.

The Company also generates revenues from the performance of services, including systems engineering support, consulting, maintenance and other support, testing and installation.

2 unchanged sentences

The appropriate allocation of the transaction price and recognition of revenue is then determined for the bundled performance obligation.

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, 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.

Revenue recognized at a point in time generally relates to contracts that include a combination of components, modules and sub-assemblies, integrated solutions 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, to taled 45 % and 42 % of revenues for the first quarters ended September 27, 2024 and September 29, 2023, respectively.

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

These over time contracts involve the design, development, manufacture, or modification of complex modules and sub-assemblies or integrated subsystems and related services.

These over time contracts involve the design, development, manufacture, or modification of complex modules and sub-assemblies or integrated solutions and related services.

Over time contracts include both fixed-price and cost reimbursable contracts.

1 unchanged sentence

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.

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 and the impact of contract amendments which may result in cumulative adjustments.

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.

2 unchanged sentences

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

First Quarters Ended

(In thousands, except per share data) September 27, 2024 September 29, 2023

Loss from operations $ ( 8,293 ) $ ( 16,463 )

3 unchanged sentences

(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.

Total revenue recognized over time was 55 % and 58 % of total revenues for the first quarters ended September 27, 2024 and September 29, 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.

21 unchanged sentences

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

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.

The contract asset balances were $ 298,270 and $ 304,029 as of September 27, 2024 and June 28, 2024, res pectively.

The contract asset balance decreased due to $ 117,865 of billings, offset by revenue recognized under over time contracts of $ 112,106 during the first quarter ended September 27, 2024.

The contract liability balances were $ 96,859 and $ 74,367 as of September 27, 2024 and June 28, 2024, respectively.

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

Revenue recognized for the first quarter ended September 27, 2024 that was included in the contract liability balance at June 28, 2024 was $ 26,411 .

Revenue recognized for the first quarter ended September 29, 2023 that was included in the contract liability balance at June 30, 2023 was $ 21,015 .

R EMAINING P ERFORMANCE O BLIGATIONS

1 unchanged sentence

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

As of September 27, 2024, the aggregate amount of the transaction price allocated to remaining performance obligations was $ 765,775 .

The Company expects to recognize approximately 54 % of its remaining performance obligations as revenue in the next 12 months and the balance thereafter.

12 unchanged sentences

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.

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

7 unchanged sentences

Settlements made during the period ( 998 )

Balance at March 29, 2024 $ 6,011

Balance at September 27, 2024 $ 4,820

W EIGHTED -A VERAGE S HARES

Weighted-average shares were calculated as follows:

Third Quarters Ended Nine Months Ended

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

First Quarters Ended

September 27, 2024 September 29, 2023

Basic weighted-average shares outstanding 58,260 57,105

1 unchanged sentence

Diluted weighted-average shares outstanding 58,260 57,105

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.

Equity instruments to purchase 2,694 and 1,912 shares of common stock were not included in the calculation of diluted net loss per share for the first quarters ended September 27, 2024 and September 29, 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

Effective July 1, 2023, the company adopted ASU No.

2021-08, Business Combinations (ASC 805):

Accounting for Contract Assets and Contract Liabilities from Contracts with Customers , an amendment of the FASB Accounting Standards Codification.

The amendments in this ASU address diversity and inconsistency related to the recognition and measurement of contract assets and contract liabilities acquired in a business combination and require that an acquirer recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with ASC 606, Revenue from Contracts with Customers .

This adoption did not have an impact to the Company's consolidated financial statements or related disclosures.

The Company has evaluated all issued accounting pronouncements and determined there were no recently adopted accounting pronouncements.

Fair Value of Financial Instruments

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

The following table summarizes the Companies' financial instruments measured at fair value on a recurring basis as of September 27, 2024:

Fair Value Measurements

March 29, 2024 Level 1 Level 2 Level 3

September 27, 2024 Level 1 Level 2 Level 3

Interest rate swap $ 9,628 $ — $ 9,628 $ —

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 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.

