What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-11-04 compared with 2025-05-06 · 100 added, 195 removed, 180 unchanged (62% of the section changed)

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federal government shutdown or extended continuing resolution, effects of geopolitical unrest and regional conflicts, competition, changes in technology and methods of marketing, delays in or cost increases related to completing development, engineering and manufacturing programs, changes in customer order patterns, changes in product mix, continued success in technological advances and delivering technological innovations, changes in, or in the U.S.

government’s interpretation of, federal export control or procurement rules and regulations, including tariffs, changes in, or in the interpretation or enforcement of, environmental rules and regulations, market acceptance of our products, shortages in or delays in receiving components, supply chain delays or volatility for critical components, production delays or unanticipated expenses including due to quality issues or manufacturing execution issues, adherence to required manufacturing standards, capacity underutilization, increases in scrap or inventory write-offs, failure to achieve or maintain manufacturing quality certifications, such as AS9100, the impact of supply chain disruption, inflation and labor shortages, among other things, on program execution and the resulting effect on customer satisfaction, inability to fully realize the expected benefits from acquisitions, restructurings, and operational efficiency initiatives or delays in realizing such benefits, challenges in integrating acquired businesses and achieving anticipated synergies, effects of shareholder activism, increases in interest rates, changes to industrial security and cyber-security regulations and requirements and impacts from any cyber or insider threat events, changes in tax rates or tax regulations, such as the deductibility of internal research and development, changes to interest rate swaps or other cash flow hedging arrangements, changes to generally accepted accounting principles, difficulties in retaining key employees and customers, litigation, including the dispute arising with the former CEO over his resignation, unanticipated costs under fixed-price service and system integration engagements, and various other factors beyond our control.

government’s interpretation of, federal export control or procurement rules and regulations, including tariffs, changes in, or in the interpretation or enforcement of, environmental rules and regulations, market acceptance of our products, shortages in or delays in receiving components, supply chain delays or volatility for critical components, production delays or unanticipated expenses including due to quality issues or manufacturing execution issues, failure to meet contractual performance specifications, adherence to required manufacturing standards, capacity underutilization, increases in scrap or inventory write-offs, failure to achieve or maintain manufacturing quality certifications, such as AS9100, failure to achieve or maintain qualified business systems, such as those required by the DFARS, adverse findings in government audits or investigations, the impact of supply chain disruption, inflation and labor shortages, among other things, on program execution and the resulting effect on customer satisfaction, inability to fully realize the expected benefits from acquisitions, restructurings, and operational efficiency initiatives or delays in realizing such benefits, challenges in integrating acquired businesses and achieving anticipated synergies, effects of shareholder activism, increases in interest rates, changes to industrial security and cyber-security regulations and requirements and impacts from any cyber or insider threat events, changes in tax rates or tax regulations, changes to interest rate swaps or other cash flow hedging arrangements, changes to generally accepted accounting principles, difficulties in retaining key employees and customers, litigation, including the dispute arising with the former CEO over his resignation, unanticipated costs under fixed-price service and system integration engagements, and various other factors beyond our control.

These risks and uncertainties also include such additional risk factors as are discussed in our filings with the U.S.

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We undertake no obligation to update any forward looking statement to reflect events or circumstances after the date on which such statement is made.

Mercury Systems is a technology company that delivers mission-critical processing power to the edge to solve the most pressing aerospace and defense challenges.

Mercury Systems is a global technology company that delivers mission-critical processing to the edge to solve the most pressing aerospace and defense challenges.

Combining technologies and expertise developed for more than 40 years, the Mercury Processing Platform offers customers a unique advantage to unleash breakthrough capabilities.

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The company is headquartered in Andover, Massachusetts, and has more than 20 locations worldwide.

As a leading manufacturer of essential components, products, modules and subsystems, we sell to all of the top defense prime contractors, the U.S.

As a leading manufacturer of essential components, products, modules and subsystems, we sell to the top U.S.

and European defense prime contractors, the U.S.

government and original equipment manufacturers (“OEM”) commercial aerospace companies.

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We maintain our technological edge by investing in critical capabilities and intellectual property (“IP” or “building blocks”) in processing, leveraging open standards and open architectures to adapt quickly those building blocks into solutions for highly data-intensive applications, including emerging needs in areas such as artificial intelligence (“AI”).

As of March 28, 2025, we had 2,200 employees.

As of September 26, 2025, we had 2,175 employees.

We employ hardware and software architects and design engineers, primarily engaged in engineering and research and product development activities to achieve our objectives to fully capitalize upon and maintain our technological leads in the high-performance, real-time sensor processing industry and in mission computing, platform management and other safety-critical applications.

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By adhering to these values, it will help our employees to realize their full potential at work to provide Innovation That Matters®.

Our consolidated revenues, net loss, diluted net loss per share, adjusted earnings per share (“adjusted EPS”), and adjusted EBITDA for the third quarter ended March 28, 2025 were $211.4 million, ($19.2) million, ($0.33), $0.06, and $24.7 million, respectively.

Our consolidated revenues, net loss, diluted net loss per share, adjusted earnings per share (“adjusted EPS”), and adjusted EBITDA for the nine months ended March 28, 2025 were $638.9 million, ($54.3) million, ($0.93), $0.17, and $68.2 million, respectively.

See the Non-GAAP Financial Measures section for a reconciliation to our most directly comparable GAAP financial measures.

