MERCURY SYSTEMS INC 10-Q

ITEM 1. FINANCIAL STATEMENTS MERCURY SYSTEMS, INC. CONSOLIDATED BALANCE SHEETS (In thousands, except share and per share data) (Unaudited) December 26, 2025 June 27, 2025 Assets Current assets: Cash and cash equivalents $ 334,990 $ 309,099 Accounts receivable, net of allowance for credit losses of $ 1,832 and $ 1,767 at December 26, 2025 and June 27, 2025, respectively 105,832 109,588 Unbilled receivables and costs in excess of billings, net of allowance for credit losses of $ 5,311 for both December 26, 2025 and June 27, 2025 273,938 278,475 Inventory 349,645 332,920 Prepaid income taxes 1,230 457 Prepaid expenses and other current assets 66,518 27,639 Total current assets 1,132,153 1,058,178 Property and equipment, net 102,019 101,440 Goodwill 938,093 938,093 Intangible assets, net 193,232 210,611 Operating lease right-of-use assets, net 51,972 52,264 Deferred tax assets 76,429 69,016 Other non-current assets 8,206 5,162 Total assets $ 2,502,104 $ 2,434,764 Liabilities and Shareholders’ Equity Current liabilities: Accounts payable $ 106,182 $ 79,116 Accrued expenses 72,437 35,264 Due to factoring facility 32,255 7,879 Accrued compensation 35,251 51,321 Deferred revenues and customer advances 136,918 126,797 Total current liabilities 383,043 300,377 Income taxes payable 4,046 4,046 Long-term debt 591,500 591,500 Operating lease liabilities 50,960 52,738 Other non-current liabilities 12,567 12,642 Total liabilities 1,042,116 961,303 Commitments and contingencies (Note M) Shareholders’ equity: Preferred stock, $ 0.01 par value; 1,000,000 shares authorized; no shares issued or outstanding — — Common stock, $ 0.01 par value; 85,000,000 shares authorized; 59,376,887 and 59,003,174 shares issued and outstanding at December 26, 2025 and June 27, 2025, respectively 594 590 Additional paid-in capital 1,302,020 1,287,478 Retained earnings 154,285 181,895 Accumulated other comprehensive income 3,089 3,498 Total shareholders’ equity 1,459,988 1,473,461 Total liabilities and shareholders’ equity $ 2,502,104 $ 2,434,764 The accompanying notes are an integral part of the consolidated financial statements. 3 MERCURY SYSTEMS, INC. CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (In thousands, except per share data) (Unaudited) Second Quarters Ended Six Months Ended December 26, 2025 December 27, 2024 December 26, 2025 December 27, 2024 Net revenues $ 232,872 $ 223,125 $ 458,081 $ 427,556 Cost of revenues 172,239 162,299 334,549 314,940 Gross margin 60,633 60,826 123,532 112,616 Operating expenses: Selling, general and administrative 42,139 40,501 88,045 73,654 Research and development 15,381 21,368 28,565 39,751 Amortization of intangible assets 9,694 11,154 19,953 22,389 Restructuring and other charges 4,055 40 5,639 2,300 Acquisition costs and other related expenses 182 178 745 355 Total operating expenses 71,451 73,241 142,947 138,449 Loss from operations ( 10,818 ) ( 12,415 ) ( 19,415 ) ( 25,833 ) Interest income 1,648 406 3,675 950 Interest expense ( 7,849 ) ( 8,430 ) ( 15,735 ) ( 17,336 ) Other expense, net ( 440 ) ( 3,865 ) ( 2,520 ) ( 5,204 ) Loss before income tax benefit ( 17,459 ) ( 24,304 ) ( 33,995 ) ( 47,423 ) Income tax benefit ( 2,364 ) ( 6,725 ) ( 6,385 ) ( 12,319 ) Net loss $ ( 15,095 ) $ ( 17,579 ) $ ( 27,610 ) $ ( 35,104 ) Basic net loss per share $ ( 0.26 ) $ ( 0.30 ) $ ( 0.47 ) $ ( 0.60 ) Diluted net loss per share $ ( 0.26 ) $ ( 0.30 ) $ ( 0.47 ) $ ( 0.60 ) Weighted-average shares outstanding: Basic 59,415 58,561 59,324 58,454 Diluted 59,415 58,561 59,324 58,454 Comprehensive loss: Net loss $ ( 15,095 ) $ ( 17,579 ) $ ( 27,610 ) $ ( 35,104 ) Change in fair value of derivative instruments, net of tax ( 411 ) 3,777 ( 667 ) ( 2,115 ) Foreign currency translation adjustments ( 103 ) 603 334 283 Deferred compensation and pension benefit plan, net of tax ( 35 ) ( 46 ) ( 76 ) ( 93 ) Total other comprehensive (loss) income, net of tax ( 549 ) 4,334 ( 409 ) ( 1,925 ) Total comprehensive loss $ ( 15,644 ) $ ( 13,245 ) $ ( 28,019 ) $ ( 37,029 ) The accompanying notes are an integral part of the consolidated financial statements. 4 MERCURY SYSTEMS, INC. CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (In thousands) (Unaudited) For the Second Quarter Ended December 26, 2025 Common Stock Additional Paid-in Capital Retained Earnings Accumulated Other Comprehensive Income Total Shareholders’ Equity Shares Amount Balance at September 26, 2025 59,427 $ 594 $ 1,301,397 $ 169,380 $ 3,638 $ 1,475,009 Issuance of common stock under employee stock incentive plans 60 1 ( 1 ) — — — Issuance of common stock under employee stock purchase plan 70 1 2,727 — — 2,728 Issuance of common stock under defined contribution plan 42 — 3,164 — — 3,164 Retirement of common stock ( 222 ) ( 2 ) ( 14,999 ) — — ( 15,001 ) Stock-based compensation — — 9,732 — — 9,732 Net loss — — — ( 15,095 ) — ( 15,095 ) Other comprehensive loss — — — — ( 549 ) ( 549 ) Balance at December 26, 2025 59,377 $ 594 $ 1,302,020 $ 154,285 $ 3,089 $ 1,459,988 For the Second Quarter Ended December 27, 2024 Common Stock Additional Paid-in Capital Retained Earnings Accumulated Other Comprehensive Income Total Shareholders’ Equity Shares Amount Balance at September 27, 2024 58,455 $ 584 $ 1,253,249 $ 202,274 $ 3,734 $ 1,459,841 Issuance of common stock under employee stock incentive plans 57 1 ( 1 ) — — — Issuance of common stock under employee stock purchase plan 60 1 1,491 — — 1,492 Issuance of common stock under defined contribution plan 88 1 3,368 — — 3,369 Stock-based compensation — — 8,819 — — 8,819 Net loss — — — ( 17,579 ) — ( 17,579 ) Other comprehensive income — — — — 4,334 4,334 Balance at December 27, 2024 58,660 $ 587 $ 1,266,926 $ 184,695 $ 8,068 $ 1,460,276 For the Six Months Ended December 26, 2025 Common Stock Additional Paid-in Capital Retained Earnings Accumulated Other Comprehensive Income Total Shareholders’ Equity Shares Amount Balance at June 27, 2025 59,003 $ 590 $ 1,287,478 $ 181,895 $ 3,498 $ 1,473,461 Issuance of common stock under employee stock incentive plans 405 4 ( 4 ) — — — Issuance of common stock under employee stock purchase plan 70 1 2,727 — — 2,728 Issuance of common stock under defined contribution plan 121 1 8,369 — — 8,370 Retirement of common stock ( 222 ) ( 2 ) ( 14,999 ) — — ( 15,001 ) Stock-based compensation — — 18,449 — — 18,449 Net loss — — — ( 27,610 ) — ( 27,610 ) Other comprehensive loss — — — — ( 409 ) ( 409 ) Balance at December 26, 2025 59,377 $ 594 $ 1,302,020 $ 154,285 $ 3,089 $ 1,459,988 For the Six Months Ended December 27, 2024 Common Stock Additional Paid-in Capital Retained Earnings Accumulated Other Comprehensive Income Total Shareholders’ Equity Shares Amount 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 292 3 ( 3 ) — — — Issuance of common stock under employee stock purchase plan 60 1 1,491 — — 1,492 Issuance of common stock under defined contribution plan 214 2 7,879 — — 7,881 Stock-based compensation — — 15,157 — — 15,157 Net loss — — — ( 35,104 ) — ( 35,104 ) Other comprehensive loss — — — — ( 1,925 ) ( 1,925 ) Balance at December 27, 2024 58,660 $ 587 $ 1,266,926 $ 184,695 $ 8,068 $ 1,460,276 The accompanying notes are an integral part of the consolidated financial statements. 5 MERCURY SYSTEMS, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited) Six Months Ended December 26, 2025 December 27, 2024 Cash flows from operating activities: Net loss $ ( 27,610 ) $ ( 35,104 ) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation and amortization expense 37,213 42,142 Stock-based compensation expense 20,167 14,054 Stock-based matching contributions on defined contribution plan 11,444 7,860 Benefit for deferred income taxes ( 7,445 ) ( 13,089 ) Provision for bad debt ( 36 ) 342 Other non-cash items 1,025 1,518 Changes in operating assets and liabilities: Accounts receivable, unbilled receivables, and costs in excess of billings 8,144 31,498 Inventory ( 23,689 ) ( 21,783 ) Prepaid income taxes ( 786 ) 5 Prepaid expenses and other current assets ( 29,802 ) 2,188 Other non-current assets ( 2,297 ) 3,583 Accounts payable, accrued expenses, accrued compensation, and due to factoring 66,952 ( 19,816 ) Deferred revenues and customer advances 2,793 62,163 Income taxes payable 5 202 Other non-current liabilities ( 2,285 ) ( 4,961 ) Net cash provided by operating activities 53,793 70,802 Cash flows from investing activities: Purchases of property and equipment ( 12,450 ) ( 9,791 ) Other investing activities — 1,900 Net cash used in investing activities ( 12,450 ) ( 7,891 ) Cash flows from financing activities: Proceeds from employee stock plans 2,728 1,492 Purchase and retirement of common stock ( 15,001 ) — Payments of deferred financing and offering costs ( 3,156 ) ( 2,249 ) Net cash used in financing activities ( 15,429 ) ( 757 ) Effect of exchange rate changes on cash and cash equivalents ( 23 ) ( 110 ) Net increase in cash and cash equivalents 25,891 62,044 Cash and cash equivalents at beginning of period 309,099 180,521 Cash and cash equivalents at end of period $ 334,990 $ 242,565 Cash paid (refunded) during the period for: Interest $ 16,636 $ 19,237 Income taxes paid (refunded), net $ 1,370 $ ( 398 ) Supplemental disclosures—non-cash activities: Non-cash investing activity: Purchases of property and equipment incurred but not yet paid $ 4,991 $ 2,644 Non-cash investing activity: Inventory transfer to property and equipment, net $ 4,444 $ 12,675 The accompanying notes are an integral part of the consolidated financial statements. 