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Item 7. Management’s Discussion and Analysis

2026-08-18 compared with 2025-08-11 · 160 added, 157 removed, 305 unchanged (51% of the section changed)

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FORWARD-LOOKING STATEMENTS

From time to time, information provided, statements made by our employees or information included in our filings with the Securities and Exchange Commission (“SEC”) may contain statements that are not historical facts but that are “forward-looking statements,” which involve risks and uncertainties.

From time to time, information provided, statements made by our employees or information included in our filings with the SEC may contain statements that are not historical facts but that are “forward-looking statements,” which involve risks and uncertainties.

You can identify these statements by the words “may,” “will,” “could,” “should,” “would,” “plans,” “expects,” “anticipates,” “continue,” “estimate,” “project,” “intend,” “likely,” “forecast,” “probable,” “potential,” and similar expressions.

These forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those projected or anticipated.

Such risks and uncertainties include, but are not limited to, continued funding of defense programs, the timing and amounts of such funding, general economic and business conditions, including unforeseen weakness in the Company’s markets, effects of any U.S.

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 the Company's 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, failure to achieve or maintain qualified business systems, such as those required by the DFARS, 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.

Such risks and uncertainties include, but are not limited to, cost increases, our inability to increase production and deliver products on time and with appropriate quality, continued funding of defense programs, the timing and amounts of such funding, general economic and business conditions, including unforeseen weakness in our markets, effects of any U.S.

federal government shutdown or extended continuing resolution, effects of increasingly volatile geopolitical events 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 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, including the risks from heightened, persistent, and increasingly sophisticated nation-state level cyberattacks and emerging threats associated with agentic AI-enabled cyber tools, 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 state law claim related to our settled federal securities class action lawsuit, 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 set forth under Part I-Item 1A (Risk Factors) in this Annual Report on Form 10-K.

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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 to the edge 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 we provide to our customers.

It comprises the innovative technologies we’ve developed and acquired for more than 40 years that bring integrated, mission-critical processing capabilities to the edge.

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

It allows us 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 we take to delivering capabilities that are mission-ready, trusted and secure, software-defined, and open and modular.

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

Mercury Systems is a global leader in aerospace and defense electronics, providing breakthrough capabilities in signal and data processing.

With a four-decade legacy of innovation that spans silicon to systems and RF front ends to effectors, we accelerate commercial technology adoption to deliver powerful and secure mission-critical processing solutions to the edge.

We are headquartered in Andover, Massachusetts, and have multiple locations worldwide.

Our end-to-end processing ecosystem, the Mercury Processing Platform, is built on technologies we have developed and acquired over 40 years.

Our technologies are available as standard products or custom solutions from silicon to system scale to ensure interoperability, reduced complexity, optimized performance and speed development.

As a leading manufacturer of essential components, 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.

Our mission-critical products and solutions are deployed by our customers for a variety of applications including sensor and radar processing, electronic warfare, avionics, weapons, and command, control, communications, and intelligence ("C4I").

Mercury has built a trusted, robust portfolio of proven capabilities, leveraging the most advanced commercial silicon technologies and purpose-built to exceed the performance needs of our defense and commercial customers.

Customers add their own applications and algorithms to our specialized, secure and innovative products and pre-integrated solutions.

This allows them to complete their full system by integrating with their platform, the sensor technology and, increasingly, the processing from Mercury.

Our deep, long-standing relationships with leading high-tech and other commercial companies, coupled with our targeted research and development (“R&D”) investments and industry-leading trusted and secure design and manufacturing capabilities, are the foundational tenets of this highly successful model.

We are leading the development and adaptation of commercial technology for aerospace and defense solutions.

From chip-scale to system scale and from data, including RF to digital to decision, we make mission-critical technologies safe, secure, affordable and relevant for our customers.

Our capabilities, technology, people and R&D investment strategy combine to differentiate Mercury in our industry.

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 June 27, 2025, we had 2,162 employees.

government and OEM commercial aerospace companies.

Our customers deploy our

solutions for a variety of applications including sensor and radar processing, electronic warfare, avionics, weapons, and C4I.

We deliver a trusted, robust portfolio of proven capabilities, built on the most advanced commercial silicon technologies to exceed the performance needs of our defense and commercial customers.

Our capabilities, technology, people, culture and R&D strategy all differentiate Mercury in the aerospace and defense industry.

We maintain our technological edge by investing in the critical building blocks of processing, developing valuable IP and embracing open standards and architectures.

This lets us rapidly shape these building blocks into products and solutions for highly data-intensive missions, including emerging areas like AI processing at the edge.

As of July 3, 2026, we had 2,102 employees.

Our consolidated revenues, net loss, diluted net loss per share, adjusted earnings per share and adjusted EBITDA for fiscal 2026 were $983.6 million, $(29.7) million, $(0.50), $1.06 and $150.2 million, respectively.

Our consolidated revenues, net loss, diluted net loss per share, adjusted loss per share and adjusted EBITDA for fiscal 2024 were $835.3 million, $(137.6) million, $(2.38), $(0.69) and $9.4 million, respectively.

Our consolidated revenues, net loss, diluted net loss per share, adjusted earnings per share and adjusted EBITDA for fiscal 2025 were $912.0 million, $(37.9) million, $(0.65), $0.64 and $119.4 million, respectively.

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

B USINESS D EVELOPMENTS :

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.

Repurchased shares are accounted for as authorized and unissued shares.

All share repurchases are made in accordance with Rule 10b-18.

