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What changed in MERCURY SYSTEMS INC's 10-K — 2024 vs 2025

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Paragraph-level year-over-year comparison of MERCURY SYSTEMS INC's 2024 and 2025 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2025 report.

+302 added−368 removedSource: 10-K (2025-08-11) vs 10-K (2024-08-13)

Top changes in MERCURY SYSTEMS INC's 2025 10-K

302 paragraphs added · 368 removed · 238 edited across 9 sections

Item 1. Business

Business — how the company describes what it does

63 edited+9 added−14 removed105 unchanged
Biggest changeSome of our products are designed to include intellectual property owned by third parties. It may be necessary in the future to seek or renew licenses to various aspects of our products, processes and services. 11 Table of Contents Over time, we have accumulated a meaningful portfolio of issued and registered intellectual property rights.
Biggest changeWe have licensed intellectual property rights in the past and expect that we may license such rights in the future to certain other parties. Some of our products may include intellectual property owned by third parties. It may be necessary in the future to review or renew such licenses to various aspects of our products and services.
Our Hudson, New Hampshire and Chantilly, Virginia locations are IPC1791 and AS9100 quality systems-certified facility. Our Andover, Massachusetts and Hudson, New Hampshire facilities design and assemble our processing products and are AS9100 quality systems-certified facilities. Our Andover, Massachusetts facility is also a DMEA-certified trusted design facility and is primarily focused on advanced security features for the processing product line.
Our Hudson, New Hampshire and Chantilly, Virginia locations are IPC1791 and AS9100 quality systems-certified facilities. Our Andover, Massachusetts and Hudson, New Hampshire facilities design and assemble our processing products and are AS9100 quality systems-certified facilities. Our Andover, Massachusetts facility is also a DMEA-certified trusted design facility and is primarily focused on advanced security features for the processing product line.
ITEM 1. BUSINESS Our Company Mercury Systems is a technology company that delivers mission-critical processing power to the edge - where signals and data are collected - to solve the most pressing aerospace and defense challenges. Mercury’s products and solutions are deployed in more than 300 programs and across 35 countries.
ITEM 1. BUSINESS Our Company Mercury Systems is a 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 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.
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 to the edge.
The current scope of delivered hardware products includes commercial and industrial class printed circuit board assemblies (modules), complex chassis subsystems, rugged display system and servers and RF and microwave components and subsystems. Our Phoenix, Arizona facility manufactures our custom microelectronics products in an AS9100 quality system-certified facility.
The current scope of delivered hardware products includes commercial and industrial class printed circuit board assemblies (modules), complex chassis subsystems, rugged display systems and servers and RF and microwave components and subsystems. Our Phoenix, Arizona facility manufactures our custom microelectronics products in an AS9100 quality system-certified facility.
Our businesses are complementary and synergistic, as they are organized within a single integrated operating unit, leverage common human and capital resources, and share IP to accelerate innovation across our offerings. Our structure is now aligned and optimized to execute against these different business models.
Our businesses are complementary and synergistic, as they are organized within a single integrated operating unit, leverage common human and capital resources, and share IP to accelerate innovation across our offerings. Our structure is aligned and optimized to execute against these different business models.
The primary demand drivers for our unique capabilities include: an increased commitment to defense spending by U.S. allies in light of the dynamic threat environment in Europe and Asia; ongoing modernization of legacy defense platforms to maintain relevance in the current near-peer threat environment; increasing electronification of next-generation defense systems, where electronics are driving capability enhancements on next-gen programs; outsourcing and delayering from the government and prime customers seeking to access innovation from smaller players like Mercury; and a focus on open systems, which allow customers to upgrade capabilities more rapidly and efficiently and better leverage advances in commercial technology such as AI-powered processing.