6 MERCURY SYSTEMS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Amounts in thousands except per share data) (Unaudited) A. Description of Business Mercury Systems, Inc. (the Company) is a global technology company that delivers mission-critical processing 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 bring integrated, mission-critical processing to the edge. The Company's processing platform spans the full breadth of signal processing—from radio frequency (“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. B. Summary of Significant Accounting Policies B ASIS OF P RESENTATION The accompanying consolidated financial statements have been prepared by the Company in accordance with Generally Accepted Accounting Principles (“GAAP”) in the United States of America for interim financial information and with the instructions to the Form 10-Q and Article 10 of Regulation S-X. Certain information and footnote disclosures normally included in annual consolidated financial statements have been condensed or omitted pursuant to those rules and regulations; however, in the opinion of management the financial information reflects all adjustments, consisting of adjustments of a normal recurring nature, necessary for fair presentation. These consolidated financial statements should be read in conjunction with the audited consolidated financial statements and related notes for the fiscal year ended June 27, 2025, which are contained in the Company’s Annual Report on Form 10-K filed with the SEC on August 11, 2025. The results for the second quarter and six months ended December 26, 2025 are not necessarily indicative of the results to be expected for the full fiscal year. The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All intercompany transactions and balances have been eliminated in consolidation. All references to the second quarter of fiscal 2026 are to the quarter ended December 26, 2025. There were 13 weeks during the second quarters ended December 26, 2025 and December 27, 2024, respectively. There were 26 weeks during the six months ended December 26, 2025 and December 27, 2024, respectively. U SE OF E STIMATES The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates. F OREIGN C URRENCY Local currencies are the functional currency for the Company’s subsidiaries in Switzerland, the United Kingdom, and Spain. The accounts of foreign subsidiaries are translated using exchange rates in effect at period-end for assets and liabilities and at average exchange rates during the period for results of operations. The related translation adjustments are reported in Accumulated other comprehensive income (“AOCI”) in shareholders’ equity. Gains (losses) resulting from non-U.S. currency transactions are included in Other expense, net in the Consolidated Statements of Operations and Comprehensive Loss and were immaterial for all periods presented. A CCOUNTS R ECEIVABLE Accounts receivable, net, represents amounts that have been billed and are currently due from customers. The Company maintains an allowance for credit losses to provide for the estimated amount of receivables that will not be collected. The Company provides credit to customers in the normal course of business. 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 7 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. A CCOUNTS R ECEIVABLES F ACTORING On August 13, 2024, the Company entered into a $ 60,000 committed receivables purchase and servicing agreement (“RPSA”). The RPSA has an initial term of two years . Pursuant to the RPSA, the counterparty 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. On December 10, 2025, the Company amended the RPSA to increase the facility from $ 60,000 to $ 75,000 . 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 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 ad ministrative expenses in the Company's Consolidated Statements of Operations and Comprehensive Loss. The Company is responsible for collecting customer payments related to factored receivables and will remit these payments to the counterparty. From time to time, the Company will collect customer payments related to factored receivables, which are not remitted to the counterparty prior to the end of the period due to the timing of receiving funds from the customer. As of December 26, 2025 and June 27, 2025, the Company had collected $ 32,255 and $ 7,879 , respectively, that was not remitted to the counterparty by quarter end. These collected balances are reflected as Cash and cash equivalents and the related obligation to remit the cash to the counterparty is recorded in Due to factoring facility on the Company's Consolidated Balance Sheet. The decrease in the receivable for these collections is reflected within the change in operating assets and liabilities within the Company's Consolidated Statement of Cash Flows for the six months ended December 26, 2025. The Company had $ 75,000 of factored accounts receivable, of which $ 42,745 was included as a contra account within Accounts receivable, net of allowance for credit losses on the Company's Consolidated Balance Sheet and $ 32,255 was recorded in Due to factoring facility on the Company's Consolidated Balance Sheet as of December 26, 2025. The Company incurred factoring fees of approximately $ 542 and $ 961 for the second quarter and six months ended December 26, 2025. The Company had $ 59,977 of factored accounts receivable, of which $ 58,120 was included as a contra account within Accounts receivable, net of allowance for credit losses on the Company's Consolidated Balance Sheet and $ 1,857 was recorded in Due to factoring facility on the Company's Consolidated Balance Sheet as of December 27, 2024. The Company incurred factoring fees of approximately $ 459 and $ 821 for the second quarter and six months ended December 27, 2024. D ERIVATIVES The Company records the fair value of its derivative financial instruments in its consolidated financial statements in Other non-current assets, or Other non-current liabilities depending on their net position, regardless of the purpose or intent for holding the derivative contract. Changes in the fair value of the derivative financial instruments are either recognized periodically in earnings or in shareholders’ equity as a component of Other comprehensive income (loss) (“OCI”). Changes in the fair value of cash flow hedges that qualify for hedge accounting treatment are recorded in OCI and reclassified into earnings in the same line item on the Consolidated Statements of Operations and Comprehensive Loss as the impact of the hedged transaction when the underlying contract matures and, for interest rate exposure derivatives, over the term of the corresponding debt instrument. Changes in the fair values of derivatives not qualifying for hedge accounting are reported in earnings as they occur. All derivatives for the Company qualified for hedge accounting as of December 26, 2025. R EVENUE R ECOGNITION The Company recognizes revenue in accordance with ASC 606, Revenue from Contracts with Customers , (“ASC 606”). Revenues are derived from the sales of products that are grouped into one of the following three categories: (i) components; (ii) modules and sub-assemblies; 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. Each promised good or service within a contract is accounted for separately under the guidance of ASC 606 if they are distinct. Promised goods or services not meeting the criteria for being a distinct performance obligation are bundled into a single performance obligation with other goods or services that together meet the criteria for being distinct. The appropriate allocation of the transaction price and recognition of revenue is then determined for the bundled performance obligation. 8 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. Contr acts with distinct performance obligations recognized at a point in time, with or without an allocation of the transaction price, totaled 55 % and 54 % of revenues for the second quarter and six months ended December 26, 2025, respectively. Contracts with distinct performance obligations recognized at a point in time, with or without an allocation of the transaction price, totaled 55 % and 50 % of revenues for the second quarter and six months ended December 27, 2024, 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 solutions and related services. Over time contracts include both fixed-price and cost reimbursable contracts. The Company’s cost reimbursable contracts typically include cost-plus fixed fee and time and material contracts. Total revenue recognized over time was 45 % and 46 % of total revenues for the second quarter and six months ended December 26, 2025, respectively. Total revenue recognized over time was 45 % and 50 % of total revenues for the second quarter and six months ended December 27, 2024, respectively. Accounting for contracts recognized over time requires significant judgment relative to estimating total contract revenues and costs. In particular, this includes assumptions relative to the amount of time to complete the contract and the assessment of the nature and complexity of the work to be performed 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. Changes in estimates are applied retrospectively and when adjustments in estimated contract costs are identified, such revisions may result in current period adjustments to earnings applicable to performance in prior periods. The aggregate effects of these favorable and unfavorable changes across the Company’s portfolio of programs can have a significant effect upon its reported Loss from operations, Net loss and Diluted net loss per share in each of the reporting periods. The net impact of changes in estimates had the following impact on the Company’s operating results: Second Quarters Ended Six Months Ended (In thousands, except per share data) December 26, 2025 December 27, 2024 December 26, 2025 December 27, 2024 Loss from operations $ ( 3,479 ) $ ( 4,408 ) $ ( 7,529 ) $ ( 12,701 ) Net loss (1) $ ( 2,539 ) $ ( 3,218 ) $ ( 5,496 ) $ ( 9,272 ) Diluted net loss per share $ ( 0.04 ) $ ( 0.05 ) $ ( 0.09 ) $ ( 0.16 ) Diluted Shares 59,415 58,561 59,324 58,454 (1) Federal and state statutory rate of 27% 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. The Company accrues for anticipated warranty costs upon product shipment. The Company does not consider activities related to such assurance warranties, if any, to be a separate performance obligation. The Company does offer separately priced extended warranties which generally range from 12 to 36 months that are treated as separate performance obligations. The transaction price allocated to extended warranties is recognized over time in proportion to the costs expected to be incurred in satisfying the obligations under the contract. The Company's contracts generally do not include significant financing components. The Company's over time contracts may include milestone payments, which align the payment schedule with the progress towards completion on the performance obligation. Otherwise, the Company's contracts are predicated on payment upon completion of the performance obligation. On certain contracts, the Company may be entitled to receive an advance payment, which is not considered a significant financing component because most contracts have a duration of approximately two years on average and it is used to facilitate inventory demands at the onset of a contract and to safeguard the Company from the failure of the other party to abide by some or all of their obligations under the contract. All revenues are reported net of government assessed taxes (e.g., sales taxes or value-added taxes). Refer to Note L for disaggregation of revenue for the period. 