Our consolidated revenues, net loss, diluted net loss per share, adjusted earnings per share (“adjusted EPS”), and adjusted EBITDA for the first quarter ended September 26, 2025 were $225.2 million, $12.5 million, $0.21, $0.26, and $35.6 million, respectively.

RESULTS OF OPERATIONS:

There were 13 weeks included in the results of operations for the third quarters ended March 28, 2025 and March 29, 2024, respectively.

The results for the third quarter ended March 28, 2025 are not necessarily indicative of the results to be expected for the full fiscal year.

The third quarter ended March 28, 2025 compared to the third quarter ended March 29, 2024

The following table sets forth, for the third quarter ended indicated, financial data from the Consolidated Statements of Operations and Comprehensive Loss:

(In thousands) March 28, 2025 As a % of

Revenue March 29, 2024 As a % of

There were 13 weeks included in the results of operations for the first quarters ended September 26, 2025 and September 27, 2024, respectively.

The results for the first quarter ended September 26, 2025 are not necessarily indicative of the results to be expected for the full fiscal year.

The first quarter ended September 26, 2025 compared to the first quarter ended September 27, 2024

The following table sets forth, for the first quarter ended indicated, financial data from the Consolidated Statements of Operations and Comprehensive Loss:

(In thousands) September 26, 2025 As a % of

Revenue September 27, 2024 As a % of

Net revenues $ 225,209 100.0 % $ 204,431 100.0 %

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Interest expense (7,886) (3.5) (8,906) (4.4)

Other income (expense), net 2,304 1.1 (2,784) (1.3)

Other expense, net (2,080) (1.0) (1,339) (0.6)

Loss before income tax benefit (16,536) (7.4) (23,119) (11.3)

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Net Loss $ (12,515) (5.6) % $ (17,525) (8.6) %

Total revenues increased $3.1 million, or 1.5%, to $211.4 million during the third quarter ended March 28, 2025, as compared to $208.3 million during the third quarter ended March 29, 2024.

Revenues increased year over year as we pivoted our resources in fiscal 2024 to executing on our program base, including progress toward full rate production of our common processing architecture programs.

Point in time revenue and over time revenue represented 53% and 47%, respectively, of total revenues during the third quarter ended March 28, 2025, an increase of $24.9 million and decrease of $21.8 million, respectively.

Point in time revenue and over time revenue represented 42% and 58% respectively, of total revenues during the third quarter ended March 29, 2024.

Revenue increases by product grouping were driven by the modules and sub-assemblies and integrated solutions product groupings which increased $8.3 million and $2.1 million, respectively, partially offset by components which decreased $7.3 million during the third quarter ended March 28, 2025 when compared to the prior period.

The increase in total revenue by end application was primarily driven by the C4I, radar, and other end applications with increases of $12.2 million, $11.3 million, and $5.3 million respectively, partially offset by a decrease to other sensor & effector of $25.5 million.

The increase in total revenue by platform was also driven by higher Other, Land, and Airborne of $11.2 million, $10.7 million, and $6.5 million, respectively, partially offset by decreases to Space and Naval of $21.4 million and $3.9 million, respectively.

The largest program increases were related to KC46, a secure processing program, and F/A-18, partially offset by decreases in a strategic weapons program and the Tracking Layer program when compared to the prior period.

There were no programs comprising 10% or more of our revenues for the third quarters ended March 28, 2025 or March 29, 2024.

Total revenues increased $20.8 million, or 10.2%, to $225.2 million during the first quarter ended September 26, 2025, as compared to $204.4 million during the first quarter ended September 27, 2024.

Revenues increased year over year as we continued to execute on our program base, and continued toward full rate production of our common processing architecture programs.

Point in time revenue and over time revenue represented 52% and 48%, respectively, of total revenues during the first quarter ended September 26, 2025, an increase of $25.2 million and decrease of $4.5 million, respectively.

Point in time revenue and over time revenue represented 45% and 55% respectively, of total revenues during the first quarter ended September 27, 2024.

Revenue increases were driven by the modules and sub-assemblies as well as the components product grouping which increased $20.4 million and $0.6 million, respectively, partially offset by the integrated solutions product grouping which decreased $0.2 million during the first quarter ended September 26, 2025 when compared to the prior period.

The increase in total revenue was primarily driven by the C4I and other sensor and effector end applications with increases of $26.2 million and $3.4 million respectively, partially offset by decreases to the electronic warfare and the radar end applications of $5.3 million and $3.6 million.

The increase in total revenue was also driven by the Land, Other, Airborne, and Space platforms with increases of $8.6 million, $5.9 million, $4.2 million, and $3.1 million, respectively, partially offset by a decrease to the Naval platform of $1.0 million.

The largest program increases were related to KC-46, a secure processing program, and F/A-18, partially offset by decreases in a secure processing program and the F-16 program when compared to the prior period.

There were no programs comprising 10% or more of our revenues for the first quarters ended September 26, 2025 or September 27, 2024.

G ROSS M ARGIN

Gross margin was 27.0% for the third quarter ended March 28, 2025, an increase of 750 basis points from the 19.5% gross margin realized during the third quarter ended March 29, 2024.

The higher gross margin was driven primarily by net Estimate at completion ("EAC") change impact on our programs recognized over time of approximately $3.7 million recorded in the quarter, an incremental improvement of approximately $12.3 million, or 600 basis points, when compared to the prior period as well as lower inventory reserves of $9.6 million and lower warranty provisions of $5.0 million.

The increase in inventory reserves in fiscal 2024 was primarily related to programs with end of life components, where design changes have occurred, as well as configuration changes necessary to drive efficient production in our common processing architecture programs.