As of September 27, 2024, the fair value of the September 2023 Swap was a liability of $ 9,628 and is included within Other non-current liabilities in the Company's Consolidated Balance Sheets.

As of June 28, 2024, the fair value of the September 2023 Swap was a liability of $ 2,436 and was 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 28, 2024:

3 unchanged sentences

Total assets measured at fair value $ 2,436 $ — $ 2,436 $ —

The fair value of interest rate hedging agreement entered on September 29, 2022 ("the 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 June 30, 2023, the fair value of the Swap was an asset of $ 3,523 and was included within Other non-current assets in the Company's Consolidated Balance Sheets.

The Company terminated the Swap during the first quarter ended September 29, 2023.

Refer to Note M for further information regarding the September 2023 Swap and the termination of the Swap.

Refer to Note M for further information regarding the September 2023 Swap .

Inventory is stated at the lower of cost (first-in, first-out) or net realizable value, and consists of materials, labor and overhead.

4 unchanged sentences

Inventory was comprised of the following:

March 29, 2024 June 30, 2023

September 27, 2024 June 28, 2024

Raw materials $ 206,986 $ 200,501

16 unchanged sentences

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:

During the first quarter ended September 27, 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.

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.

The Company concluded that there were no triggering events during the period that would require an interim impairment test.

Restructuring

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;

(ii) streamlining organizational structure and removing areas of redundancy between corporate and divisional organizations;

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.

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.

During the first quarter ended September 27, 2024, the Company incurred $ 2,260 of severance costs.

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.

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.

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.

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

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Cash paid ( 6,185 )

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.

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.

Balance at September 27, 2024 $ 4,833

The Company recorded an income tax benefit of $ 5,594 and $ 13,027 on a loss before income taxes of $ 23,119 and $ 49,735 for the first quarters ended September 27, 2024 and September 29, 2023, respectively.

During the first quarters ended September 27, 2024 and September 29, 2023, the Company recognized a tax provision of $ 219 and $ 1,215 related to stock compensation shortfalls, respectively.

The effective tax rate for the first quarter ended September 27, 2024 differed from the federal statutory rate primarily due to federal and state research and development credits, non-deductible compensation and state taxes.

The effective tax rate for the first quarter ended September 29, 2023 differed from the federal statutory rate primarily due to federal and state research and development credits and state taxes.

The Company continues to maintain a valuation allowance on the majority of its foreign net operating loss carryforwards and state research and developmental tax credit carryforwards.

Based on forecasted taxable income and the scheduled reversal of the remaining deferred tax assets, the Company believes it is more likely than not that all other deferred tax assets will be recognized.

R EVOLVING C REDIT F ACILITY

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.

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.

The Company maintains a 5 -year revolving credit facility (the "Revolver") with a maturity extended to February 28, 2027.

As of September 27, 2024, the Company's outstanding balance of unamortized deferred financing costs was $ 5,108 , 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 August 2024 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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Refer to exhibit 10.1 on Form 8-K filed by the Company with the SEC on November 7, 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.

On August 13, 2024, the Company executed Amendment No.

6 to the Revolver, decreasing the permanent borrowing capacity to $ 900,000 , with a temporary reduction in credit availability to $ 750,000 until the Company meets a minimum consolidated EBITDA level, as defined in the Amendment No.

6 to the Revolver.

In conjunction with Amendment No.

6 to the Revolver, the Company incurred $ 2,249 of new deferred financing costs that will be amortized over the remaining term of the Revolver.

As part of the amendment, the Company wrote off $ 714 of previously deferred financing costs associated with the line of credit facility prior to the amendment.

This write-off is included in Other expense, net in the Consolidated Statements of Operations and Comprehensive Loss.

Refer to exhibit 10.7.6 on Form 10-K filed by the Company with the SEC on August 13, 2024.