9 C ONTRACT B ALANCES Contract balances result from the timing of revenue recognized, billings and cash collections resulting in the generation of contract assets and liabilities. Contract assets represent revenue recognized in excess of amounts invoiced to the customer and the right to payment is not subject to the passage of time. Instead, while the Company has an enforceable right to payment as progress is made over performance obligations, billings to customers are generally predicated on (i) completion of defined milestones, (ii) monthly costs incurred or (iii) final delivery of goods or services. Contract assets are presented as Unbilled receivables and costs in excess of billings, net of allowance for credit losses on the Company’s Consolidated Balance Sheets. Contract liabilities consist of deferred product revenue, billings in excess of revenues, deferred service revenue and customer advances. Deferred product revenue represents amounts that have been invoiced to customers, but are not yet recognizable as revenue because the Company has not satisfied its performance obligations under the contract. Billings in excess of revenues represents milestone billing contracts where the billings of the contract exceed recognized revenues. Deferred service revenue primarily represents amounts invoiced to customers for annual maintenance contracts or extended warranty contracts, which are recognized over time in proportion to the costs expected to be incurred in satisfying the obligations under the contract. Customer advances represent deposits received from customers on an order. Contract liabilities are included in deferred revenue as well as Other non-current liabilities on the Company’s Consolidated Balance Sheets. Contract balances are reported in a net position on a contract-by-contract basis. The contract asset balance s were $ 273,938 and $ 278,475 as of December 26, 2025 and June 27, 2025, respectively. The contract asset balance decrease d due to $ 216,232 of billings, partially offset by revenue recognized under over time contracts of $ 211,695 during the six months ended December 26, 2025. Th e contract liability balances were $ 137,278 and $ 127,605 as of December 26, 2025 and June 27, 2025, respectively. The contract liability increased due to the timing of revenue recognized across multiple programs. Revenue recognized for the second quarter and six months ended December 26, 2025 that was included in the contract liability balance at June 27, 2025 was $ 18,256 and $ 57,898 , respectively. Revenue recognized for the second quarter and six months ended December 27, 2024 that was included in the contract liability balance at June 28, 2024 was $ 15,336 and $ 41,747 , respectively. R EMAINING P ERFORMANCE O BLIGATIONS The Company includes in its computation of remaining performance obligations customer orders for which it has accepted executed sales orders. The definition of remaining performance obligations excludes contracts with original expected durations of less than one year, as well as those contracts that provide the customer with the right to cancel or terminate the order with no substantial penalty, even if the Company’s historical experience indicates the likelihood of cancellation or termination is remote. As of December 26, 2025, the aggregate amount of the transaction price allocated to remaining performance obligations was $ 823,523 . The Company expects to recognize approximately 50 % of its remaining performance obligations as revenue in the next 12 months and the balance thereafter. L ONG- L IVED A SSETS Long-lived assets primarily include property and equipment, intangible assets and right-of-use ("ROU") assets. The Company regularly evaluates its long-lived assets for events and circumstances that indicate a potential impairment in accordance with ASC 360, Property, Plant and Equipment (“ASC 360”). The Company reviews long-lived assets for impairment whenever events or changes in business circumstances indicate that the carrying amount of the assets may not be fully recoverable or that the useful lives of these assets are no longer appropriate. Each impairment test is based on a comparison of the estimated undiscounted cash flows of the asset as compared to the recorded value of the asset. If impairment is indicated, the asset is written down to its estimated fair value. G OODWILL AND I NTANGIBLE A SSETS Goodwill is the amount by which the purchase price of a business acquisition exceeded the fair values of the net identifiable assets on the date of purchase (see Note F). In accordance with the requirements of Intangibles-Goodwill and Other (“ASC 350”), goodwill is not amortized. Goodwill is assessed for impairment at least annually, on a reporting unit basis, or when events and circumstances (“triggering event”) occur indicating that the recorded goodwill may be impaired. Potential triggering events include macroeconomic conditions, industry and market considerations, financial performance and expectations of projected financial performance and cash flows, and changes in the Company's stock price in relation to the carrying value of its reporting units, among other relevant factors. Adverse changes to these events and circumstances could require the Company to perform an interim impairment test. 10 Intangible assets result from the Company’s various business acquisitions and certain licensed technologies, and consist of identifiable intangible assets, including completed technology, licensing agreements, patents, customer relationships, trademarks, backlog and non-compete agreements. Intangible assets are reported at cost, net of accumulated amortization and are either amortized on a straight-line basis over their estimated useful lives of up to 12.5 years or over the period the economic benefits of the intangible asset are consumed. P RODUCT W ARRANTY A CCRUAL The Company’s product sales generally include a 12 to 36 month standard hardware warranty. At time of product shipment, the Company accrues for the estimated cost to repair or replace potentially defective products. Estimated warranty costs are based upon prior actual warranty costs for substantially similar transactions and any specifically identified warranty requirements. Product warranty accrual is included as part of accrued expenses in the accompanying Consolidated Balance Sheets. The following table presents the changes in the Company's product warranty accrual. Total Balance at June 27, 2025 $ 2,945 Accruals for warranties issued during the period 1,449 Settlements made during the period ( 1,508 ) Balance at December 26, 2025 $ 2,886 W EIGHTED -A VERAGE S HARES Weighted-average shares were calculated as follows: Second Quarters Ended Six Months Ended December 26, 2025 December 27, 2024 December 26, 2025 December 27, 2024 Basic weighted-average shares outstanding 59,415 58,561 59,324 58,454 Effect of dilutive equity instruments — — — — Diluted weighted-average shares outstanding 59,415 58,561 59,324 58,454 Equity instruments to purchase 2,633 and 2,610 shares of common stock were not included in the calculation of diluted net loss per share for the second quarter and six months ended December 26, 2025, respectively, because the equity instruments were anti-dilutive. Equity instruments to purchase 2,993 and 2,840 shares of common stock were not included in the calculation of diluted net loss per share for the second quarter and six months ended December 27, 2024, respectively, because the equity instruments were anti-dilutive. R ETIREMENT OF C OMMON S TOCK Repurchases may be made through open market or privately negotiated transactions from time to time at prevailing market prices. The Company accounts for this under the cost method, and upon retirement the excess amount over par value is charged against additional paid-in capital. R ECENTLY I SSUED A CCOUNTING P RONOUNCEMENTS In November 2024, the FASB issued ASU No. 