Gross margin was 27.9% for the first quarter ended September 26, 2025, an increase of 260 basis points from the 25.3% gross margin realized during the first quarter ended September 27, 2024.

The higher gross margin was driven primarily by favorable program mix, lower manufacturing adjustments of $7.4 million as well as net estimate at completion ("EAC") change impact on our programs recognized over time of approximately $4.1 million recorded in the quarter, an incremental improvement of approximately $4.2 million, or 200 basis points, when compared to the prior period.

We may experience increases in our manufacturing costs related to the imposition of tariffs on the import of components from other countries.

We do not expect to see material increases to these costs in fiscal 2025, but they could impact our gross margins in fiscal 2026.

We have not seen material increases to these costs in the first quarter of fiscal 2026, but they could impact our gross margins in the future.

We had the following aggregate effects of favorable and unfavorable margin impacts as a result of changes in estimates across our portfolio for the period presented:

Third Quarters Ended

(in thousands) March 28, 2025 March 29, 2024

First Quarters Ended

(in thousands) September 26, 2025 September 27, 2024

Gross favorable $ 8,455 $ 7,774

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The changes in estimates are assessed based on historical results and cumulative adjustments are recorded to recognize revenue to date based on changes in estimated margin on programs, including impact of contract amendments factored for potential risks and opportunities.

We utilize the latest and best information available when revising our estimates and apply consistent judgement across the full portfolio of programs.

We utilize the latest and best information available when revising our estimates and apply consistent judgment across the full portfolio of programs.

S ELLING , G ENERAL AND A DMINISTRATIVE

Selling, general and administrative expenses decreased $0.2 million, or 0.4%, to $43.0 million during the third quarter ended March 28, 2025, as compared to $43.2 million in the third quarter ended March 29, 2024.

The decrease was primarily driven by lower bad debt expense of $6.4 million as well as the savings from reductions in force initiated in fiscal 2024, resulting in lower compensation costs of $6.1 million.

These decreases were partially offset by higher legal and consulting costs of $5.7 million, additional bonus and stock compensation expense of $4.6 million, and higher depreciation expense of $1.3 million.

Selling, general and administrative expenses increased $12.7 million, or 38.4%, to $45.9 million during the first quarter ended September 26, 2025, as compared to $33.2 million in the first quarter ended September 27, 2024.

The increase was primarily driven by higher compensation and litigation and settlement expense of $7.3 million and $6.0 million, respectively.

These increases were partially offset by lower consulting and depreciation expense of $0.6 million and $0.5 million, respectively.

The litigation and settlement expense incurred during the first quarter ended September 26, 2025 was comprised of $5.2 million related to the dispute with our former CEO and $1.0 million related to contract matters.

R ESEARCH AND D EVELOPMENT

Research and development expenses decreased $5.6 million, or 25.9%, to $16.0 million during the third quarter ended March 28, 2025, as compared to $21.6 million during the third quarter ended March 29, 2024.

The decrease was primarily driven by the savings from headcount reductions of 185 R&D employees, initiated in fiscal 2024 and fiscal 2025, resulting in lower expense of $4.6 million as well as decreased spend on consultants and outside services of $2.3 million, and lower equipment and supplies expense of $2.0 million.

These decreases were partially offset by higher bonus expense of $3.7 million.

Research and development expenses decreased $5.2 million, or 28.3%, to $13.2 million during the first quarter ended September 26, 2025, as compared to $18.4 million during the first quarter ended September 27, 2024.

The decrease was primarily driven by the savings from headcount reductions of approximately 230 employees, initiated in fiscal 2025, resulting in lower expense of $6.7 million.

We also saw decreased spending on outside service, depreciation, and software licensing expense of $0.6 million, $0.6 million, and $0.4 million, respectively.

These decreases were partially offset by higher equipment and supplies and bonus expense of $2.2 million and $1.1 million, respectively.

A MORTIZATION OF I NTANGIBLE A SSETS

Amortization of intangible assets decreased $1.3 million to $10.2 million during the third quarter ended March 28, 2025, as compared to $11.5 million during the third quarter ended March 29, 2024, primarily due to various developed technology and customer relationship intangibles being fully amortized in fiscal 2024.

We recognized $10.3 million of amortization of intangible assets during the first quarter ended September 26, 2025, as compared to $11.2 million during the first quarter ended September 27, 2024, primarily due to various customer relationship intangibles being fully amortized in fiscal 2025.

R ESTRUCTURING AND O THER C HARGES

We incurred $4.9 million of restructuring and other charges during the third quarter ended March 28, 2025, as compared to $9.8 million during the third quarter ended March 29, 2024.

Restructuring and other charges during the third quarter ended March 28, 2025 include $4.9 million for separation costs related to the reduction in workforce initiated January 29, 2025 impacting approximately 145 positions.

Restructuring and other charges during the third quarter ended March 29, 2024 include $9.8 million for separation costs related to the reduction in workforce initiated January 12, 2024 impacting approximately 100 positions.

I NTEREST I NCOME

We recognized $1.3 million of interest income during the third quarter ended March 28, 2025, as compared to $0.5 million during the third quarter ended March 29, 2024.

The increase was driven by higher average cash and cash equivalents during the period.

I NTEREST E XPENSE

We incurred $8.1 million of interest expense during the third quarter ended March 28, 2025, as compared to $9.3 million during the third quarter ended March 29, 2024.