As of July 3, 2026, there was $185.0 million available for future share repurchases under this share repurchase program See Note O in the accompanying consolidated financial statements for more information on our share repurchase program.

On November 4, 2025, we executed Amendment No.

7 to the Revolver.

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

We had $591.5 million in outstanding borrowings prior to the closing of Amendment No.

On April 30, 2026, we repaid $150.0 million of the Revolver, leaving $441.5 million drawn on the Revolver as of that date.

The repayment was funded with available cash on hand and did not affect our assessment of liquidity or capital resources.

We remained in compliance with all applicable financial covenants both before and after the partial repayment.

We continue to evaluate opportunities to further reduce outstanding borrowings under the facility depending on market conditions, operational requirements and cash flows.

See Note L in the accompanying consolidated financial statements for further discussions of the Revolver.

On March 3, 2026, we completed the asset acquisition of a provider of specialized manufacturing processes that support key Mercury programs that are ramping into production.

On June 1, 2026, we entered into a $100.0 million committed Receivables Purchase Agreement ("RPA") with a new party.

The RPA has an initial term of one year.

Pursuant to the RPA, the new party committed to purchase receivables at a discount from a list of certain of our customers, maintaining a balance of purchased receivables at or below $100.0 million.

On June 4, 2026, we terminated the Receivables Purchase and Servicing Agreement ("RPSA") in conjunction with entering into the new RPA.

On August 13, 2024, we entered into Amendment No.

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Ballhaus, our Chairman and CEO, leading the business operations group, with the group’s senior leaders reporting directly to him.

Farnsworth, our Executive Vice President and Chief Financial Officer, assumed additional responsibilities including leading a rigorous and focused organization-wide management operating system;

Farnsworth, our Executive Vice President and Chief Financial Officer, assumed additional responsibilities including

leading a rigorous and focused organization-wide management operating system;

actioning a robust and aligned technology investment strategy;

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On April 30, 2025, we completed an asset acquisition of Star Lab, a subsidiary of Wind River Systems, Inc., that provides anti-tamper and cybersecurity software solutions designed to protect mission-critical processors from advanced attacks.

On July 18, 2023, we executed the planned evolution of our 1MPACT value creation initiative, embedding the processes and execution of 1MPACT into our operations organization.

The 1MPACT office concluded its responsibilities, having successfully incorporated the principles behind 1MPACT into how we think about continuous improvement at all levels of the Company.

On August 15, 2023, we announced William L.

Ballhaus has been appointed President and Chief Executive Officer.

On August 9, 2023, we approved and initiated a workforce reduction that, together with the consolidation of 1MPACT into our operations organization, eliminated approximately 150 positions resulting in $9.5 million of severance costs.

Our plan enacted several immediate cost savings measures that simplified our organizational structure, facilitated clearer accountability, and aligned our priorities, including:

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

(ii) streamlined organizational structure and removed areas of redundancy between corporate and divisional organizations;

and (iii) reduced selling, general, and administrative headcount and rebalanced discretionary and third party spend to better align with our priority areas.

On November 7, 2023, we entered into Amendment No.

5 (“Amendment No.

5”) to the Company’s Credit Agreement dated May 2, 2016, as amended to date.

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 allow 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 had $576.5 million in outstanding borrowings both prior to and following the closing of Amendment No.

See Note L in the accompanying consolidated financial statements for further discussions of the Revolver.

On January 12, 2024, we adopted a plan to consolidate our Mission Systems and Microelectronics divisions into one unified structure that incorporates multiple business units and functions, under the leadership of an Executive Vice President, Chief Operating Officer effective as of January 22, 2024.

This consolidation was designed to simplify our organizational structure, facilitate clearer accountability, and align to our priorities.

On January 12, 2024, we approved and initiated workforce reductions that eliminated approximately 100 positions resulting in an additional $9,841 of severance costs for fiscal 2024.

See Note H in the accompanying consolidated financial statements for further discussions of restructuring charges incurred during the year.

On June 17, 2024, we approved the next phase of our consolidation efforts and implemented a workforce reduction that eliminated approximately 100 positions and resulted in restructuring charges of $6,781 for employee separation costs.

See Note H in the accompanying consolidated financial statements for further discussions of restructuring charges incurred during the year.

RESULTS OF OPERATIONS:

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Refer to Item 7 of the Company's Form 10-K issued on August 11, 2025 for prior year discussion related to fiscal 2025.

There were 53 weeks and 52 weeks included in the results of operations for fiscal 2026 and fiscal 2025, respectively.

The following tables set forth, for the periods indicated, financial data from the Consolidated Statements of Operations and Comprehensive Loss:

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Total operating expenses 280,885 28.6 274,121 30.0

Loss from operations (19,627) (2.1) (147,754) (17.7)

Income (loss) from operations 280 — (19,627) (2.1)

Interest income 7,723 0.8 3,607 0.4

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Other expense, net (7,302) (0.7) (974) (0.1)

Loss before income tax benefit (50,424) (5.5) (189,275) (22.7)

Income tax benefit (12,520) (1.4) (51,635) (6.2)

Loss before income tax provision (benefit) (28,889) (2.9) (50,424) (5.5)

Income tax provision (benefit) 784 0.1 (12,520) (1.4)

Net loss $ (29,673) (3.0) % $ (37,904) (4.1) %

Total revenues increased $71.6 million, or 7.9%, to $983.6 million during fiscal 2026, as compared to $912.0 million during fiscal 2025.