The primary demand drivers for our unique capabilities include: an increased commitment to defense spending by U.S. allies in light of the dynamic threat environment in Europe and Asia; ongoing modernization of legacy defense platforms to maintain relevance in the current near-peer threat environment; increasing electronification of next-generation defense systems, where electronics are driving capability enhancements on next-gen programs; outsourcing and delayering from the government and prime customers seeking to access innovation from smaller players like Mercury; and a focus on open systems, which allow 6 Table of Contents customers to upgrade capabilities more rapidly and efficiently and better leverage advances in commercial technology such as AI-powered processing.
See the Non-GAAP Financial Measures section of this annual report for a reconciliation of our acquired revenues, adjusted EPS and adjusted EBITDA to the most directly comparable GAAP measures. 3 Table of Contents Our Business Strategy Mercury’s business strategy is based on a differentiated market position: we make trusted, secure, mission critical technologies profoundly more accessible to the aerospace and defense industry.
See the Non-GAAP Financial Measures section of this annual report for a reconciliation of our adjusted EPS and adjusted EBITDA to the most directly comparable GAAP measures. 3 Table of Contents Our Business Strategy Mercury’s business strategy is based on a differentiated market position: we make trusted, secure, mission critical technologies profoundly more accessible to the aerospace and defense industry.
RSA estimates that in 2023 the U.S. defense Tier 2 embedded computing and RF market addressable by suppliers such as Mercury was approximately $25 billion. RSA estimates that the U.S. defense prime contractors currently outsource only a small percentage of their work. The U.S. government is intensely focused on making systems more affordable and shortening their development time.
RSA estimates that in 2025 the U.S. defense Tier 2 embedded computing and RF market addressable by suppliers such as Mercury was approximately $25 billion. RSA estimates that the U.S. defense prime contractors currently outsource only a small percentage of their work. The U.S. government is intensely focused on making systems more affordable and shortening their development time.
The additions of Themis and Germane provided us with new capabilities and positioned us with a significant footprint within the rugged server business. Our organic investments as well as the acquisitions of LIT, the Microsemi Carve-Out Business and Athena added to our portfolio of embedded security products that can be leveraged across our business.
The additions of Themis and Germane provided us with new capabilities and positioned us with a significant footprint within the rugged server business. Our organic investments as well as the acquisitions of LIT, the Microsemi Carve-Out Business, Athena, and Star Lab added to our portfolio of embedded security products that can be leveraged across our business.
While sales to each of these customers may comprise 10% or more of our annual revenue, the sales to these customers are spread across multiple programs and platforms. For the fiscal years ended 2024, 2023 and 2022, we had no single program that represented 10% or more of our revenues.
While sales to each of these customers may comprise 10% or more of our annual revenue, the sales to these customers are spread across multiple programs and platforms. For the fiscal years ended 2025, 2024 and 2023, we had no single program that represented 10% or more of our revenues.
Investors and others should note that we announce material financial information using our website ( www.mrcy.com ), SEC filings, press releases, public conference calls, webcasts, and social media, including X (formerly Twitter) ( X.com/mrcy ) and LinkedIn ( www.linkedin.com/company/mercury-systems ).
Investors and others should note that we announce material financial information using our website ( www.mrcy.com ), SEC filings, press releases, public conference calls, webcasts, and social media, including X ( X.com/mrcy ) and LinkedIn ( www.linkedin.com/company/mercury-systems ).
This open systems approach mitigates obsolescence risk while emphasizing commonality, interoperability and sustainability across platforms and domains. The Mercury Processing Platform is 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, we seek to leverage technology investments across multiple product lines and product solutions.
This open systems approach mitigates obsolescence risk while emphasizing commonality, interoperability and sustainability across platforms and domains. The Mercury Processing Platform is 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, we seek to leverage technology investments across multiple lines of business.
Our competitive strengths include rapid, innovative engineering in both hardware and software products, subsystem design expertise, advanced packaging capability to deliver the most optimized SWaP solution possible, our ability to respond rapidly to varied customer requirements and a track record of successfully supporting many high profile programs in the defense market.