The decrease was driven by lower average outstanding borrowings during the period on our existing credit facility (the "Revolver").

O THER I NCOME ( E XPENSE ) , N ET

Other income (expense), net was $2.3 million during the third quarter ended March 28, 2025, as compared to $(2.8) million during the third quarter ended March 29, 2024.

The third quarter ended March 28, 2025 includes other income of $2.7 million, related to the sale of the mc.com domain name, $1.2 million net foreign currency translation gains, $0.9 million of financing costs, $0.5 million of securities class action expense, and $0.2 million of consulting costs.

The third quarter ended March 29, 2024 includes litigation and settlement expenses of $2.1 million, $0.8 million of financing costs and $0.2 million net foreign currency translation losses, partially offset by other income of $0.3 million.

I NCOME T AXES

We recorded an income tax benefit of $2.6 million and $12.6 million on a loss before income taxes of $21.8 million and $57.2 million for the third quarters ended March 28, 2025 and March 29, 2024, respectively.

The effective tax rate for the third quarter ended March 28, 2025 differed from the federal statutory rate primarily due to federal and state research and development credits, return to provision adjustments, non-deductible compensation, and state taxes.

The effective tax rate for the third quarter ended March 29, 2024 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.

We continue to maintain a valuation allowance on the majority of our 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, we believe it is more likely than not that all other deferred tax assets will be recognized.

Nine months ended March 28, 2025 compared to the nine months ended March 29, 2024

The following table sets forth, for the nine month periods indicated, financial data from the Consolidated Statements of Operations and Comprehensive Loss:

(In thousands) March 28, 2025 As a % of

Revenue March 29, 2024 As a % of

Net revenues $ 638,914 100.0 % $ 586,712 100.0 %

Cost of revenues 469,188 73.4 464,023 79.1

Gross margin 169,726 26.6 122,689 20.9

Operating expenses:

Selling, general and administrative 116,698 18.3 123,421 21.0

Research and development 55,734 8.7 81,911 14.0

Amortization of intangible assets 32,574 5.1 36,350 6.2

Restructuring and other charges 7,231 1.1 19,389 3.3

Acquisition costs and other related expenses 666 0.1 1,404 0.3

Total operating expenses 212,903 33.3 262,475 44.8

Loss from operations (43,177) (6.7) (139,786) (23.9)

Interest income 2,240 0.4 674 0.1

Interest expense (25,404) (4.0) (25,856) (4.4)

Other expense, net (2,900) (0.5) (5,706) (0.9)

Loss before income tax benefit (69,241) (10.8) (170,674) (29.1)

Income tax benefit (14,967) (2.3) (43,811) (7.5)

Net Loss $ (54,274) (8.5) % $ (126,863) (21.6) %

Total revenues increased $52.2 million, or 8.9%, to $638.9 million during the nine months ended March 28, 2025, as compared to $586.7 million during the nine months ended March 29, 2024.

Revenues increased year over year as we pivoted

our resources in fiscal 2024 to executing on our program base, including progress toward full rate production of our common processing architecture programs.

Point in time revenue and over time revenue represented 51% and 49%, respectively, of total revenues during the nine months ended March 28, 2025, an increase of $70.0 million and $17.8 million, respectively.

Point in time revenue and over time revenue represented 44% and 56%, respectively, of total revenue during the nine months ended March 29, 2024.

Revenue increases by product groupings were driven by the integrated solutions, modules and sub-assemblies, and components product groupings which increased by $28.2 million, $20.0 million and $4.0 million, respectively.

The increase in total revenue by end application was primarily driven by the radar and other end applications increases of $54.4 million and $34.3 million, respectively, partially offset by decreases to other sensor & effector and C4I of $20.9 million and $15.2 million, respectively.

The increase in total revenue by platform was also driven by higher Other, Land, and Naval of $41.5 million, $35.9 million, and $9.2 million, respectively, partially offset by decreases to Airborne and Space of $29.6 million and $4.8 million, respectively.

The largest program increases were related to LTAMDS, MH-60R/S, Aegis, and a secure processing program, partially offset by decreases to the SCAR and Tracking Layer programs when compared to the prior period.

There were no programs comprising 10% or more of our revenues for the nine months ended March 28, 2025 or March 29, 2024.

G ROSS M ARGIN

Gross margin was 26.6% for the nine months ended March 28, 2025, an increase of 570 basis points from the 20.9% gross margin realized during the nine months ended March 29, 2024.

The higher gross margin was driven primarily by net EAC change impact on our programs recognized over time of approximately $16.4 million recorded in the period, an incremental improvement of approximately $47.6 million, or 830 basis points, when compared to the prior period as well as lower inventory reserves of $19.0 million and lower warranty provisions of $5.1 million, partially offset by higher manufacturing adjustments of $11.1 million.

We may experience increases in our manufacturing costs related to the imposition of tariffs on the import of components from other countries.

We do not expect to see material increases to these costs in fiscal 2025, but they could impact our gross margins in fiscal 2026.

We had the following aggregate effects of favorable and unfavorable margin impacts as a result of changes in estimates across our portfolio for the period presented:

Nine Months Ended

(in thousands) March 28, 2025 March 29, 2024

Gross favorable $ 20,262 $ 14,441

Gross unfavorable (36,616) (78,391)

Net impact of changes in estimates $ (16,354) $ (63,950)

We utilize the latest and best information available when revising our estimates and apply consistent judgement across the full portfolio of programs.