Revenues increased year over year as we pivoted our resources in fiscal 2025 to executing on our program base, including progress toward full rate production of our common processing architecture programs, following the prioritization of resources to execute our challenged programs in fiscal 2024.

Point in time revenue and over time revenue represented 53% and 47%, respectively, of total revenue during fiscal 2026.

Point in time revenue increased $112.3 million and

over time revenue decreased $35.5 million as we transitioned many of our development programs to production.

Over time revenue increased $40.5 million and point in time revenue increased $31.1 million.

Point in time revenue and over time revenue represented 53% and 47%, respectively, of total revenues during fiscal 2025.

We experienced revenue increases across the modules and sub-assemblies and integrated solutions product groupings of $60.5 million and $18.7 million, respectively, partially offset by a decrease to the components product grouping of $2.5 million.

The increase in total revenue was primarily driven by the radar, other, and C4I end applications increases of $67.7 million, $34.4 million, and $15.1 million, respectively, partially offset by decreases to other sensor and effector and electronic warfare end applications of $30.2 million and $10.3 million, respectively.

We experienced revenue increases across the modules and sub-assemblies, components, and integrated solutions product groupings of $43.5 million, $15.1 million, and $13.0 million, respectively.

The increase in total revenue was primarily driven by the other sensor and effector, radar, electronic warfare, and C4I end applications increases of $46.9 million, $19.1 million, $16.4 million, and $1.6 million respectively, partially offset by a decrease to other end applications of $12.2 million.

We experienced increases across several of our platforms during fiscal 2026 when compared to fiscal 2025;

Land, Other, and Naval platforms increased $50.5 million, $43.5 million, and $7.9 million, respectively, partially offset by decreases to Airborne and Space platforms of $20.6 million and $4.6 million, respectively.

The largest program increases were related to LTAMDS, KC-46, MH-60R/S, THAAD and a secure processing program, partially offset by decreases to the SCAR and ADTS programs when compared to the prior period.

Land, Naval, Space, and Other platforms increased $53.7 million, $23.7 million, $22.0 million, and $10.3 million respectively, partially offset by a decrease to the Airborne platform of $38.1 million.

The largest program increases were related to a secure processing program, an integrated space program, SEWIP, and PGK, partially offset by Aegis and T-45.

There were no programs comprising 10% or more of our revenues for fiscal 2026 or 2025.

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Gross margin was 28.6% for fiscal 2026, an increase of 70 basis points from the 27.9% gross margin realized during fiscal 2025.

The higher gross margin was primarily driven by net EAC change impact on our programs recognized over time of $21.1 million recorded in the period, an incremental improvement of approximately $52.2 million, or 650 basis points, when compared to the prior period as well as lower manufacturing adjustments of $16.4 million, related to inventory reserves, warranty expense, and certain other non-recurring cost adjustments.

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

Risk Factors for discussion on potential impact from tariffs.

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

The higher gross margin was primarily driven by lower manufacturing variances of $15.8 million, partially offset by higher scrap, inventory reserves, and warranty provisions of $3.8 million, $2.3 million, and $1.1 million, respectively.

The increase was also driven by net EAC change impact on our programs recognized over time of $18.7 million recorded in the period, an incremental improvement of approximately $2.3 million, or 40 basis points, when compared to the prior period.

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:

(in thousands) June 27, 2025 June 28, 2024

(in thousands) July 3, 2026 June 27, 2025

Gross favorable $ 28,847 $ 26,642

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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, 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 $12.4 million, or 7.4%, to $154.4 million during fiscal 2025 as compared to $166.8 million during fiscal 2024.

The decrease was primarily driven by the full year impact of the reduction in force initiated in fiscal 2024, resulting in lower compensation costs of $14.4 million.

There were also reductions in bad debt expense and software licensing fees of $14.4 million and $4.0 million, respectively.

These decreases were partially offset by higher litigation and settlement, bonus, and consulting expense of $9.9 million, $5.0 million, and $1.8 million, respectively.

Selling, general and administrative expenses increased $20.6 million, or 13.4%, to $175.0 million during fiscal 2026 as compared to $154.4 million during fiscal 2025.

The increase was primarily driven by higher compensation expense of $20.5 million, of which $10.5 million was related to stock compensation.

The increase was also driven by software licensing fees and litigation and settlement expense of $3.6 million and $3.5 million, respectively.

These increases were partially offset by lower depreciation and consulting expense of $4.0 million and $3.2 million, respectively.

R ESEARCH AND D EVELOPMENT

Research and development expenses decreased $7.9 million, or 11.7%, to $59.7 million during fiscal 2026, as compared to $67.6 million for fiscal 2025.

The decrease was primarily driven by the savings from headcount reductions of 211 employees, resulting in lower expense of $25.8 million.

There were also reductions in consulting and outside service, equipment and supplies, and depreciation expense of $8.8 million, $4.2 million, and $1.3 million, respectively, partially offset by higher bonus expense of $5.9 million.

The decrease was primarily driven by efficiency improvements and the savings from headcount reductions of approximately 270 employees, initiated across fiscal 2025 and 2026, resulting in lower expense of $13.1 million.

There was also decreased software license fees and depreciation expense of $2.0 million and $1.8 million, respectively.

These decreases were partially offset by changes in engineering utilization and higher supplies expense of $7.8 million and $2.3 million, respectively.