Our competitive strengths include rapid, innovative engineering in both hardware and software products, subsystem design expertise, advanced packaging capability to deliver the most optimized SWaP solution possible, our ability to respond rapidly to varied customer requirements and a track record of successfully supporting many high-profile programs in the defense and aerospace markets.
As a leading manufacturer of essential components, products, modules and subsystems, we sell to all of the top defense prime contractors, the U.S. government and original equipment manufacturers (“OEM”) commercial aerospace companies.
As a leading manufacturer of essential components, products, modules and subsystems, we sell to the top U.S. and European defense prime contractors, the U.S. government and original equipment manufacturers (“OEM”) commercial aerospace companies.
We deliver technology at the intersection of the high-tech and defense industries, underpinned by key differentiators that set us apart in the market: Mission-Ready; Trusted and Secure; Software-Defined; and Open and Modular. 4 Table of Contents • Mission-Ready: Fit for purpose to meet the demanding needs of our customers’ missions.
We deliver technology at the intersection of the high-tech and defense industries, underpinned by key differentiators that set us apart in the market: Mission-Ready; Trusted and Secure; Software-Defined; and Open and Modular. • Mission-Ready: Fit for purpose to meet the demanding needs of our customers’ missions.
We develop high performance signals intelligence payloads and EO/IR technologies for small UAV platforms as well as powerful onboard UAV processor systems for real-time wide area motion imagery. Intellectual Property and Proprietary Rights We hold a broad collection of intellectual property rights to protect our proprietary technology and our brand.
We develop high performance signals intelligence payloads and EO/IR technologies for small UAV platforms as well as powerful onboard UAV processor systems for real-time wide area motion imagery. Intellectual Property and Proprietary Rights We hold a broad collection of intellectual property rights to protect our proprietary technologies and our brands.
The requirement to add security comes at a 8 Table of Contents time when the commercial technology world continues to offshore more of the design, development, manufacturing and support of such capabilities, making it more difficult to protect against embedded vulnerabilities, tampering, reverse engineering and other undesired activities.
The requirement to add security comes at a time when the commercial technology world continues to offshore more of the design, development, manufacturing and support of such capabilities, making it more difficult to protect against embedded vulnerabilities, tampering, reverse engineering and other undesired activities.
The high mix, low volume and high complexity/density nature of our products require speed and seamless interaction with all internal functions (as opposed to with an external contract manufacturer) which is a key value proposition of the Phoenix operations facility.
The high mix, low volume and high complexity/density nature of our products require speed and 10 Table of Contents seamless interaction with all internal functions (as opposed to with an external contract manufacturer) which is a key value proposition of the Phoenix operations facility.
We are investing in digital transformation, insider trust, cybersecurity, supply chain management and trusted microelectronics, all integral to our commitment to being a leader in delivering uncompromised solutions to our customers. 6 Table of Contents Market Opportunity Mercury serves a large and growing global defense technology market with strong tailwinds from the current defense super-cycle and secular growth targets.
We are investing in digital transformation, insider trust, cybersecurity, supply chain management and trusted microelectronics, all integral to our commitment to being a leader in delivering uncompromised solutions to our customers. Market Opportunity Mercury serves a large and growing global defense technology market with strong tailwinds from the current defense super-cycle and secular growth targets.
This includes patents, designs, copyrights, trademarks and trade secrets in the U.S. and various foreign countries. Although we believe the ownership of such intellectual property rights is an important factor in differentiating our business and that our success depends in part on such ownership, we rely primarily on the innovation skills and technical expertise of our employees.
These include patents, designs, copyrights, trademarks and trade secrets in the U.S. and various foreign countries. Although we believe the ownership of such intellectual property rights is an important factor in differentiating our business and that our success depends in part on such ownership, we primarily rely on the innovation skills and technical expertise of our employees.
Advanced thermal management and rugged packaging technology ensures optimal performance and reliable operation in the most challenging environments on earth and beyond. We deliver extended reliability and dependability through thermal management, component selection, environmental protection and testing. • Trusted and Secure : A trusted supply chain, with products designed and manufactured onshore.