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures , an amendment of the FASB Accounting Standard Codification. The amendments in this ASU address improvements to disclosures surrounding operating expenses, including purchases of inventory, employee compensation, depreciation, amortization, and depletion, which are all normally included in common expense captions on the face of the income statement. Any expenses remaining in relevant expense captions that are not disaggregated should be accompanied with a qualitative disclosure as to their nature. This ASU is effective for fiscal years beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027, with early adoption permitted. The Company is currently evaluating the effect that this standard will have on its consolidated financial statements and related disclosures. In May 2025, the FASB issued ASU No. 2025-03, Business Combinations (Topic 805) and Consolidation (Topic 810): Determining the Accounting Acquirer in the Acquisition of a Variable Interest Entity, an amendment of the FASB Accounting Standards Codification. The amendments in this ASU are intended to clarify guidance surrounding who the accounting acquirer is in a business combination, specifically when a Variable Interest Entity ("VIE") is involved. The ASU is effective for fiscal years beginning after December 15, 2026, and all interim periods within applicable annual periods, with early adoption permitted. The Company does not expect the adoption of ASU 2025-03 to have a material impact on its Consolidated financial statements. 11 In July 2025, the FASB issued ASU No. 2025-05, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets, an amendment of the FASB Accounting Standards Codification. The amendments in this ASU affect entities that apply the practical expedient and accounting policy election (if applicable) when estimating expected credit losses on current accounts receivable and/or current contract assets arising from transactions under Topic 606, including those assets acquired in a transaction accounted for under Topic 805. The ASU is effective for fiscal years beginning after December 15, 2025, and all interim periods within applicable annual periods, with early adoption permitted. The Company is currently evaluating the effect that this standard will have on its consolidated financial statements and related disclosures. In September 2025, the FASB issued ASU No. 2025-06, Intangibles - Goodwill and Other - Internal Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal Use Software, an amendment of the FASB Accounting Standards Codification. The amendments in this ASU apply to all entities subject to the internal-use software guidance in Subtopic 350-40. The main provisions are improving operability of the guidance and removing references of different software development stages to remain neutral to different methods. The ASU is effective for fiscal years beginning after December 15, 2027, and all interim periods within applicable annual periods, with early adoption permitted at beginning of annual reporting period. The Company is currently evaluating the effect that this standard will have on its consolidated financial statements and related disclosures. In November 2025, the FASB issued ASU No. 2025-09, Derivatives and Hedging (Topic 815): Hedge Accounting Improvements , an amendment of the FASB Accounting Standards Codification. The amendments in this ASU address several hedge accounting improvements and clarifies guidance for cash flow hedges, hedging forecasted interest payments, net written options as instruments, and foreign-currency-denominated debt instruments as a dual hedge. This ASU is effective for fiscal years beginning after December 15, 2026, and all interim periods within applicable annual periods, with early adoption permitted. The Company is currently evaluating the effect that this standard will have on its consolidated financial statements and related disclosures. In December 2025, the FASB issued ASU No. 2025-11, Interim Reporting (Topic 270): Narrow Scope Improvements , an amendment of the FASB Accounting Standards Codification. The amendments in this ASU primarily provide clarification on interim reporting requirements and enhanced disclosure requirements. The amendments also include a disclosure principle to disclose all events since the end of the last annual reporting period that have a material impact on the Company. The ASU is effective for fiscal years beginning after December 15, 2027, and all interim reporting periods within applicable annual periods, with early adoption permitted. The Company is currently evaluating the effect that this standard will have on its consolidated financial statements and related disclosures. R ECENTLY A DOPTED A CCOUNTING P RONOUNCEMENTS Effective June 28, 2025, the Company adopted ASU No. 2023-09, Improvement to Income Tax Disclosures , an amendment of the FASB Accounting Standards Codification. The amendments in this ASU enact new income tax disclosure requirements in addition to modifying existing requirements. The amendment requires entities to categorize and provide greater disaggregation of information in the rate reconciliation and income taxes paid disclosures. The adoption of this update did not have a material impact on the Company's consolidated financial statements but will result in expanded income tax disclosures in the Company's annual financial statements for the fiscal period ending July 3, 2026. C. Fair Value of Financial Instruments The following table summarizes the Companies' financial instruments measured at fair value on a recurring basis as of December 26, 2025: Fair Value Measurements December 26, 2025 Level 1 Level 2 Level 3 Liabilities: Interest rate swap $ 4,453 $ — $ 4,453 $ — Total measured at fair value $ 4,453 $ — $ 4,453 $ — The carrying values of cash and cash equivalents, including money market funds, restricted cash, accounts receivable and payable, contract assets and liabilities and accrued liabilities approximate fair value due to the short-term maturities of these assets and liabilities. The Company determined the carrying value of long-term debt approximated fair value due to variable interest rates charged on the borrowings, which reprice frequently. 12 During the first quarter ended September 29, 2023, the Company entered into an interest rate hedging agreement (the “September 2023 Swap”). The fair value of the September 2023 Swap is estimated using a discounted cash flow analysis based on the contractual terms of the derivative, leveraging observable inputs other than quoted prices, such as interest rates. As of December 26, 2025, the fair value of the September 2023 Swap was a liability of $ 4,453 a nd is included within Other non-current liabilities in the Company's Consolidated Balance Sheets. The following table summarizes the Companies' financial instruments measured at fair value on a recurring basis as of June 27, 2025: Fair Value Measurements June 27, 2025 Level 1 Level 2 Level 3 Liabilities: Interest rate swap $ 5,391 $ — $ 5,391 $ — Total measured at fair value $ 5,391 $ — $ 5,391 $ — 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 June 27, 2025, the fair value of the September 2023 Swap was a liability of $ 5,391 and was included within Other non-current liabilities in the Company's Consolidated Balance Sheets. Refer to Note N for further information regarding the September 2023 Swap . D. Inventory Inventory is stated at the lower of cost (first-in, first-out) or net realizable value, and consists of materials, labor and overhead. On a quarterly basis, the Company uses consistent methodologies to evaluate inventory for net realizable value. Once an item is written down, the value becomes the new inventory cost basis. The Company reduces the value of inventory for excess and obsolete inventory, consisting of on-hand inventory in excess of estimated usage. The excess and obsolete inventory evaluation is based upon assumptions about future demand, historical usage, product mix and possible alternative uses. During the first quarter ended September 26, 2025, the Company reclassified $ 4,444 of work in process inventory to property and equipment, net to support a test lab and demonstration room for its technologies and to meet anticipated production demands for its solutions through additional testing capabilities. Inventory was comprised of the following: As of December 26, 2025 June 27, 2025 Raw materials $ 195,304 $ 195,496 Work in process 133,061 118,376 Finished goods 21,280 19,048 Total $ 349,645 $ 332,920 E. Property and Equipment Property and equipment, net consisted of the following: Estimated Useful Lives (Years) As of December 26, 2025 June 27, 2025 Computer equipment and software 3 - 4 $ 155,561 $ 149,342 Furniture and fixtures 5 11,559 23,176 Leasehold improvements lesser of estimated useful life or lease term 73,216 74,278 Machinery and equipment 5 - 10 192,720 168,412 433,056 415,208 Less: accumulated depreciation ( 331,037 ) ( 313,768 ) Property and equipment, net $ 102,019 $ 101,440 The $ 579 increase in property and equipment, net was primarily due to capital expenditures of $ 12,450 and the reclassification of work in process inventory to property and equipment of $ 4,444 , partially offset by depreciation expense. 13 There was $ 12,450 and $ 9,791 of capital expenditures during the six months ended December 26, 2025 and December 27, 2024, respectively. There was $ 161 and $ 97 retirements of property and equipment during the six months ended December 26, 2025 and December 27, 2024, respectively. Depreciation expense related to property and equipment for the second quarter and six months ended December 26, 2025 was $ 8,606 and $ 17,260 , respectively. Depreciation expense related to property and equipment for the second quarter and six months ended December 27, 2024 was $ 9,768 and $ 19,753 , respectively. F. Goodwill In the second quarter ended December 26, 2025, the Company completed its internal reorganization, which changed how segment management reviewed discrete financial information, by consolidating two divisions into a single integrated structure that unified all lines of business and matrixed business functions. The Company's U.S.