S ELLING , G ENERAL AND A DMINISTRATIVE

Selling, general and administrative expenses decreased $6.7 million, or 5.4%, to $116.7 million during the nine months ended March 28, 2025, as compared to $123.4 million during the nine months ended March 29, 2024.

The decrease was primarily driven by the reduction in force initiated in fiscal 2024, resulting in lower compensation costs of $14.7 million, lower bad debt expense of $11.2 million, lower software licensing fees of $3.1 million, as well as lower equipment and supplies expense of $0.8 million.

These decreases were partially offset by higher bonus and stock-based compensation of $11.2 million as well as higher legal and consulting costs of $9.3 million.

R ESEARCH A ND D EVELOPMENT

Research and development expenses decreased $26.2 million, or 32.0%, to $55.7 million during the nine months ended March 28, 2025, as compared to $81.9 million during the nine months ended March 29, 2024.

The decrease was primarily driven by the savings from headcount reductions of 185 employees, initiated in fiscal 2024 and fiscal 2025, resulting in lower expense of $22.6 million, as well as decreased spend on outside services, supplies, and consulting services of $10.8 million.

These decreases were partially offset by higher bonus expense of $7.4 million.

R ESTRUCTURING A ND O THER C HARGES

Restructuring and other charges were $7.2 million during the nine months ended March 28, 2025, as compared to $19.4 million during the nine months ended March 29, 2024.

Restructuring and other charges during the nine months ended March 28, 2025 related to severance related charges primarily related to the reduction in workforce initiated January 29, 2025.

Restructuring and other charges during the nine months ended March 29, 2024 include $19.4 million of severance costs related to workforce reductions that eliminated approximately 250 positions.

We incurred $1.6 million of restructuring and other charges during the first quarter ended September 26, 2025, as compared to $2.3 million during the first quarter ended September 27, 2024.

Restructuring and other charges during the first quarter ended September 26, 2025 were primarily to related to severance related charges associated with a workforce reduction initiated during the quarter that eliminated approximately 40 positions.

Restructuring and other charges during the first quarter ended September 27, 2024 were primarily for severance related charges.

We expect to incur an additional $2.4 million of restructuring and other charges during the second quarter ending December 26, 2025, primarily related to severance-related charges associated with a workforce reduction that eliminates 42 international positions.

A CQUISITION C OSTS AND O THER R ELATED E XPENSES

Acquisition costs and other related expenses were $0.7 million during the nine months ended March 28, 2025, as compared to $1.4 million during the nine months ended March 29, 2024.

The acquisition costs and other related expenses we incurred during the nine months ended March 28, 2025 includes $0.5 million related to run-rate amortization of fair value adjustments from purchase accounting and $0.2 million related to the acquisition of Star Lab and disposal of our manufacturing operations in Plan-Les-Ouates, Switzerland.

Acquisition costs and other related expenses during the nine months ended March 29, 2024 includes $0.5 million related to run-rate amortization of fair value adjustments from purchase accounting, $0.3 million related to the conclusion of the Board of Directors' review of strategic alternatives, as well as $0.3 million for third-party advisory fees in connection with engagements by activist investors.

Acquisition costs and other related expenses were $0.6 million during the first quarter ended September 26, 2025, as compared to $0.2 million during the first quarter ended September 27, 2024.

We could incur acquisition costs and other related expenses periodically in the future as we continue to seek acquisition opportunities to expand our technological capabilities and especially within the sensor and effector and C4I markets.

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I NTEREST I NCOME

We recognized $2.2 million of interest income during the nine months ended March 28, 2025, as compared to $0.7 million during the nine months ended March 29, 2024.

We recognized $2.0 million of interest income during the first quarter ended September 26, 2025, as compared to $0.5 million during the first quarter ended September 27, 2024.

The increase was driven by higher average cash and cash equivalents during the period.

I NTEREST E XPENSE

We incurred $25.4 million of interest expense during the nine months ended March 28, 2025, as compared to $25.9 million during the nine months ended March 29, 2024.

The decrease was driven by lower average outstanding borrowings during the period on the Revolver.

We incurred $7.9 million of interest expense during the first quarter ended September 26, 2025, as compared to $8.9 million during the first quarter ended September 27, 2024.

The decrease was driven by lower interest rates during the period on our existing credit facility (the "Revolver").

O THER E XPENSE, N ET

Other expense, net decreased $2.8 million to $2.9 million during the nine months ended March 28, 2025, as compared to $5.7 million during the nine months ended March 29, 2024.

There was $4.3 million of financing costs, $0.9 million of consulting costs, and $0.8 million of securities class action expense, partially offset by other income of $2.9 million, primarily related to the sale of the mc.com domain name, and $0.3 million of net foreign currency translation gains during the nine months ended March 28, 2025.

There was $4.0 million of litigation and settlement costs, $2.1 million of financing costs and $0.5 million of net foreign currency translation losses, partially offset by other income of $0.9 million during the nine months ended March 29, 2024.

Other expense, net was $2.1 million during the first quarter ended September 26, 2025, as compared to $1.3 million during the first quarter ended September 27, 2024.

The first quarter ended September 26, 2025 includes $0.9 million of financing costs, $0.8 million net foreign currency translation losses, and $0.4 million of securities class action expense.

Legal fees incurred under the securities class action are reimbursable by our insurance providers, mitigating our expenses incurred to date.

The first quarter ended September 27, 2024 includes $2.3 million of financing costs, $0.5 million of consulting costs, and $0.2 million securities class action expenses, partially offset by $1.5 million net foreign currency translation gains and $0.2 million of other income.