Advanced thermal management and rugged packaging technology ensures optimal performance and reliable operation in the most challenging environments on Earth and beyond. We deliver extended reliability and dependability through thermal management, component selection, environmental protection and testing. 4 Table of Contents • Trusted and Secure : A trusted supply chain, with products designed and manufactured onshore.
Our top customers include Airbus, BAE Systems, Boeing, General Atomics, General Dynamics, L3Harris Technologies, Leonardo, Lockheed Martin Corporation, Northrop Grumman Corporation, RTX Corporation (formerly known as Raytheon Technologies) and the U.S. Navy. Over this period, we have become recognized for our ability to develop new technologies and meet stringent program requirements.
Our top customers include Airbus, BAE Systems, Boeing, General Atomics, General Dynamics, L3Harris Technologies, Leonardo, Lockheed Martin Corporation, Northrop Grumman Corporation, RTX Corporation and the U.S. Navy. Over this period, we have become recognized for our ability to develop new technologies and meet stringent program requirements.
We regularly seek employee input through engagement surveys, the results of which drive meaningful and timely action, as appropriate, from our leadership team and people leaders across the Company. Participation in our most recent employee engagement survey in October 2023 remained strong at 75%. Our investment in our employees extends to our workplaces.
We regularly seek employee input through engagement surveys, the results of which drive meaningful and timely action, as appropriate, from our leadership team and people leaders across the Company. Participation in our most recent employee engagement survey in April 2025 remained strong at 75%. Our investment in our employees extends to our workplaces.
Within this global market, RSA estimates that the total Tier 2 defense electronics market, which Mercury participates in, was approximately $50 billion in 2024, and will grow to $66 billion in 2029. The aerospace and defense electronics marketplace consists of two primary subsegments: (i) C4I and (ii) sensor and effector mission systems.
Within this global market, RSA estimates that the total Tier 2 defense electronics market, which Mercury participates in, was approximately $51 billion in 2025, and will grow to $66 billion in 2029. The aerospace and defense electronics marketplace consists of two primary subsegments: (i) C4I and (ii) sensor and effector mission systems.
An increase in the prevalence and resolution of ISR is generating significant growth in the associated data that needs to be stored and turned into information for the warfighter in a timely manner.
An 7 Table of Contents increase in the prevalence and resolution of ISR is generating significant growth in the associated data that needs to be stored and turned into information for the warfighter in a timely manner.
We use the latest Intel® server-class processing 5 Table of Contents products, AMD Field Programmable Gate Arrays (“FPGA”), as well as NVIDIA GPU products in our embedded high-performance processing technologies. While this multi-computing and embedded processing technology is one of our core capabilities, the SWaP constraints inherent in high-performance embedded processing applications create unique challenges.
We use the latest Altera® server-class processing products, AMD Field Programmable Gate Arrays (“FPGA”), as well as NVIDIA GPU products in our embedded high-performance processing technologies. While this multi-computing and embedded processing technology is one of our core capabilities, the SWaP constraints inherent in high-performance embedded processing applications create unique challenges.
Secure: Security engineering to ensure systemwide integrity and protect Critical Program Information, IP and sensitive data–including securing boot, key management, attack countermeasures, and memory management.
Secure: Security engineering to ensure system wide integrity and protect Critical Program Information, IP and sensitive data–including securing boot, key management, attack countermeasures and memory management.
We believe we have built the most trusted, proven, contemporary portfolio of solutions and sub-systems that are purpose-built to meet or exceed our customers’ most pressing high-tech needs.
Our Solutions and Products We believe we have built the most trusted, proven, contemporary portfolio of solutions and sub-systems that are purpose-built to meet or exceed our customers’ most pressing processing needs.
These trends remain favorable in our view and the demand environment is improving due to urgent needs for warfighting capability at a more rapid pace than traditional defense prime contractors can easily react to, as demonstrated by our strong bookings and design wins, in fiscal 2024.