A MORTIZATION OF I NTANGIBLE A SSETS

Amortization of intangible assets decreased $4.9 million to $42.8 million during fiscal 2025, as compared to $47.7 million for fiscal 2024, due to various developed technology, customer relationship, and backlog intangibles being fully amortized during fiscal 2024 and 2025.

Amortization of intangible assets decreased $3.9 million to $38.9 million during fiscal 2026, as compared to $42.8 million for fiscal 2025, due to various customer relationship intangibles being fully amortized in fiscal 2025 and fiscal 2026.

R ESTRUCTURING AND O THER C HARGES

During fiscal 2025, we incurred $7.2 million of restructuring and other charges, related to severance related charges primarily associated with the reduction in workforce initiated January 29, 2025 that eliminated approximately 145 positions.

Restructuring and other charges during fiscal 2024 include $26.2 million of severance costs related to workforce reductions that eliminated approximately 350 positions.

During fiscal 2026, we incurred $5.9 million of restructuring and other charges, related to severance related charges associated with workforce reductions initiated during the period that eliminated approximately 100 positions, predominantly in selling, general and administrative, research and development, and manufacturing.

Restructuring and other charges during fiscal 2025 related to severance related charges primarily associated with the reduction in workforce initiated January 29, 2025 that eliminated approximately 145 positions, predominantly in research and development.

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.

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Acquisition costs and other related expenses were $1.3 million during fiscal 2026, as compared to $2.0 million during fiscal 2025.

The acquisition costs and other related expenses we incurred during fiscal 2025 includes $1.4 million related to the sale of our manufacturing operations in Plan-Les-Ouates, Switzerland and the associated supply agreement with Cicor Group and $0.6 million related to run-rate amortization of fair value adjustments from purchase accounting on prior acquisitions.

Acquisition costs during fiscal 2024 were primarily included $0.7 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.

The acquisition costs and other related expenses we incurred during fiscal 2026 includes $0.5 million related to run-rate amortization of fair value adjustments from purchase accounting as well as an immaterial amount of costs incurred in the asset acquisition of a provider of specialized manufacturing processes.

Acquisition costs during fiscal 2025 included $1.4 million related to the sale of our manufacturing operations in Switzerland and the associated supply agreement with Cicor Group as well as $0.6 million related to run-rate amortization of fair value adjustments from purchase accounting on prior acquisitions.

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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We recognized $7.7 million of interest income in fiscal 2026, as compared to $3.6 million in fiscal 2025.

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

The increase was driven by higher average cash and cash equivalents and higher average interest rates on deposits during the period.

I NTEREST E XPENSE

Interest expense for fiscal 2026 decreased to $29.6 million, as compared to $33.4 million in fiscal 2025.

The decrease was driven primarily by lower average rates during the period on the Revolver.

Borrowings under our Revolver were $591.5 million at June 27, 2025 and June 28, 2024, respectively.

The decrease was driven primarily by lower average rates and lower average borrowings on our Revolver during the period.

Outstanding borrowings under our Revolver were $441.5 million and $591.5 million at July 3, 2026 and June 27, 2025, respectively.

O THER E XPENSE, N ET

Other expense, net was $1.0 million during fiscal 2025, as compared to $7.7 million in fiscal 2024.

Fiscal 2025 includes $5.3 million of financing costs, $2.3 million of securities class action expense, and $1.1 million of consulting costs, partially offset by other income primarily related to the gain associated with the sale of manufacturing operations to Cicor Group of $3.3 million and the sale of our mc.com domain name of $2.7 million, as well as $1.7 million of net foreign currency translation gains during fiscal 2025.

There was $4.9 million of litigation and settlement costs, $3.4 million of financing costs and $0.4 million of net foreign currency translation losses, partially offset by other income of $1.3 million during fiscal 2024.

Other expense, net for fiscal 2026 increased to $7.3 million, as compared to $1.0 million in fiscal 2025.

The increase was primarily driven by $1.9 million of other expense during fiscal 2026, as compared to $6.2 million of other income during fiscal 2025 related to the gain associated with the sale of manufacturing operations to Cicor Group of $3.3 million and the sale of our mc.com domain name of $2.7 million.

The increase was also driven by $1.1 million of net foreign currency translation losses during fiscal 2026, as compared to $1.7 million of net foreign currency translation gains during fiscal 2025.

These increases were partially offset by lower securities class expense, financing costs, and consulting costs of $2.4 million, $1.5 million, and $0.5 million, respectively.

I NCOME T AXES

We recorded an income tax benefit of $12.5 million and $51.6 million on losses before income taxes of $50.4 million and $189.3 million for fiscal years 2025 and 2024, respectively.

We recorded an income tax provision of $0.8 million and an income tax benefit of $12.5 million on losses before income taxes of $28.9 million and $50.4 million for fiscal years 2026 and 2025, respectively.

The effective tax rate for fiscal 2026 differed from the federal statutory rate primarily due to nondeductible compensation and valuation allowances recorded, partially offset by tax benefits related to stock compensation.

The effective tax rate for fiscal 2025 differed from the federal statutory rate primarily due to federal and state research and development tax credits, changes to reserves for unrecognized income tax benefits and state taxes, partially offset by nondeductible compensation and tax provisions related to stock compensation.

The effective tax rate for fiscal 2024 differed from the federal statutory rate primarily due to federal and state research and development tax credits and state taxes, partially offset by tax provisions related to stock compensation.

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

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While sufficient taxable income to utilize the remainder of deferred tax assets is currently projected, changes to our forecast could lead to the establishment of a valuation allowance in future periods.