I NCOME T AXES

We recorded an income tax benefit of $15.0 million and $43.8 million on a loss before income taxes of $69.2 million and $170.7 million for the nine months ended March 28, 2025 and March 29, 2024, respectively.

During the nine months ended March 28, 2025, we recognized a return to provision adjustment of $2.8 million related to federal and state research and development credits.

The effective tax rate for the nine months ended March 28, 2025 differed from the federal statutory rate primarily due to federal and state research and development credits, return to provision adjustments, non-deductible compensation, and state taxes.

The effective tax rate for the nine months ended March 29, 2024 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.

We continue to maintain a valuation allowance on the majority of our foreign net operating loss carryforwards and state research and developmental tax credit carryforwards.

We recorded income tax benefits of $4.0 million and $5.6 million on losses before income taxes of $16.5 million and $23.1 million for the first quarters ended September 26, 2025 and September 27, 2024, respectively.

During the first quarter ended September 26, 2025 and September 27, 2024, we recognized a tax benefit of $1.1 million related to stock compensation windfalls and a tax provision of $0.2 million related to stock compensation shortfalls, respectively.

The effective tax rate for the first quarter ended September 26, 2025 and 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.

We continue to maintain a valuation allowance on all of our foreign net operating loss carryforwards and the majority of our state research and developmental tax credit carryforwards.

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

We expect to amortize previously capitalized research and development expenditures.

On July 4, 2025, the One Big Beautiful Bill Act (“OBBBA”) was enacted, which includes a broad range of tax provisions and extended and modified certain provisions of the Tax Cuts and Jobs Act ("TCJA"), including, but not limited to, restoration of 100% bonus depreciation, EBITDA-based interest expense limitation and immediate expensing of domestic research and development expenditures.

We have evaluated the potential impact of this legislation and expect it to result primarily in a timing difference, with no material impact on our effective tax rate.

L IQUIDITY AND C APITAL R ESOURCES

Our primary sources of liquidity come from existing cash and cash generated from operations, our Revolver, our ability to raise capital under our universal shelf registration statement and our ability to factor our receivables.

Our primary sources of liquidity come from existing cash and cash generated from operations, our Revolver, and our ability to raise capital under our universal shelf registration statement.

Our near-term fixed commitments for cash expenditures consist primarily of payments under operating leases and inventory purchase commitments.

We have experienced growth in our working capital balances and, in particular, related to unbilled receivables and inventory over the last several years.

As we have received follow-on production awards, our unbilled receivables began to convert to cash reducing our working capital balances during the nine months ended March 28, 2025.

As we receive follow-on production awards, we believe that both unbilled receivables and inventory should convert to cash further reducing our working capital balances.

As of the first quarter ended September 26, 2025, our working capital balance increased $9.0 million as compared to the balance as of June 27, 2025.

Based on our current plans and business conditions, we believe that existing cash and cash equivalents, our available Revolver, cash generated from operations and our financing capabilities will be sufficient to satisfy our anticipated cash requirements for at least the next twelve months.

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Revolving Credit Facilities

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, we proactively executed Amendment No.

5 to the Revolver, as amended to date, with a syndicate of commercial banks and Bank of America, N.A acting as the administrative agent allowing for a temporary increase in the Consolidated Total Net Leverage Ratio covenant requirement from 4.50 to 5.25 for the second quarter ended December 29, 2023.

As part of Amendment No.

5, we agreed to a temporary reduction of Revolver capacity to $750.0 million through the earlier of May 15, 2024 or the filing of the compliance certificate for the period ended March 29, 2024.

We have a 5-year Revolver with a maturity extended to February 28, 2027.

The borrowing capacity as defined under the Revolver as of September 26, 2025 is the total availability of $900.0 million less outstanding borrowings of $591.5 million and outstanding letters of credit of $5.9 million.

During the first quarter ended September 26, 2025, we made no borrowings or repayments.

As of September 26, 2025, we were in compliance with all covenants and conditions under the Revolver.

On August 13, 2024, we executed Amendment No.

6 to the Revolver, decreasing the permanent borrowing capacity to $900.0 million, with a temporary reduction in credit availability to $750.0 million until we meet a minimum consolidated EBITDA level of $75.0 million.

During the third quarter and nine months ended March 28, 2025, we did not have any additional borrowings or repayments.

As of March 28, 2025, we were in compliance with all covenants and conditions under the Revolver and expect to be within our covenants and conditions for the remainder of the year.

The borrowing capacity as defined under the Revolver as of March 28, 2025 is approximately $900.0 million, less outstanding borrowings of $591.5 million.

6 to the Revolver, decreasing the permanent borrowing capacity to $900.0 million.

On November 4, 2025, the Company entered into Amendment No.

7 to the Revolver.

This amendment extends the maturity date of the credit facility by five years to November 4, 2030 with a facility size of $850.0 million.

As of the effective date of the amendment, the outstanding balance on the facility was $591.5 million.

See Note I in the accompanying consolidated financial statements for further discussion of the Revolver.

Receivables Purchase Agreement

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

The RPA was an uncommitted arrangement such that we were not obligated to sell any receivables and the party had no obligation to purchase any receivables from us.

Pursuant to the RPA, the party may purchase certain of our 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 $20.0 million.

The RPA had an indefinite term, with the agreement remaining in effect until termination by either party.

On March 14, 2023, we amended the RPA to increase the capacity from $20.0 million to $30.6 million.