-based businesses are now aligned into two product-oriented reporting units, Signal Technologies and Processing Technologies, a third reporting unit focused on more comprehensive solutions, Integrated Processing Solutions, and a fourth reporting unit is dedicated to bringing its advanced edge processing capabilities to the international market, Europe, the Middle East and Africa ("EMEA"). In accordance with FASB ASC 350, Intangibles-Goodwill and Other (“ASC 350”), the Company determines its reporting units based upon whether discrete financial information is available, if management regularly reviews the operating results of the component, the nature of the products offered to customers and the market characteristics of each reporting unit. A reporting unit is considered to be an operating segment or one level below an operating segment also known as a component. Component level financial information is reviewed by management across four business units: Signal Technologies, Processing Technologies, Integrated Processing Solutions, and EMEA. Accordingly, these were determined to be the Company's reporting units. The Company performs its annual goodwill impairment test in the fourth quarter of each fiscal year. The Company also assesses potential triggering events during interim reporting periods. During the second quarter ended December 26, 2025, the Company assessed events and circumstances to consider its reporting units for a potential triggering event, including: macroeconomic conditions, industry and market considerations, financial performance and expectations of projected financial performance and cash flows, changes in the Company's stock price in relation to the carrying value of its reporting units, among other relevant factors. The Company concluded that the internal reorganization and change in reporting units qualified as a triggering event and required goodwill to be tested for impairment. As required by ASC 350, the Company tested goodwill for impairment immediately before and after the reorganization. The testing indicated that the fair values of the Company's reporting units each had an estimated fair value substantially in excess of their carrying values. As a result of these analyses, it was determined that goodwill was not impaired before or after the reorganization. In the second quarter ended December 26, 2025, the Company assigned goodwill to the new reporting units based on the relative fair value of transferred operations. There has been no change to the carrying amount of goodwill during the second quarter and six months ended December 26, 2025. G. Restructuring During the six months ended December 26, 2025, the Company approved and initiated workforce reductions that eliminated approximately 100 positions, resulting in $ 5,639 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 lines of business. 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. The following table presents the detail of charges included in the Company’s liability for restructuring and other charges: Severance & Related Balance at June 27, 2025 $ 1,206 Restructuring charges 5,639 Cash paid ( 2,547 ) Balance at December 26, 2025 $ 4,298 14 H. Income Taxes The Company recorded an income tax benefit of $ 2,364 and $ 6,725 on a loss before income taxes of $ 17,459 and $ 24,304 for the second quarters ended December 26, 2025 and December 27, 2024, respectively. The Company recorded an income tax benefit of $ 6,385 and $ 12,319 on a loss before income taxes of $ 33,995 and $ 47,423 for the six months ended December 26, 2025 and December 27, 2024, respectively. During the second quarter and six months ended December 26, 2025, the Company recognized a tax benefit of $ 1,002 and $ 2,122 related to stock compensation windfalls, respectively, and during the second quarter and six months ended December 27, 2024, the Company recognized a tax provision of $ 138 and $ 357 related to stock compensation shortfalls, respectively. The effective tax rate for the second quarter and six months ended December 26, 2025 differed from the federal statutory rate primarily due to federal and state research and development credits, non-deductible compensation, stock compensation windfalls, and state taxes. The effective tax rate for the second quarter and six months ended December 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 Company continues to maintain a valuation allowance on all of its foreign net operating loss carryforwards and the majority of its 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. 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. The Company has evaluated the potential impact of this legislation and expects it to result primarily in a timing difference, with no material impact on the Company's effective tax rate. I. Debt R EVOLVING C REDIT F ACILITY The Company has a 5 -year revolving credit facility (the "Revolver") with a maturity extended to November 4, 2030. The borrowing capacity as defined under the Revolver as of December 26, 2025 is $ 850,000 less outstanding borrowings of $ 591,500 . There were outstanding letters of credit of $ 5,878 as of December 26, 2025. During the second quarter and six months ended December 26, 2025, the Company made no borrowings or repayments. As of December 26, 2025, the Company was in compliance with all covenants and conditions under the Revolver. The Company incurred interest expense of $ 7,849 and $ 15,735 for the second quarter and six months ended December 26, 2025, respectively. 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 borrowing capacity of $ 850,000 . In conjunction with Amendment No. 7 to the Revolver, the Company incurred $ 3,156 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 $ 845 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 10.1 on Form 8-K filed by the Company with the SEC on November 4, 2025. As of December 26, 2025, the Company's outstanding balance of unamortized deferred financing costs was $ 4,961 , 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 and November 2025 amendments to the Revolver. J. Employee Benefit Plan P ENSION P LAN The Company maintains a defined benefit pension plan (the “Plan”) for its Swiss employees, which is administered by an independent pension fund. The Plan is mandated by Swiss law and meets the criteria for a defined benefit plan under ASC 715, Compensation—Retirement Benefits (“ASC 715”), because participants of the Plan are entitled to a defined rate of return on contributions made. The independent pension fund is a multi-employer plan with unrestricted joint liability for all participating companies for which the Plan’s overfunding or underfunding is allocated to each participating company based on an allocation key determined by the Plan. 15 The Company recognizes a net asset or liability for the Plan equal to the difference between the projected benefit obligation of the Plan and the fair value of the Plan’s assets as required by ASC 715. The funded status may vary from year to year due to changes in the fair value of the Plan’s assets and variations on the underlying assumptions of the projected benefit obligation of the Plan. The Plan's funded status at December 26, 2025 was a net liability of $ 5,458 , which is recorded in Other non-current liabilities on the Consolidated Balance Sheet. The Company recognized net periodic benefit costs of $ 167 and $ 231 associated with the Plan and a net loss of $ 56 and $ 51 in AOCI during the second quarters ended December 26, 2025 and December 27, 2024, respectively. The Company recognized net periodic benefit costs of $ 334 and $ 463 associated with the Plan and a net loss of $ 113 and $ 105 in AOCI during the six months ended December 26, 2025 and December 27, 2024, respectively. The Company's total expected employer contributions to the Plan during fiscal 2026 are $ 706 . 401(k) Plan The Company maintains a qualified 401(k) plan (the “401(k) Plan”) for its U.S. employees and matches participants' contributions to the plan and/or qualified student loan payments of up to 6 % of their eligible annual compensation in Company stock. The Company may also make optional contributions to the plan for any plan year at its discretion. Stock-based 401(k) matching compensation cost is measured based on the value of the matching amount and is recognized as expense as incurred. During the second quarter and six months ended December 26, 2025, the Company recognized share-based matching contributions related to the 401(k) plan of $ 4,694 and $ 11,444 , as compared to $ 3,428 and $ 7,860 during the second quarter and six months ended December 27, 2024. Deferred Compensation Plan The Company implemented a nonqualified deferred compensation plan as of January 1, 2024, under which eligible employees may defer up to 50% of their base salaries and up to 100% of their annual incentive bonuses. The Company may also make employer contributions to participant accounts in its sole discretion, and currently matches 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 obligations for participant deferrals made during each calendar year are subject to a financial performance condition for the Company's four fiscal quarters corresponding to such calendar year. In the case of the Company's matching obligations for participant deferrals made during calendar year 2024, the financial performance condition was fully satisfied, and the deferred stock units issued in respect of the Company's matching obligations vested accordingly. Participant deferrals under the plan are held in a rabbi trust and are subject to the claims of the Company’s creditors. Assets held by the rabbi trust are classified as trading securities and are recorded at fair value, with changes in value recorded as adjustments to other income. All deferrals or employer contributions under the plan, and all earnings thereon, are fully vested as and when made or credited to plan participants. As of December 26, 2025, the Company held assets under the rabbi trust of $ 714 , 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 $ 714 . Assets related to this plan are included in Other assets, and liabilities related to this plan are included in Accrued compensation in the Consolidated Balance Sheets. During the second quarters ended December 26, 2025 and December 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. K. Stock-Based Compensation S TOCK I NCENTIVE P LANS The Company’s 2025 Long Term Incentive Plan (as amended from time