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.

Due to the timing of the bill being enacted after fiscal 2025, the impact of the OBBBA will be reflected in fiscal 2026.

We are evaluating the impacts of this legislation on future periods.

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, EBITDA-based interest expense limitation and immediate expensing of domestic research and development expenditures.

We have evaluated the impact of this legislation, which results primarily in a timing difference, with no material impact on our effective tax rate.

LIQUIDITY AND CAPITAL RESOURCES

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

During fiscal 2024, our working capital decreased primarily related to unbilled receivables and deferred revenue.

As we completed our challenged programs and received follow-on production awards, both our unbilled receivables and inventory have begun converting to cash, which is reducing our working capital balances.

During fiscal 2025, our working capital balance declined $90.1 million compared to the prior year.

Our working capital balance, which we define as Total current assets less Cash and cash equivalents and Total current liabilities, as of July 3, 2026 was $430.6 million, as compared to $448.7 million 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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The shelf registration statement, which was effective upon filing with the SEC, registered each of the following securities:

debt securities, preferred stock, common stock, warrants and units.

debt securities, preferred

stock, common stock, warrants and units.

We intend to use the proceeds from financings using the shelf registration statement for general corporate purposes, which may include the following:

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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.

On August 13, 2024, we executed Amendment No.

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The temporary reduction in credit availability was removed as of the filing of our fiscal 2025 Q2 compliance certificate, and capacity returned to $900 million.

During fiscal 2025, we did not have any additional borrowings or repayments.

As of June 27, 2025, the Company was in compliance with all covenants and conditions under the Revolver.

The borrowing capacity as defined under the Revolver as of June 27, 2025 is approximately $900.0 million, less outstanding borrowings of $591.5 million.

On November 4, 2025, we executed Amendment No.

7 to the Revolver.

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

During fiscal 2026, we made payments of $150.0 million on the Revolver with no additional borrowings.

As of July 3, 2026, the Company was in compliance with all covenants and conditions under the Revolver.

The borrowing capacity as defined under the Revolver as of July 3, 2026 is approximately $850.0 million, less outstanding borrowings of $441.5 million.

See Note L 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 could offer to sell certain customer receivables, subject to the terms and conditions of the RPA.

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 at a discount from a list of certain of our customers, maintaining a balance of purchased receivables at or below $60 million.

We had $52.2 million of factored accounts receivable as of June 27, 2025 and incurred factoring fees of approximately $1.8 million in fiscal 2025.

We had $33.8 million of factored accounts receivable as of June 28, 2024 and incurred factoring fees of approximately $1.9 million in fiscal 2024.

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

The RPSA had an initial term of two years.

Pursuant to the RPSA, the new party 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.

On December 10, 2025, we amended the RPSA to increase the facility from $60.0 million to $75.0 million.

On June 4, 2026, we terminated the RPSA in conjunction with entering into a new receivables purchase agreement.

On June 1, 2026, we entered into a $100.0 million committed RPA with a new party.

The RPA has an initial term of one year.

Pursuant to the RPA, the new party committed to purchase receivables at a discount from a list of certain of our customers, maintaining a balance of purchased receivables at or below $100.0 million.

We had $72.3 million of factored accounts receivable, of which $71.9 million was included within Accounts receivable, net of allowance for credit losses on our Consolidated Balance Sheet and $0.4 million was recorded in Due to factoring facility on our Consolidated Balance Sheet as of July 3, 2026.

We incurred factoring fees of approximately $1.7 million during fiscal 2026.

We had $60.0 million of factored accounts receivable, of which $52.2 million was included within Accounts receivable, net of allowance for credit losses on our Consolidated Balance Sheet and $7.8 million was recorded in Due to factoring facility on our Consolidated Balance Sheet as of June 27, 2025.

We incurred factoring fees of approximately $1.8 million during fiscal 2025.

Share Repurchase Agreement

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.

Repurchased shares are accounted for as authorized and unissued shares.

All share repurchases are made in accordance with Rule 10b-18.

During fiscal 2026, 222 shares of our common stock were repurchased under the share repurchase program at an average cost of $67.70 per share.

As of July 3, 2026, there was $185.0 million available for future share repurchases under this share repurchase program.

For the Fiscal Years Ended

(In thousands) June 27, 2025 June 28, 2024

(In thousands) July 3, 2026 June 27, 2025

Net cash provided by operating activities $ 102,388 $ 138,851

Net cash used in investing activities $ (35,716) $ (13,500)

Net cash provided by financing activities $ 1,412 $ 82,680

Net increase in cash and cash equivalents $ 128,578 $ 108,958

Net cash (used in) provided by financing activities $ (162,739) $ 1,412

Net (decrease) increase in cash and cash equivalents $ (94,793) $ 128,578

Cash and cash equivalents at end of year $ 214,306 $ 309,099

Our cash and cash equivalents increased by $128.6 million during fiscal 2025 primarily as the result of $138.9 million provided by operating activities, $6.2 million of proceeds from sale of manufacturing operations to Cicor Group, $3.7 million of proceeds from employee stock plans, $2.7 million provided by the sale of our mc.com domain name, and $1.9 million provided by other investing activities.

These inflows were partially offset by $19.8 million invested in purchases of property and equipment, $4.5 million of cash paid in the asset acquisition of Star Lab and $2.2 million of cash paid in deferred financing and offering costs.