During the first quarter ended September 27, 2024, the Company made no additional borrowings.

As of September 27, 2024, the Company was in compliance with all covenants and conditions under the Revolver and there were outstanding borrowings of $ 591,500 against the Revolver, resulting in interest expense of $ 8,906 for the first quarter ended September 27, 2024.

The borrowing capacity as defined under the Revolver as of September 27, 2024 is approximately $ 750,000 less outstanding borrowings of $ 591,500 .

There were outstanding letters of credit of $ 753 as of September 27, 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 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 Plan's funded status at September 27, 2024 was a net liability of $ 5,383 , which is recorded in Other non-current liabilities on the Consolidated Balance Sheet.

The Company recognized net periodic benefit costs of $ 232 and $ 207 associated with the Plan and a net loss of $ 54 and $ 56 in AOCI during the first quarters ended September 27, 2024 and September 29, 2023, respectively.

The Company's total expected employer contributions to the Plan during fiscal 2025 are $ 959 .

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

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.

The Company had $ 2,981 and $ 2,901 of capitalized stock-based 401(k) matching compensation expense on the Consolidated Balance Sheets at September 27, 2024 and June 28, 2024, 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 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.

During the first quarter ended September 27, 2024, the Company recognized share-based matching contributions related to the 401(k) plan of $ 4,432 , as compared to $ 4,841 during the first quarter ended September 29, 2023.

Deferred Compensation Plan

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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.

The Company’s matching obligation for 2024 is subject to the satisfaction of a financial performance condition for the Company's four fiscal quarters corresponding to 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.

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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 .

As of September 27, 2024, the Company held assets under the rabbi trust of $ 183 , 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 $ 183 .

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.

During the first quarter ended September 27, 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 first quarter ended September 29, 2023.

Stock-Based Compensation

S TOCK I NCENTIVE P LANS

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.

At September 27, 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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The 2018 Plan replaced the 2005 Plan.

The shares authorized for issuance under the 2018 Plan will continue to be increased by any future cancellations, forfeitures or terminations (other than by exercise) of awards under the 2005 Plan.

The shares authorized for issuance under the 2018 Plan will continue to be increased by any future cancellations, forfeitures or terminations of awards under the 2005 Plan.

The foregoing does not affect any outstanding awards under the 2005 Plan, which remain in full force and effect in accordance with their terms.

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

There were 3,091 available shares for future grant under the 2018 Plan at September 27, 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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E MPLOYEE S TOCK P URCHASE P LAN

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.

The Company’s 1997 Employee Stock Purchase Plan, as amended and restated (the “1997 ESPP”) was terminated in accordance with its terms effective May 14, 2024.

Under the 1997 ESPP, rights were 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 1997 ESPP permitted employees to purchase common stock through payroll deductions, which may not have exceeded 10 % of an employee’s compensation as defined in the 1997 ESPP.

There were no shares issued under the 1997 ESPP during the first quarter ended September 29, 2023.

The Company adopted a new employee stock purchase plan (the “2024 ESPP”) in April 2024.

The Company's shareholders approved the plan at the Company’s 2024 annual meeting of shareholders, held on October 23, 2024.

The number of shares authorized for issuance under the 2024 ESPP is 1,000 shares.

Under the 2024 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 2024 ESPP permits employees to purchase common stock through payroll deductions, which may not exceed 10 % of an employee’s compensation as defined in the 2024 ESPP.

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.

As of September 27, 2024, no shares have been issued under the 2024 ESPP.

S TOCK O PTION A ND A WARD A CTIVITY

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Ballhaus are parties to an employment agreement, which is included in exhibit 10.1 on Form 8-K filed by the Company with the SEC on August 15, 2023.