On June 21, 2023, we further amended the RPA to increase the capacity from $30.6 million to $60.0 million.

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

On August 13, 2024, we entered into a $60.0 million 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 $60.0 million.

We factored accounts receivable and incurred factoring fees of approximately $55.1 million and $1.3 million, respectively, for the nine months ended March 28, 2025.

We factored accounts receivable and incurred factoring fees of approximately $44.2 million and $1.6 million respectively, for the nine months ended March 29, 2024.

As of and For the Nine Months Ended,

(In thousands) March 28, 2025 March 29, 2024

Pursuant to the RPSA, the new party has committed to purchase receivables at a discount from a list of certain of our customers, maintaining a balance of purchased receivables at or below $60.0 million.

We had $45.5 million of factored accounts receivable as of September 26, 2025 and incurred factoring fees of approximately $0.4 million during the first quarter ended September 26, 2025.

We had $43.7 million of factored accounts receivable as of September 27, 2024 and incurred factoring fees of approximately $0.4 million during the first quarter ended September 27, 2024.

As of and For the First Quarters Ended,

(In thousands) September 26, 2025 September 27, 2024

Net cash provided by (used in) operating activities $ 2,182 $ (14,660)

Net cash used in investing activities $ (6,548) $ (6,236)

Net cash (used in) provided by financing activities $ (757) $ 106,217

Net increase in cash and cash equivalents $ 89,301 $ 71,082

Net cash used in financing activities $ — $ (2,249)

Net decrease in cash and cash equivalents $ (4,383) $ (22,398)

Cash and cash equivalents at end of period $ 304,716 $ 158,123

Our cash and cash equivalents increased by $89.3 million from June 28, 2024 to March 28, 2025, as the result of $100.8 million of cash provided by operating activities, $4.6 million of cash provided by other investing activities, and $1.5 million of proceeds from employee stock plans, partially offset by $15.7 million invested in purchases of property and equipment and $2.2 million of cash paid in deferred financing and offering costs.

Our cash and cash equivalents decreased by $4.4 million from June 27, 2025 to September 26, 2025, as the result of $6.5 million invested in purchases of property and equipment, partially offset by $2.2 million of cash provided by operating activities.

Operating Activities

During the nine months ended March 28, 2025, we had an inflow of $100.8 million in cash from operating activities compared to a $11.4 million outflow during the nine months ended March 29, 2024.

The inflow during the nine months ended March 28, 2025 was primarily due to a lower net loss of $72.6 million, higher inflow from deferred revenues and customer advances of $53.7 million, lower prepaid income taxes of $25.0 million, lower outflow from accounts payable, accrued expenses, and accrued compensation of $20.6 million, and an income tax refund received of $5.3 million as compared to income tax payments of $25.9 million during the nine months ended March 29, 2024.

This activity was partially offset by a lower inflow from accounts receivable, unbilled receivables, and costs in excess of billings of $37.5 million and a $11.2 million lower provision for bad debt.

The nine months ended March 29, 2024 also included a $7.4 million inflow from the cash settlement for the termination of the interest rate swap.

During the first quarter ended September 26, 2025, we had an inflow of $2.2 million in cash from operating activities compared to a $14.7 million outflow during the first quarter ended September 27, 2024.

The inflow during the first quarter ended September 26, 2025 was primarily due to an inflow of $20.9 million from accounts payable, accrued expenses, and accrued compensation, as compared to an outflow in the prior period of $27.0 million, an inflow of $20.1 million from accounts receivable, unbilled receivables, and costs in excess of billings, as compared to an outflow in the prior period of $6.1 million, a lower net loss of $5.0 million, and a lower benefit for deferred income taxes of $4.0 million.

This activity was partially offset by an outflow of $35.3 million from prepaid expenses and other current assets, as compared to an inflow in the prior period of $2.0 million and an outflow of $8.3 million from deferred revenues and customer advances, as compared to an inflow in the prior period of $21.2 million.

The settlement in principle of the federal securities class action lawsuit, which is expected to be covered by our insurance, reached during the first quarter ended September 26, 20025, increased the cash provided by accrued expenses and was offset by a $32.5 million outflow in other current assets, respectively.

Investing Activities

During the nine months ended March 28, 2025, we invested $11.1 million, a decrease of $12.8 million, as compared to $23.9 million during the nine months ended March 29, 2024 primarily due to $8.2 million lower purchases of property and equipment and an inflow of $4.6 million due to other investing activities.

During the first quarter ended September 26, 2025, we had higher purchases of property and equipment of $6.5 million, an increase of $0.3 million, as compared to $6.2 million during the first quarter ended September 27, 2024.

Financing Activities

During the nine months ended March 28, 2025, we had no additional borrowings on our Revolver as compared to $105.0 million of borrowings during the nine months ended March 29, 2024.

The nine months ended March 28, 2025, included $2.2 million of cash paid in deferred financing in conjunction with the amendment to our Revolver during the first quarter of fiscal 2025, partially offset by $1.5 million proceeds from employee stock plans.

During the first quarter ended September 26, 2025, we had no financing cash flows, as compared to $2.2 million of cash paid in deferred financing in conjunction with the amendment to our Revolver during the first quarter of fiscal 2025.

C OMMITMENTS, C ONTRACTUAL O BLIGATIONS AND C ONTINGENCIES

The following is a schedule of our commitments and contractual obligations outstanding at March 28, 2025:

The following is a schedule of our commitments and contractual obligations outstanding at September 26, 2025:

(In thousands) Total Less Than

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$ 285,355 $ 199,283 $ 47,448 $ 27,725 $ 10,899

Purchase obligations represent open non-cancelable purchase commitments for certain inventory components and services used in normal operations.