Our cash and cash equivalents decreased by $94.8 million during fiscal 2026 primarily as the result of the $150.0 million repayment on the Revolver, $34.3 million invested in purchases of property and equipment, $15.0 million of cash paid for shares of the Company's common stock under the share repurchase program, and $3.2 million of cash paid in deferred financing and offering costs.

These outflows were partially offset by $102.4 million provided by operating activities and $5.4 million of proceeds from employee stock plans.

Operating Activities

During fiscal 2026, we had an inflow of $102.4 million in cash from operating activities compared to a $138.9 million inflow during fiscal 2025.

The increase during fiscal 2025 was primarily due to a lower net loss of $99.7 million, higher inflow from deferred revenues and customer advances of $32.6 million, lower outflow from the benefit for deferred income taxes of $20.9 million, a higher inflow from other non-current assets of $8.1 million and an inflow from accounts payable, accrued expenses, and accrued compensation of $8.1 million, as compared to an outflow of $0.7 million due to accounts payable, accrued expenses, and accrued compensation in the prior period.

This activity was partially offset by a lower inflow from accounts receivable, unbilled receivables, and costs in excess of billings of $46.5 million and a lower provision for bad debt of $14.4 million.

Fiscal 2024 also included a $7.4 million inflow from the cash settlement for the termination of the interest rate swap.

The reduced inflow during fiscal 2026 was primarily due to lower inventory of $27.4 million, lower deferred revenues and customer advances of $26.0 million, lower prepaid expenses and other current assets of $12.2 million, and a lower inflow from depreciation and amortization expense of $9.3 million.

This activity was partially offset by a higher stock-based compensation expense of $16.1 million and an inflow of $1.8 million from the benefit for deferred income taxes, as compared to an outflow of $10.6 million in the prior period.

Investing Activities

During fiscal 2025, we invested $13.5 million, a decrease of $20.8 million, as compared to $34.3 million during fiscal 2024 primarily due to lower purchases of property and equipment of $14.5 million, the proceeds from the sale of manufacturing operations to Cicor Group of $6.2 million, $2.7 million provided by the sale of mc.com, and an inflow of $1.9 million provided by other investing activities, partially offset by $4.5 million of cash paid in the asset acquisition of Star Lab.

During fiscal 2026, we invested $35.7 million, an increase of $22.2 million, as compared to $13.5 million during fiscal 2025.

During fiscal 2026, we purchased property and equipment of $34.3 million and paid $1.4 million of cash in the asset acquisition of a provider of specialized manufacturing processes.

During fiscal 2025, we purchased property and equipment of $19.8 million and paid $4.5 million of cash in the asset acquisition of Star Lab, partially offset by the proceeds from the sale of manufacturing operations to Cicor Group of $6.2 million, $2.7 million provided by the sale of mc.com, and an inflow of $1.9 million provided by other investing activities.

Financing Activities

During fiscal 2025, we had $1.4 million in cash provided by financing activities, as compared to $82.7 million during fiscal 2024.

During fiscal 2025, we made no borrowings or repayments on the Revolver, as compared to net borrowings of $80.0 million during fiscal 2024.

During fiscal 2026, we had $162.7 million in cash used in financing activities, as compared to $1.4 million in cash provided by financing activities during fiscal 2025.

During fiscal 2026, we made payments of $150.0 million on the Revolver with no additional borrowings.

Fiscal 2026 included $15.0 million of cash paid for shares of the Company's common stock under the share repurchase program, and $3.2 million of cash paid in financing costs in conjunction with the amendment to our Revolver during the second quarter of fiscal 2026.

This activity was partially offset by $5.4 million of proceeds from employee stock plans.

During fiscal 2025, we made no borrowings or repayments on the Revolver.

Fiscal 2025 included $3.7 million of proceeds from employee stock plans, partially offset by $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 AND C ONTRACTUAL O BLIGATIONS

The following is a schedule of our commitments and contractual obligations outstanding at June 27, 2025:

The following is a schedule of our commitments and contractual obligations outstanding at July 3, 2026:

(In thousands) Total Less Than

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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 aggregated $206.4 million at June 27, 2025.

A component of the sale of manufacturing operations to Cicor Group is a commitment to purchase $50.0 million of inventory from the Cicor Group over the next five years.

We had a liability at June 27, 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 of these uncertain tax positions and as such, do not know the ultimate timing of payments related to this liability.

The purchase commitments covered by these agreements aggregated $269.2 million at July 3, 2026.

We had a liability of $3.5 million for uncertain tax positions that have been taken or are expected to be taken in various income tax returns as of July 3, 2026.

We do not know the ultimate resolution of these uncertain tax positions and as such, do

not know the ultimate timing of payments related to this liability.

Accordingly, these amounts are not included in the above table.

Our standard product sales and license agreements entered into in the ordinary course of business typically contain an indemnification provision pursuant to which we indemnify, hold harmless, and agree to reimburse the indemnified party for losses suffered or incurred in connection with certain intellectual property infringement claims by any third party with respect to our products.

Our standard product sales and license agreements entered into in the ordinary course of business typically contain an indemnification provision pursuant to which we indemnify, hold harmless, and agree to reimburse the indemnified party for losses suffered or incurred in connection with certain IP infringement claims by any third party with respect to our products.

Such provisions generally survive termination or expiration of the agreements.

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Generally Accepted Accounting Principles (“GAAP”), including adjusted EBITDA, adjusted income (loss), adjusted earnings (loss) per share, and free cash flow.