The New Hire Option is granted in four (4) tranches as follows:

(w) 233,500 shares of the Company’s common stock with an exercise price equal to $ 42.00 (“Tranche 1”);

(x) 233,500 shares of the Company’s common stock with an exercise price equal to $ 43.00 (“Tranche 2”);

(y) 233,500 shares of the Company’s common stock with an exercise price equal to $ 46.00 (“Tranche 3”);

and (z) 233,500 shares of the Company’s common stock with an exercise price equal to $ 49.00 (“Tranche 4”).

Tranche 1 and Tranche 2 shall become vested and exercisable on the third anniversary of August 17, 2023 ("the Initial Grant Date") (subject to the Executive’s continued employment through such date) and shall expire on the four th anniversary of the Initial Grant Date.

Tranche 3 and Tranche 4 shall become vested and exercisable on the four th anniversary of the Initial Grant Date (subject to the Executive’s continued employment through such date) and shall expire on the fifth anniversary of the Initial Grant Date.

The following table summarizes activity of the Company's stock option plans since June 28, 2024:

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(Years) Aggregate

Intrinsic Value as of 3/29/24

Intrinsic Value as of September 27, 2024

Outstanding at June 28, 2024 934 $ 12.71 $ 45.00 —

Granted 934 12.71 45.00

Exercised — —

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.

Outstanding at September 27, 2024 934 $ 12.71 $ 45.00 3.45 —

Exercisable at September 27, 2024 — $ — $ — — —

There were no options vested or exercised during the first quarter ended September 27, 2024.

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

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:

Third Quarter Ended

March 29, 2024

Expected volatility 45 %

Expected term 4 years

Risk-free interest rate 4.44 %

Expected dividend yield — %

Weighted-average grant date fair value per share $ 12.71

The expected volatility of options granted has been determined using a weighted average of the historical volatility of the Company’s stock for a period equal to the expected life of the option.

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.

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

The Company has not paid and does not anticipate paying cash dividends on its shares of common stock;

therefore, the expected dividend yield is assumed to be zero .

The Company applied an estimated annual forfeiture rate based on historical averages in determining the expense recorded in each period.

As of September 27, 2024, there was $ 8,360 of total unrecognized compensation cost related to non-vested options granted that is expected to be recognized over a weighted-average period of 2.45 years from September 27, 2024.

There were no stock options granted during fiscal year ended June 28, 2024.

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Forfeited ( 63 ) 44.18

Outstanding at March 29, 2024 1,681 $ 41.66

Outstanding at September 27, 2024 2,123 $ 40.31

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) 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.

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 $ 715 and $ 456 of capitalized stock-based compensation expense on the Consolidated Balance Sheets for the periods ended September 27, 2024 and June 28, 2024, 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) Income:

Third Quarters Ended Nine Months Ended

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

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

First Quarters Ended

September 27, 2024 September 29, 2023

Cost of revenues $ 113 $ 816

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Stock-based compensation expense, net of income taxes $ 4,447 $ 3,005

(1) Federal and state statutory rate of 27%

Operating Segment, Geographic Information and Significant Customers

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Europe Asia Pacific Eliminations Total

THIRD QUARTER ENDED MARCH 29, 2024

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

Inter-geographic revenues 1,248 211 — ( 1,459 ) —

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

THIRD QUARTER ENDED MARCH 31, 2023

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

Inter-geographic revenues 1,794 26 — ( 1,820 ) —

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

NINE MONTHS ENDED MARCH 29, 2024

FIRST QUARTER ENDED SEPTEMBER 27, 2024

Net revenues to unaffiliated customers $ 192,660 $ 11,771 $ — $ — $ 204,431

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Net revenues $ 194,715 $ 14,590 $ — $ ( 4,874 ) $ 204,431

NINE MONTHS ENDED MARCH 31, 2023

FIRST QUARTER ENDED SEPTEMBER 29, 2023

Net revenues to unaffiliated customers $ 171,881 $ 9,104 $ 6 $ — $ 180,991

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In recent years, the Company completed a series of acquisitions that changed its technological capabilities, applications and end markets.