to time, the “2025 Plan”) was adopted by the Company’s Board of Directors in July 2025 and approved by the Company’s shareholders on October 22, 2025. At December 26, 2025, the aggregate number of shares authorized for issuance under the 2025 Plan is 1,954 shares, including 1,900 shares approved by the Company’s shareholders on October 22, 2025 and 54 shares by virtue of awards forfeited from and after October 22, 2025 under a predecessor stock incentive plan, the Company’s Amended and Restated 2018 Stock Incentive Plan (the “2018 Plan”). The 2025 Plan provides for the grant to employees and non-employees of non-qualified and incentive stock options, stock appreciation rights, time-based and performance-based restricted stock awards or units, and deferred stock awards or units. Stock options and stock appreciation rights 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 have a maximum exercisable term of ten years . Under the share counting rules applicable to the 2025 Plan, each share issued pursuant to a stock option or stock appreciation right counts as 0.5 shares against the available share reserve, and each share issued pursuant to any other award (a “full value” award) counts as one share against the available reserve. Accordingly, at December 26, 2025, a maximum of 3,859 shares underlying future awards of stock options and stock appreciation rights are issuable under the 2025 Plan, and a maximum of 1,929 shares underlying future full value awards are issuable under the 2025 Plan. 16 As part of the Company's ongoing annual equity grant program for employees, the Company grants performance-based restricted stock unit awards to certain executives and employees pursuant to the 2025 Plan (and prior to October 22, 2025, the 2018 Plan). Performance awards vest based on the requisite service period subject to the achievement of specific financial performance targets. Based on the performance targets, some of these awards require graded vesting which results in more rapid expense recognition compared to traditional time-based vesting over the same vesting period. The Company monitors the probability of achieving the performance targets on a quarterly basis and may adjust periodic stock compensation expense accordingly based on its determination of the likelihood for reaching targets. The performance targets generally include the achievement of financial performance goals, either on an absolute basis or relative to a peer group of companies. Payouts under performance-based restricted stock unit awards may also be subject to modification based on Mercury’s total shareholder return relative to the component companies within the Spade Defense Index. E MPLOYEE S TOCK P URCHASE P LAN 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 six months ended December 26, 2025 and December 27, 2024, respectively. There were an immaterial amount of shares related to the 1997 Plan issued and returned to the reserve during the six months ended December 27, 2024. 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 70 and 65 shares issued under the 2024 ESPP during the six months ended December 26, 2025 and December 27, 2024, respectively. Shares available for future purchase under the 2024 ESPP totaled 800 at December 26, 2025. S TOCK O PTION A ND A WARD A CTIVITY The following table summarizes activity with respect to Company-issued stock options since June 27, 2025: Options Outstanding Number of Shares Weighted Average Grant Date Fair Value Weighted Average Exercise Price Weighted Average Remaining Contractual Term (Years) Aggregate Intrinsic Value as of December 26, 2025 Outstanding at June 27, 2025 934 $ 12.71 $ 45.00 — Granted — — Exercised — — Canceled — — Outstanding at December 26, 2025 934 12.71 45.00 2.32 years — Exercisable at December 26, 2025 — $ — $ — — — There were no options vested or exercised during the six months ended December 26, 2025. Non-vested stock options are subject to the risk of forfeiture until the fulfillment of specified conditions. As of December 26, 2025, there was $ 4,046 of total unrecognized compensation cost related to non-vested options granted that is expected to be recognized over a weighted-average period of 1.32 years from December 26, 2025. 17 The following table summarizes the status of the Company’s non-vested restricted stock awards and deferred stock awards since June 27, 2025: Non-vested Restricted Stock Awards Number of Shares Weighted Average Grant Date Fair Value Non-vested at June 27, 2025 1,742 $ 40.37 Granted 555 67.08 Vested ( 405 ) 39.86 Forfeited ( 90 ) 47.89 Non-vested at December 26, 2025 1,802 $ 48.45 S TOCK -B ASED C OMPENSATION E XPENSE The Company recognizes expense for its share-based payment plans in the Consolidated Statements of Operations and Comprehensive Loss in accordance with ASC 718, Compensation - Stock Compensation (“ASC 718”). Under the fair value recognition provisions of ASC 718, stock-based compensation cost is measured at the grant date based on the value of the award and is recognized as expense over the service period, net of estimated forfeitures. The following table presents share-based compensation expenses included in the Company’s Consolidated Statements of Operations and Comprehensive Loss: Second Quarters Ended Six Months Ended December 26, 2025 December 27, 2024 December 26, 2025 December 27, 2024 Cost of revenues $ 1,863 $ ( 167 ) $ 3,623 $ ( 54 ) Selling, general and administrative 7,026 6,317 13,322 10,928 Research and development 1,705 1,812 3,222 3,180 Stock-based compensation expense before tax 10,594 7,962 20,167 14,054 Income taxes (1) ( 2,860 ) ( 2,150 ) ( 5,445 ) ( 3,795 ) Stock-based compensation expense, net of income taxes $ 7,734 $ 5,812 $ 14,722 $ 10,259 (1) Federal and state statutory rate of 27% L. Operating Segment, Geographic Information and Significant Customers Operating segments are defined as components of an enterprise evaluated regularly by the Company's chief executive officer who acts as its Chief Operating Decision Maker ("CODM") in deciding how to allocate resources and assess performance. The Company evaluated its internal organization under FASB ASC 280, Segment Reporting (“ASC 280”) to determine whether there has been a change to its conclusion of a single operating and reportable segment. The Company concluded there has been no changes given the CODM continues to evaluate and manage the Company on the basis of one operating and reportable segment. The Company utilized the management approach for determining its operating segment in accordance with ASC 280. The CODM utilizes Net loss that is reported on the Consolidated Statement of Operations and Comprehensive Loss to assess operating performance and make decisions related to resource allocation. The Company's significant segment expenses include stock-based compensation and depreciation which are disclosed in Note K and Note E, respectively. Any other significant segment expenses which are regularly provided to the CODM are provided on the Consolidated Statement of Operations and Comprehensive Loss. The Company's segment assets are reported on the Consolidated Balance Sheets as Total Assets and its segment purchase of property plant and equipment are disclosed in Note E. The geographic distribution of the Company’s revenues as determined by country in which the Company's legal subsidiary is domiciled is summarized as follows: 18 U.S. Europe Eliminations Total SECOND QUARTER ENDED DECEMBER 26, 2025 Net revenues to unaffiliated customers $ 221,010 $ 11,862 $ — $ 232,872 Inter-geographic revenues 1,874 4,491 ( 6,365 ) — Net revenues $ 222,884 $ 16,353 $ ( 6,365 ) $ 232,872 SECOND QUARTER ENDED DECEMBER 27, 2024 Net revenues to unaffiliated customers $ 205,054 $ 18,071 $ — $ 223,125 Inter-geographic revenues 2,718 2,529 ( 5,247 ) — Net revenues $ 207,772 $ 20,600 $ ( 5,247 ) $ 223,125 SIX MONTHS ENDED DECEMBER 26, 2025 Net revenues to unaffiliated customers $ 433,008 $ 25,073 $ — $ 458,081 Inter-geographic revenues 4,175 6,977 ( 11,152 ) — Net revenues $ 437,183 $ 32,050 $ ( 11,152 ) $ 458,081 SIX MONTHS ENDED DECEMBER 27, 2024 Net revenues to unaffiliated customers $ 397,714 $ 29,842 $ — $ 427,556 Inter-geographic revenues 4,773 5,348 ( 10,121 ) — Net revenues $ 402,487 $ 35,190 $ ( 10,121 ) $ 427,556 The geographic distribution of the Company’s identifiable long-lived assets is summarized as follows: U.S. Europe Total December 26, 2025 $ 101,154 $ 865 $ 102,019 June 27, 2025 $ 100,484 $ 956 $ 101,440 Identifiable long-lived assets exclude right-of-use assets, goodwill, and intangible assets. The Company offers a broad family of products and processing solutions designed to meet the full range of requirements in compute-intensive, signal processing, image processing and command and control applications. To maintain a competitive advantage, the Company seeks to leverage technology investments across multiple lines of business and product solutions. The Company’s products are typically compute-intensive and require extremely high bandwidth and high throughput. These processing solutions often must also meet significant size, weight and power ("SWaP") constraints for use in aircraft, unmanned aerial vehicles, ships and other platforms and be ruggedized for use in harsh environments. The Company's products transform the massive streams of digital data created in these applications into usable information in real time. The systems can scale from a few processors to thousands of processors. 