The purchase commitments covered by these agreements are for less than one year and aggregated approxi mately $156.8 million at March 28, 2025.

We have a liability at March 28, 2025 of $7.7 million for uncertain tax positions that have been taken or are expected to be taken in various income tax returns.

Purchase obligations represent open non-cancelable purchase commitments for certain inventory components and services used in no rmal operations.

The purchase commitments covered by these agreements aggregated approximately $209.5 million at September 26, 2025.

We have a liability at September 26, 2025 of $4.0 million for uncertain tax positions that have been taken or are expected to be taken in various income tax returns.

We do not know the ultimate resolution on these uncertain tax positions and as such, do not know the ultimate timing of payments or amount, if any, related to this liability.

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These transactions would be treated as a use of cash in financing activities in our Consolidated Statements of Cash Flows.

On November 3, 2025, the Board of Directors authorized a new share repurchase program for the purchase of up to $200.0 million of our outstanding common stock.

The program has no expiration date and repurchases may be made through open market or privately negotiated transactions from time to time at prevailing market prices.

The timing and amount of repurchases will depend on market conditions and other factors.

O FF - BALANCE S HEET A RRANGEMENTS

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The following table reconciles our net loss, the most directly comparable GAAP financial measure, to our adjusted EBITDA:

Third Quarters Ended Nine Months Ended

(In thousands) March 28, 2025 March 29, 2024 March 28, 2025 March 29, 2024

First Quarters Ended

(In thousands) September 26, 2025 September 27, 2024

Net loss $ (12,515) $ (17,525)

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Restructuring and other charges 1,584 2,260

Impairment of long-lived assets — — — —

Impairment of long-lived asset — —

Acquisition, financing and other third party costs 1,317 2,331

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We expect to continue to incur expenses similar to the adjusted income and adjusted EPS financial adjustments described above, and investors should not infer from our presentation of these non-GAAP financial measures that these costs are unusual, infrequent or non-recurring.

The following tables reconcile net loss and diluted loss per share, the most directly comparable GAAP measures, to adjusted income (loss) and adjusted EPS:

Third Quarters Ended

(In thousands, except per share data) March 28, 2025 March 29, 2024

The following tables reconcile net loss and diluted loss per share, the most directly comparable GAAP measures, to adjusted income and adjusted EPS:

First Quarters Ended

(In thousands, except per share data) September 26, 2025 September 27, 2024

Net loss and loss per share $ (12,515) $ (0.21) $ (17,525) $ (0.30)

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(9,516) (6,253)

Adjusted income (loss) and adjusted earnings (loss) per share (2)

Adjusted income and adjusted earnings per share (2)

$ 15,560 $ 0.26 $ 2,444 $ 0.04

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(2) Adjusted earnings per share is calculated using diluted shares whereas Net loss per share or Adjusted loss per share is calculated using basic shares.

There was no impact to the calculation of adjusted earnings per share as a result of this for the third quarters ended March 28, 2025 and March 29, 2024.

Nine Months Ended

(In thousands, except per share data) March 28, 2025 March 29, 2024

Net loss and loss per share $ (54,274) $ (0.93) $ (126,863) $ (2.20)

Other non-operating adjustments, net (3,097) (375)

Amortization of intangible assets 32,574 36,350

Restructuring and other charges 7,231 19,389

Impairment of long-lived assets — —

Acquisition and financing costs 4,512 2,970

Fair value adjustments from purchase accounting 486 532

Litigation and settlement expense, net 8,948 3,982

Stock-based and other non-cash compensation expense 34,108 30,607

Impact to income taxes (1)

(20,515) (19,588)

Adjusted income (loss) and adjusted earnings (loss) per share (2)

$ 9,973 $ 0.17 $ (52,996) $ (0.92)

Diluted weighted-average shares outstanding 59,024 57,536

(1) Impact to income taxes is calculated by recasting income before income taxes to include the items involved in determining adjusted income and recalculating the income tax provision using this adjusted income from operations before income taxes.

The recalculation also adjusts for any discrete tax expense or benefit related to the items.

(2) Adjusted earnings per share is calculated using diluted shares whereas Net loss per share is calculated using basic shares.

There was a $0.01 impact to the calculation of adjusted earnings per share as a result of this for the nine months ended March 28, 2025 and no impact to the calculation of adjusted earnings per share as a result of this for the nine months ended March 29, 2024.

There was no impact to the calculation of adjusted earnings per share as a result of this for the first quarters ended September 26, 2025 and September 27, 2024.

Free cash flow, a non-GAAP measure for reporting cash flow, is defined as cash provided by operating activities less capital expenditures for property and equipment, which includes capitalized software development costs.

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The following table reconciles cash used in operating activities, the most directly comparable GAAP financial measure, to free cash flow:

Third Quarters Ended Nine Months Ended

(In thousands) March 28, 2025 March 29, 2024 March 28, 2025 March 29, 2024

First Quarters Ended

(In thousands) September 26, 2025 September 27, 2024

Net cash provided by (used in) operating activities $ 2,182 $ (14,660)

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QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

There were no material changes in our exposure to market risk from June 28, 2024 to March 28, 2025.

There were no material changes in our exposure to market risk from June 27, 2025 to September 26, 2025.

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 2. Management’s Discussion and Analysis