As these acquisitions and changes occurred, the Company's proportion of revenue derived from the sale of components in different technological areas, and modules, sub-assemblies and integrated subsystems which combine technologies into more complex diverse products has shifted.

As these acquisitions and changes occurred, the Company's proportion of revenue derived from the sale of components in different technological areas, and modules, sub-assemblies and integrated solutions which combine technologies into more complex diverse products has shifted.

The following tables present revenue consistent with the Company's strategy of expanding its technological capabilities and program content.

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

Third Quarters Ended Nine Months Ended

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

First Quarters Ended

September 27, 2024 September 29, 2023

$ 161,194 $ 146,467

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

Third Quarters Ended Nine Months Ended

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

First Quarters Ended

September 27, 2024 September 29, 2023

$ 33,749 $ 26,703

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

Third Quarters Ended Nine Months Ended

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

First Quarters Ended

September 27, 2024 September 29, 2023

Components (1)

2 unchanged sentences

45,822 37,533

Integrated Subsystems (3)

Integrated Solutions (3)

113,745 105,949

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Examples of modules and sub-assemblies include embedded processing boards, switched fabrics and boards for high-speed input/output, digital receivers, graphics and video, along with multi-chip modules, integrated radio frequency and microwave multi-function assemblies and radio frequency tuners and transceivers.

(3) Integrated subsystems bring components, modules and/or sub-assemblies into one system, enabled with software.

(3) Integrated solutions bring components, modules and/or sub-assemblies into one system, enabled with software.

Subsystems are typically, but not always, integrated within an open standards-based chassis and often feature interconnect technologies to enable communication between disparate systems.

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

Third Quarters Ended Nine Months Ended

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

First Quarters Ended

September 27, 2024 September 29, 2023

$ 90,490 $ 104,716

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(3) Naval platform includes products that relate to personnel, equipment or pieces of equipment designed for naval operations.

(4) All platforms other than Airborne, Land or Naval.

(4) Space platform includes products that relate to personnel, equipment or pieces of equipment designed for space operations.

(5) All platforms other than Airborne, Land, Naval, or Space.

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

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

September 27, 2024 $ 103,176 $ 1,883 $ 105,059

June 28, 2024 $ 107,655 $ 2,698 $ 110,353

1 unchanged sentence

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

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 %

First Quarters Ended

September 27, 2024 September 29, 2023

L3Harris 12 % 12 %

Lockheed Martin Corporation 11 % 13 %

RTX Corporation * 11 %

Northrop Grumman 10 % 11 % * 11 %

Navy * * * 10 %

49 % 42 % 32 % 49 %

* Indicates that the amount is less than 10% of the Company's revenue for the respective period.

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 third quarters and nine months ended March 29, 2024 and March 31, 2023.

There were no programs comprising 10% or more of the Company's revenues for the first quarters ended September 27, 2024 and September 29, 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.

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.

The Company subsequently delivered a letter to NTS outlining the deficiencies in their claim and reiterated that the Company is not obligated to tender a substantive response to their demand without first having received the responsive information requested in connection with the meet and confer session.

In April 2024, counsel for NTS sent additional communications on their demand that the Company participate in their environmental monitoring and remediation planning, and in May 2024, the Company responded with a rebuttal of the allegations.

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

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 the standard that MassDEP published for PFAS in October 2020.

The Company has not been contacted by MassDEP since the Company's response was provided in November 2021.

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

The Board accepted his resignation effective June 24, 2023.

In the notice, the former CEO claimed entitlement to certain benefits, including equity vesting, severance, and other benefits, under the change in control severance agreement (the “CIC Agreement”) because the former CEO had resigned with good reason during a potential change in control period.

In the notice, the former CEO claimed he was entitled to certain benefits, including equity vesting, severance, and other benefits, under the change in control severance agreement (the “CIC Agreement”) because the former CEO had resigned with good reason during a potential change in control period.