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 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. As additional information related to the Company’s products by end user, application, product grouping and/or platform is attained, the categorization of these products can vary over time. When this occurs, the Company reclassifies revenue by end user, application, product grouping and/or platform for prior periods. Such reclassifications typically do not materially change the underlying trends of results within each revenue category. The following table presents the Company's net revenue by end user for the periods presented: Second Quarters Ended Six Months Ended December 26, 2025 December 27, 2024 December 26, 2025 December 27, 2024 Domestic (1) $ 194,480 $ 176,291 $ 382,404 $ 337,485 International/Foreign Military Sales (2) 38,392 46,834 75,677 90,071 Total Net Revenue $ 232,872 $ 223,125 $ 458,081 $ 427,556 (1) Domestic revenues consist of sales where the end user is within the U.S., as well as sales to prime defense contractor customers where the ultimate end user location is not defined. (2) International/Foreign Military Sales consist of sales to U.S. prime defense contractor customers where the end user is outside the U.S., foreign military sales through the U.S. government, and direct sales to non-U.S. based customers intended for end use outside of the U.S. 19 The following table presents the Company's net revenue by end application for the periods presented: Second Quarters Ended Six Months Ended December 26, 2025 December 27, 2024 December 26, 2025 December 27, 2024 Radar (1) $ 53,724 $ 47,110 $ 83,914 $ 80,859 Electronic Warfare (2) 27,483 23,930 48,482 50,276 Other Sensor & Effector (3) 23,949 22,131 53,714 48,497 Total Sensor & Effector 105,156 93,171 186,110 179,632 C4I (4) 90,868 88,370 202,334 173,650 Other (5) 36,848 41,584 69,637 74,274 Total Net Revenue $ 232,872 $ 223,125 $ 458,081 $ 427,556 (1) Radar includes end-use applications where radio frequency signals are utilized to detect, track and identify objects. (2) Electronic Warfare includes end-use applications comprising the offensive and defensive use of the electromagnetic spectrum. (3) Other Sensor and Effector products include all Sensor and Effector end markets other than Radar and Electronic Warfare. (4) C4I includes rugged secure rackmount servers that are designed to drive the most powerful military processing applications. (5) Other products include all component and other sales where the end use is not specified. The following table presents the Company's net revenue by product grouping for the periods presented: Second Quarters Ended Six Months Ended December 26, 2025 December 27, 2024 December 26, 2025 December 27, 2024 Components (1) $ 48,703 $ 45,085 $ 94,202 $ 89,949 Modules and Sub-assemblies (2) 60,496 46,106 126,692 91,928 Integrated Solutions (3) 123,673 131,934 237,187 245,679 Total Net Revenue $ 232,872 $ 223,125 $ 458,081 $ 427,556 (1) Components represent the basic building blocks of an electronic system. They generally perform a single function such as switching, storing or converting electronic signals. Some examples include power amplifiers and limiters, switches, oscillators, filters, equalizers, digital and analog converters, chips, MMICs (monolithic microwave integrated circuits) and memory and storage devices. (2) Modules and sub-assemblies combine multiple components to serve a range of complex functions, including processing, networking and graphics display. Typically delivered as computer boards or other packaging, modules and sub-assemblies are usually designed using open standards to provide interoperability when integrated in a subsystem. 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 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. Spares and replacement modules and sub-assemblies are provided for use with subsystems sold by the Company. The Company’s subsystems are deployed in sensor processing, aviation and mission computing and C4I applications. The following table presents the Company's net revenue by platform for the periods presented: Second Quarters Ended Six Months Ended December 26, 2025 December 27, 2024 December 26, 2025 December 27, 2024 Airborne (1) $ 84,200 $ 96,214 $ 178,888 $ 186,704 Land (2) 59,110 44,831 101,993 79,145 Naval (3) 23,891 22,193 43,530 42,846 Space (4) 11,920 11,827 30,395 27,186 Other (5) 53,751 48,060 103,275 91,675 Total Net Revenues $ 232,872 $ 223,125 $ 458,081 $ 427,556 (1) Airborne platform includes products that relate to personnel, equipment or pieces of equipment designed for airborne applications. (2) Land platform includes products that relate to fixed or mobile equipment, or pieces of equipment for personnel, weapon systems, vehicles and support elements operating on land. (3) Naval platform includes products that relate to personnel, equipment or pieces of equipment designed for naval operations. (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. 20 Customers comprising 10% or more of the Company’s revenues for the periods shown are as follows: Second Quarters Ended Six Months Ended December 26, 2025 December 27, 2024 December 26, 2025 December 27, 2024 RTX Corporation 19 % 15 % 15 % 12 % Northrop Grumman 12 % * 11 % * Lockheed Martin Corporation 11 % * 12 % 10 % U.S. Navy * 11 % * 10 % L3Harris * * * 10 % 42 % 26 % 38 % 42 % * 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 second quarters and six months ended December 26, 2025 and December 27, 2024. M. Commitments and Contingencies L EGAL C LAIMS The Company is subject to litigation, claims, investigations and audits arising from time to time in the ordinary course of business. Although legal proceedings are inherently unpredictable, the Company believes that it has valid defenses with respect to those matters currently pending against the Company and intends to defend itself vigorously. The outcome of these matters, individually and in the aggregate, is not expected to have a material impact on the Company's cash flows, results of operations, or financial position. On December 7, 2021, counsel for National Technical Systems, Inc. (“NTS”) sent the Company an environmental demand letter pursuant to Massachusetts General Laws Chapter 21E, Section 4A, and CERCLA 42 U.S.C. Section 9601, related to a site that NTS formerly owned at 533 Main Street, Acton, Massachusetts. NTS received a Notice of Responsibility from the Massachusetts Department of Environmental Protection (“MassDEP”) alleging trichloroethene, Freon and 1,4-dioxane contamination in the groundwater emanating from NTS’s former site. NTS alleges that the operations of a predecessor company to Mercury that was acquired in the Company's acquisition of the Microsemi Carve-Out Business that once owned and operated a facility at 531 Main Street, Acton, Massachusetts (the “Site”) contributed to the groundwater contamination, and NTS is seeking payment from the Company of NTS’s costs for any required environmental remediation. The Company believes the NTS claims are without merit and intends to defend itself vigorously. 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 Site at a level above the standard that MassDEP published for PFAS in October 2020. The Company had not been contacted by MassDEP regarding PFAS since the response was provided in November 2021 until October 30, 2025, when MassDEP sent a Notice of Responsibility to the Company reporting that the Company, as successor to a former owner and operator of the Site, and Laine Realty Trust, the current owner of the Site, are responsible parties related to alleged releases of waste wave solder and Freon at the Site. The Company has engaged a licensed site professional and responded to the notice from MassDEP. It is too early to determine what responsibility, if any, the Company 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 his positions of President and Chief Executive Officer. The Board accepted his resignation effective June 24, 2023. In his notice, the former CEO claimed he was entitled to certain benefits, including equity vesting, severance, and other benefits, under his 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. On March 25, 2024, the arbitrator denied the former CEO’s motion for compensation during the dispute and payment of his legal fees, preserving those matters for the arbitration hearing. An arbitration hearing was conducted from March 31, 2025 through April 9, 2025. Following the arbitration hearing, the parties filed post-hearing briefs on May 16, 2025, response briefs on June 13, 2025 and conducted oral arguments on June 30, 2025. On August 13, 2025, the arbitrator issued an interim award finding that the former CEO did not have good reason for termination under the CIC Agreement, rejecting the former CEO's claims for enhanced severance payments and accelerated stock vesting. However, the arbitrator found that the former CEO is entitled to compensation during the dispute under the agreement. The arbitrator awarded the former CEO cash compensation including base salary, interest, and bonus, but the arbitrator declined to award the former CEO shares of Mercury stock (or the value thereof) because the arbitrator determined it 21 was unclear whether he had jurisdiction to review the effect of Mercury's Human Capital and Compensation Committee decision to rescind and cancel such stock awards. The arbitrator also awarded the former CEO all reasonable legal fees and expenses incurred in the arbitration per the CIC Agreement, finding no bad faith in his pursuit of the claims, and rejected the Company's counterclaims. On September 12, 2025, the former CEO filed a complaint in Massachusetts state court seeking to vacate the interim arbitration award in part, as to the shares of Mercury's stock the arbitrator declined to award. On December 30, 2025, the parties executed a settlement agreement resolving the claims in both the arbitration proceeding and the Massachusetts state court lawsuit in exchange for a payment of $ 5,000 from the Company to the former CEO. The payment was completed on December 30, 2025, the arbitration proceeding has been closed, and the Massachusetts state court lawsuit has been dismissed. On December 13, 2023, a securities class action complaint was filed against the Company, Mark Aslett, and Michael Ruppert in the U.S. District Court for the District of Massachusetts. The complaint asserted Section 10(b) and 20(a) securities fraud claims on behalf of a