Adjusted EBITDA is defined as net income before other non-operating adjustments, interest income and expense, income taxes, depreciation, amortization of intangible assets, restructuring and other charges, impairment of long-lived assets, acquisition, financing and other third party costs, fair value adjustments from purchase accounting, litigation and settlement income and expense, COVID related expenses, and stock-based and other non-cash compensation expense.

Adjusted EBITDA is defined as net income before other non-operating adjustments, interest income and expense, income taxes, depreciation, amortization of intangible assets, restructuring and other charges, impairment of long-lived assets, acquisition, financing and other third party costs, fair value adjustments from purchase accounting, litigation and settlement income and expense, and stock-based and other non-cash compensation expense.

We use adjusted EBITDA as an important indicator of the operating performance of our business.

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We believe that adjusted EBITDA permits a comparative assessment of our operating performance, relative to our performance based on our GAAP results, while isolating the effects of charges that may vary from period to period without any correlation to underlying operating performance.

We believe that these non-GAAP financial adjustments are useful to investors because they allow investors to evaluate the effectiveness of the methodology and

information used by management in our financial and operational decision-making.

We believe that these non-GAAP financial adjustments are useful to investors because they allow investors to evaluate the effectiveness of the methodology and information used by management in our financial and operational decision-making.

We believe that trends in our adjusted EBITDA are valuable indicators of our operating performance.

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For the Fiscal Years Ended

(In thousands) June 27, 2025 June 28, 2024 June 30, 2023

(In thousands) July 3, 2026 June 27, 2025 June 28, 2024

Net loss $ (29,673) $ (37,904) $ (137,640)

Other non-operating adjustments, net 2,963 (7,742) (592)

Interest expense (income), net 29,823 33,816 24,106

Income tax (benefit) provision (12,520) (51,635) (20,207)

Interest expense, net 21,867 29,823 33,816

Income tax provision (benefit) 784 (12,520) (51,635)

Depreciation 33,779 39,178 40,369

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Litigation and settlement expense, net 13,451 13,010 4,927

COVID related expenses — — 67

Stock-based and other non-cash compensation expense 57,144 38,273 41,257

38,273 41,257 43,031

Adjusted EBITDA $ 150,192 $ 119,438 $ 9,413

(1) Restructuring and other charges for fiscal 2025 are related to management's decision to undertake certain actions to realign our cost structure through workforce reductions and the closure of certain facilities, businesses and lines of business.

(1) Restructuring and other charges are related to management's decision to undertake certain actions to realign our cost structure through workforce reductions and the closure of certain facilities, businesses and lines of business.

These charges are typically related to acquisitions and organizational redesign programs initiated as part of discrete post-acquisition integration activities.

We believe these items are non-routine and may not be indicative of ongoing operating results.

(2) Acquisition, financing and other third party costs for fiscal 2026 are related to costs incurred in the asset acquisition of a provider of specialized manufacturing processes.

Acquisition, financing and other third party costs for fiscal 2025 are related to costs associated with the sale of manufacturing operations to Cicor Group and financing costs.

(3) Effective in the first quarter of fiscal 2023, the Company increased the rate of its matching contributions from 3% to 6% of participants' eligible annual compensation and changed the form of these contributions from cash to company stock.

Fiscal 2023 also includes forfeitures of $6.8 million of stock-based compensation from the Company's former CEO's resignation.

Adjusted income and adjusted EPS exclude the impact of certain items and, therefore, have not been calculated in accordance with GAAP.

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We use these measures along with the corresponding GAAP financial measures to manage our business and to evaluate our performance compared to prior periods and the marketplace.

We define adjusted income as net income before other non-operating adjustments, amortization of intangible assets, restructuring and other charges, impairment of long-lived assets, acquisition, financing and other third party costs, fair value adjustments from purchase accounting, litigation and settlement income and expense, COVID related expenses, and stock-based and other non-cash compensation expense.

We define adjusted income as net income before other non-operating adjustments, amortization of intangible assets, restructuring and other charges, impairment of long-lived assets, acquisition, financing and other third party costs, fair value adjustments from purchase accounting, litigation and settlement income and expense, and stock-based and other non-cash compensation expense.

The impact to income taxes includes the impact to the effective tax rate, current tax provision and deferred tax provision.

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For the Fiscal Years Ended

(In thousands, except per share data) June 27, 2025 June 28, 2024 June 30, 2023

(In thousands, except per share data) July 3, 2026 June 27, 2025 June 28, 2024

Net loss and diluted loss per share $ (29,673) $ (0.50) $ (37,904) $ (0.65) $ (137,640) $ (2.38)

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Litigation and settlement expense, net 13,451 13,010 4,927

COVID related expenses — — 67

Stock-based and other non-cash compensation expense 57,144 38,273 41,257

38,273 41,257 43,031

Impact to income taxes (3)

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Diluted weighted-average shares outstanding 60,737 59,203 57,738

These charges are typically related to acquisitions and organizational redesign programs initiated as part of discrete post-acquisition integration activities.

We believe these items are non-routine and may not be indicative of ongoing operating results.

(2) Acquisition, financing and other third party costs for fiscal 2026 are related to costs incurred in the asset acquisition of a provider of specialized manufacturing processes.

Acquisition, financing and other third party costs for fiscal 2025 are related to costs associated with the sale of manufacturing operations to Cicor Group and financing costs.

Fiscal 2023 also includes forfeitures of $6.8 million of stock-based compensation from the Company's former CEO's resignation.