The Company disputes these claims and maintains that the former CEO resigned without good reason.

On September 19, 2023, the former CEO filed for binding arbitration under the employment rules of the American Arbitration Association (“AAA”).

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

An arbitrator was appointed on November 29, 2023, and an arbitration trial that was initially scheduled for mid-December 2024 has been rescheduled to late March 2025.

On March 25, 2024, the arbitrator denied Mr.

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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.

If the arbitrator rules in the Company’s favor, the Company may still need to pay the former CEO’s reasonable legal fees and compensation during the dispute.

If instead the arbitrator rules for the former CEO, the Company could be liable for up to approximately $ 12,900 , based on the closing price of the Company's common stock on June 26, 2023, plus legal fees and expenses and compensation during dispute, for accelerated equity vesting, severance, and other benefits under the CIC Agreement.

If the arbitrator rules in the Company’s favor, the Company may still need to pay the former CEO’s reasonable legal fees, interest, and compensation during the dispute.

If instead the arbitrator rules for the former CEO, the Company could be liable for up to approximately $ 14,100 , based on the closing price of the Company's common stock on June 26, 2023, for accelerated equity vesting, severance, and other benefits under the CIC Agreement, plus interest, legal fees and expenses and compensation during dispute, which could include Mr.

Aslett's base salary and other amounts based on the compensation, benefit and insurance plans in which he participated.

The Company categorically denies any wrongdoing or liability under the CIC Agreement, but the outcome of potential arbitration is inherently uncertain.

Accordingly, it is reasonably possible that the Company will incur a liability in this matter, and the Company estimates the potential range of exposure from $ 0 to $ 12,900 , plus costs and attorneys’ fees and compensation to the former CEO during the dispute.

Accordingly, it is reasonably possible that the Company will incur a liability in this matter, and the Company estimates the potential range of exposure from $ 0 to $ 14,100 , plus costs and attorneys’ fees, interest and compensation to the former CEO during the dispute.

On December 13, 2023, a securities class action complaint was filed against the Company, Mark Aslett, and Michael Ruppert in the U.S.

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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 February 27, 2024, the Court entered an order appointing Carpenters 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.

The Company filed a motion to dismiss on May 24, 2024, and after the plaintiffs’ filed their opposition motion and the Company filed its reply to their opposition, a hearing on the motion was conducted by the Court on July 24, 2024.

On July 24, 2024, the Court dismissed the case without prejudice and permitted the plaintiffs 30 days to file an amended complaint.

The plaintiffs filed for leave to amend their complaint on August 23, 2024, Mercury filed its opposition motion on September 6th, the plaintiffs filed their response brief on September 17, 2024, and Mercury filed its reply on September 30, 2024.

On October 17, 2024, Mercury received a shareholder derivative demand alleging the same claims as those covered in the federal securities class action.

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

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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.

Farnsworth, the Company's current Chief Financial officer, are indemnified by the

Company for this matter.

The Company believes the claims in the complaints 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.

On January 31, 2024, a former employee at the Company's Torrance, California 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 Mission Systems, LLC employees in California, alleging a range of violations of California wage and hour regulations.

On October 1, 2024, a second former employee at our Torrance location filed a PAGA notice to act in a representative capacity on allegations of a range of violations of California wage and hour regulations.

The Company believes the claims in the complaints 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.

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P URCHASE C OMMITMENTS

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.

As of September 27, 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 $ 120,574 .

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

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.

As of September 27, 2024, the fair value of the September 2023 Swap was a liability of $ 9,628 and is included within Other non-current liabilities in the Company's Consolidated Balance Sheets.

During the first quarter ended September 27, 2024, the Company amortized a total of $ 881 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 March 29, 2024, nonperformance is not perceived to be a material risk.

Based on the credit ratings of the Company’s counterparty as of September 27, 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.

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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.

What changed 10-Q

Item 1. Financial Statements