purported class of purchasers and sellers of the Company's stock from December 7, 2020, through June 23, 2023. The complaint alleged that the Company's public disclosures in SEC filings and on earnings calls were false and/or misleading. On February 27, 2024, the Court entered an order appointing 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, the Company filed its opposition motion on September 6th, the plaintiffs filed their response brief on September 17, 2024, and the Company filed its reply on September 30, 2024. On February 20, 2025, the Court issued an order that dismissed claims relating to 14 of 17 challenged statements and that allowed the remaining three challenged statements to proceed. The Court also dismissed Messrs. Ruppert and Farnsworth from the lawsuit. Subject to the terms of the Company's by-laws and applicable Massachusetts law, Mr. Aslett and Mr. Ballhaus are indemnified by the Company for the federal securities class action. While in discovery, the parties participated in a mediation on September 11, 2025. After the mediation, all parties to the securities class action lawsuit agreed to a settlement in principle to resolve the litigation for $ 32,500 , which settlement in principle is subject to a final settlement agreement and review and approval by the court. As of December 26, 2025, a $ 32,500 receivable and payable were included within Prepaid expenses and other current assets and Accrued expenses in the Company's Consolidated Balance Sheet, respectively. The increase and decrease in the receivable and payable were reflected within the changes in operating assets and liabilities within the Company's Consolidated Statement of Cash Flows for the six months ended December 26, 2025. On October 11, 2024, the Company received a shareholder derivative demand on behalf of Robert Sawyer alleging substantially the same claims as those covered in the federal securities class action. On November 14, 2024, the Company entered into a tolling agreement on this derivative demand. On February 28, 2025, the Company received a derivative demand on behalf of James Jones alleging substantially the same claims as those covered in the federal securities class action and the Robert Sawyer derivative demand. On May 20, 2025, the Board of Directors formed a Special Investigation Committee of independent directors to investigate the subject matters of the demand letters. On June 6, 2025, James Jones, on behalf of nominal defendant Mercury Systems, Inc., filed a derivative complaint in Massachusetts Superior Court in Essex County against Mark Aslett, Michael Ruppert, William Ballhaus, David Farnsworth, Orlando Carvalho, Lisa Disbrow, Barry Nearhos, Howard Lance, Debora Plunkett, Gerard DeMuro, Scott Ostfeld, Roger Krone, William O’Brien, Vincent Vitto, James Bass, Michael Daniels, and Mary Louise Krakauer, all current or former Mercury officers or directors. This derivative action has been stayed while the Special Investigation Committee conducts its investigation. On July 17, 2025, the Company received a derivative demand on behalf of Pauline McKinnon alleging substantially the same claims as those covered in the federal securities class action and the James Jones and Robert Sawyer derivative demands. The Company believes the claims in the derivative demands and derivative action 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, 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. On December 21, 2024, the Company reached an agreement in principle to settle these wage and hour class action claims for $ 450 , which settlement in principle is subject to a final settlement agreement and review and approval by the court. In September 2025, an internal investigation was initiated, with the assistance of outside counsel, in connection with what the Company preliminarily believes may be inaccurately reported test results and certifications of conformance with certain product performance specifications under subcontracts involving approximately $ 15,000 in total revenue over approximately 20 22 years in support of a government program. The Company has no evidence that the product has not been effective in its intended use or function, nor has it encountered reported safety issues. The Company has reported the matter to the customer and, in an abundance of caution, to the government. The Company’s customer has notified the Company that there is no impact to system performance resulting from the reported deviations from specifications, and that such deviations are within tolerances. The Company’s customer has agreed to modify the specifications so that the Company can continue producing the product. The Company cannot currently estimate the amount or range of cost or loss, if any, associated with this matter. Any determination that the Company’s previous operations were not in compliance with laws or regulations such as the False Claims Act could result in the imposition of civil or criminal fines, penalties, disgorgement, restitution, equitable relief, or other losses or conduct restrictions, and could be material to the Company’s financial results or business operations. I NDEMNIFICATION O BLIGATIONS The Company’s standard product sales and license agreements entered into in the ordinary course of business typically contain an indemnification provision pursuant to which the Company indemnifies, holds harmless, and agrees to reimburse the indemnified party for losses suffered or incurred by the indemnified party in connection with any patent, copyright or other intellectual property infringement claim by any third party with respect to the Company’s products. Such provisions generally survive termination or expiration of the agreements. The potential amount of future payments the Company could be required to make under these indemnification provisions is, in some instances, unlimited. P URCHASE C OMMITMENTS As of December 26, 2025, 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 aggregate to $ 203,714 . O THER As part of the Company's strategy for growth, the Company continues to explore acquisitions or strategic alliances. The associated acquisition costs incurred in the form of professional fees and services may be material to the future periods in which they occur, regardless of whether the acquisition is ultimately completed. The Company may elect from time to time to purchase and subsequently retire shares of common stock in order to settle employees’ tax liabilities associated with vesting of a restricted stock award or exercise of stock options. These transactions would be treated as a use of cash in financing activities in the Company's Consolidated Statements of Cash Flows. N. Derivatives The Company utilizes interest rate derivatives to mitigate interest rate exposure with respect to its financing arrangements. As of the reporting date, the Company entered into interest rate swaps with a total notional amount of $ 300,000 to fix the interest rate associated with a portion of the $ 591,500 existing borrowings on Company’s Revolver. The Swap agreement is designated and qualified for hedge accounting treatment as a cash flow hedge and is scheduled to mature on February 28, 2027, coterminous with the maturity of the Revolver. As of December 26, 2025, the fair value of the Swap was a liability of $ 4,453 and is included within Other non-current liabilities in the Company's Consolidated Balance Sheet. On September 29, 2022 and on September 28, 2023 the Company terminated previous Swap agreements and entered into new agreements with the same maturity February 28, 2027. The fair market values of the Swaps at the time of termination are amortized until the maturity date (February 28, 2027). During the second quarter and six months ended December 26, 2025, the Company amortized a total of $ 881 and $ 1,762 , respectively, of the gain associated with the previously disclosed interest swaps terminated on September 29, 2022 and September 28, 2023, as disclosed in Note Q of Form 10-K filed with the SEC on August 11, 2025, which is included within AOCI. The market risk associated with the Company’s derivative instrument is the result of interest rate movements that are expected to offset the market risk of the underlying arrangement. The counterparty to the September 2023 Swap is JPMorgan. Based on the credit ratings of the Company’s counterparty as of December 26, 2025, 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. While the contract or notional amounts of derivative financial instruments provide one measure of the volume of these transactions, they do not represent the amount of the Company’s exposure to credit risk. The amounts potentially subject to credit risk (arising from the possible inability of the counterparty to meet the terms of their contracts) are generally limited to the amounts, if any, by which the counterparty obligations under the contracts exceed the obligations of the Company to the counterparty. As a result of the above considerations, the Company does not consider the risk of counterparty default to be significant. 23 O. Share Repurchase Program On November 3, 2025, the Board of Directors authorized a new share repurchase program for the purchase of up to $ 200,000 of the Company’s 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. All share repurchases are made in accordance with Rule 10b-18. During the second quarter and six months ended December 26, 2025, 221,510 shares of the Company's common stock were repurchased and immediately retired under the share repurchase program at an average cost of $ 67.70 per share. As of December 26, 2025, there was $ 185,003 available for future share repurchases under this share repurchase program. P. Subsequent Events The Company has evaluated subsequent events from the date of the Consolidated Balance Sheet through the date the consolidated financial statements were issued and noted no items requiring adjustment of the financial statements or additional disclosures. 24