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

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We expect to continue to incur expenditures similar to the free cash flow adjustment described above, and investors should not infer from our presentation of this non-GAAP financial measure that these expenditures reflect all of our obligations which require cash.

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

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

For the Fiscal Years Ended

(In thousands) June 27, 2025 June 28, 2024 June 30, 2023

Net cash provided by (used in) operating activities $ 138,851 $ 60,382 $ (21,254)

(In thousands) July 3, 2026 June 27, 2025 June 28, 2024

Net cash provided by operating activities $ 102,388 $ 138,851 $ 60,382

Purchase of property and equipment (34,301) (19,803) (34,291)

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A performance obligation is a promise in a contract to transfer a distinct good or service to the customer.

Contracts with distinct performance obligations recognized at a point in time, with or without an allocation of the transaction price, totaled 53% and 45% of revenues for the fiscal years ended June 27, 2025 and June 28, 2024, respectively.

Total revenue recognized under contracts over time was 47% and 55% of revenues for the fiscal years ended June 27, 2025 and June 28, 2024, respectively.

Contracts with distinct performance obligations recognized at a point in time, with or without an allocation of the transaction price, totaled 53% of revenues for the fiscal years ended July 3, 2026 and June 27, 2025, respectively.

Total revenue recognized under contracts over time was 47% revenues for the fiscal years ended July 3, 2026 and June 27, 2025, respectively.

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

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For all types of contracts, we recognize anticipated contract losses as soon as they become known and estimable.

These losses are recognized in advance of contract performance and as of June 27, 2025, approximately $4.5 million of these costs were in Accrued expenses on our Consolidated Balance Sheet.

These losses are recognized in advance of contract performance and as of July 3, 2026, approximately $4.0 million of these costs were in Accrued expenses on our Consolidated Balance Sheet.

For over time contracts, we typically leverage the input method, using a cost-to-cost measure of progress.

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and the availability and timing of funding from the customer.

risk of changes in estimates to complete on a fixed-price contract which may cause profit levels to vary from period to period.

We bear the risk of changes in estimates to complete on a fixed-price contract which may cause profit levels to vary from period to period.

For cost reimbursable contracts, we are reimbursed periodically for allowable costs and are paid a portion of the fee based on contract progress.

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We write down inventory for excess and obsolescence based upon assumptions about future demand, product mix and possible alternative uses.

Actual demand, product mix and alternative usage may be higher or lower resulting in variations in on our gross margin.

Actual demand, product mix and alternative usage may be higher or lower resulting in variations in our gross margin.

G OODWILL , I NTANGIBLE A SSETS AND L ONG - LIVED A SSETS

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

compared the estimates of our fair values to our total market capitalization to assess the reasonableness of our reporting units’ combined determined fair value.

Key assumptions of the forecast model over expected revenues, expenses, capital expenditures, and working capital, as well as discount factors and income tax rates are subject to a high degree of judgement and complexity.

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

We make every effort to forecast future financial performance as accurately as possible with the information available at the time the forecast is developed.

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There were no material changes in the key assumptions during the periods presented.

There are inherent uncertainties and management judgement required in these determinations and risks to the forecast included but are not limited to program/product execution, transition from development to production programs, industry related make-buy decisions, and global market conditions.

There are inherent uncertainties and management judgment required in these determinations and risks to the forecast included but are not limited to program/product execution, transition from development to production programs, industry related make-buy decisions, and global market conditions.

Changes in these estimates and assumptions could materially affect the results of our tests for goodwill impairment.

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The Company utilizes the management approach for determining its operating segment in accordance with ASC 280.

During the second quarter of fiscal 2026, 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").

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 during the second quarter of fiscal 2026.

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.

There has been no change to the Company's conclusion of one operating and reportable segment in fiscal 2026.

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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 two divisions:

Microelectronics, and Mission Systems.

Component level financial information is reviewed by management across four divisions:

Signal Technologies, Processing Technologies, Integrated Processing Solutions, and EMEA.

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

As part of our annual goodwill impairment testing, we utilized a discount rate for each of our reporting units, as defined by ASC 350, that we believe represents the risks that our businesses face, considering their sizes, the current economic environment, and other industry data we believe is appropriate.

The discount rates for Microelectronics and Mission Systems were 9.5%, and 9.0%, respectively.

The annual testing indicated that the fair values of our Microelectronics and Mission Systems reporting unit had an estimated fair value substantially in excess of their carrying values, and thus no further testing was required.

The discount rates for Signal Technologies, Processing Technologies, Integrated Processing Solutions, and EMEA were each 8.0%.

The annual testing indicated that the fair values of our Signal Technologies, Processing Technologies, Integrated Processing Solutions, and EMEA reporting units had an estimated fair value substantially in excess of their carrying values, and thus no further testing was required.

We also review finite-lived intangible assets and long-lived assets when indications of potential impairment exist, such as a significant reduction in undiscounted cash flows associated with the assets.

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If the tax position is deemed more-likely-than-not to be sustained, the tax position is then assessed to determine the amount of benefit to recognize in the financial statements.

The amount of the benefit that may be recognized is the largest amount that has a greater than 50% likelihood of being realized upon

ultimate settlement.

The amount of the benefit that may be recognized is the largest amount that has a greater than 50% likelihood of being realized upon ultimate settlement.

We reevaluate our uncertain tax positions on a quarterly basis and any changes to these positions as a result of tax audits, tax laws or other facts and circumstances could result in additional charges to operations.

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

What changed 10-K

Item 7. Management’s Discussion and Analysis