These trends remain favorable in our view and the demand environment is improving due to urgent needs for warfighting capability at a more rapid pace than traditional defense prime contractors can easily react to, as demonstrated by our history of design wins.
Our leadership team is focused on operational execution, including setting clear priorities, developing 9 Table of Contents the appropriate processes and systems, and delivering results. We are focused on four priorities to unlock capacity to create value and reinvest for growth. They include: delivering predictable results, building a thriving growth engine, expanding margins, and driving cash release.
Our leadership team is focused on operational execution, including setting clear priorities, developing the appropriate processes and systems, and delivering results. We are focused on four priorities to unlock capacity to create value and reinvest for growth. They include: performance excellence, building a thriving growth engine, expanding margins, and driving cash release.
We also have formal programs to further develop our leaders, at various levels: leadership cohorts, mentor programs, team excellence discussions, training programs for new managers and regular engagement with our executive leadership team. • Pay and Benefits: We seek competitiveness and fairness in total compensation with reference to external pay data and internal equity.
During fiscal 2025, we have also invested $1.7 million in formal leadership programs to further develop our leaders, at various levels: leadership cohorts, mentor programs; team excellence discussions, training programs for new managers and regular engagement with our executive leadership team. • Pay and Benefits: We seek competitiveness and fairness in total compensation with reference to external pay data and internal equity.
Our Silchester, England facility provides engineering, development and integration services and is AS9100 quality systems-certified. 10 Table of Contents We rely on both vertical integration and subcontracting to contract manufacturers to meet our manufacturing needs. Our Phoenix and Geneva facilities have the manufacturing capabilities to complete the assembly and testing for certain of our embedded multi-computing products.
Our Silchester, England facility provides engineering, development and integration services and is AS9100 quality systems-certified. We rely on both vertical integration and subcontracting to contract manufacturers to meet our manufacturing needs. Our Phoenix facility has the manufacturing capabilities to complete the assembly and testing for certain of our embedded multi-computing products.
RSA estimates the compound annual growth rate (“CAGR”) from 2024-2029 for these markets to be 5.5% for platform and mission management, 5.5% for C2I and 6.1% for dedicated communications.
RSA estimates the compound annual growth rate (“CAGR”) from 2025-2029 for these markets to be 6.6% for platform and mission management, 6.1% for C2I and 7.0% for dedicated communications.
Backlog As of June 28, 2024, we had a backlog of orders aggregating approximately $1.3 billion, of which $758.9 million is expected to be recognized as revenue within the next twelve months. As of June 30, 2023, backlog was approximately $1.1 billion. Our backlog is comprised of accepted purchase orders for which a majority are fully funded.
Backlog As of June 27, 2025, we had a backlog of orders aggregating approximately $1.4 billion, of which $807.8 million is expected to be recognized as revenue within the next twelve months. As of June 28, 2024, backlog was approximately $1.3 billion. Our backlog is comprised of accepted purchase orders for which a majority are fully funded.
Within the global Tier 2 sensor and effector mission systems market in which we participate, RSA estimated the market for 2024 to be $6.2 billion for EW, $7.0 billion for radar, $2.8 billion for EO/IR, 7 Table of Contents $1.4 billion for acoustics and $4.1 billion for weapons systems.
Within the global Tier 2 sensor and effector mission systems market in which we participate, RSA estimated the market for 2025 to be $6.5 billion for EW, $7.0 billion for radar, $2.9 billion for EO/IR, $1.5 billion for acoustics and $4.1 billion for weapons systems.
In May 2023, DoD’s National Defense Science and Technology Strategy listed microelectronics among its critical technology areas for investment. DoD’s FY23 budget requested $3.3 billion to fund microelectronics research and development initiatives, a historically large increase in funding.
In May 2023, DoD’s National Defense Science 8 Table of Contents and Technology Strategy listed microelectronics among its critical technology areas for investment. DoD’s fiscal year 23 budget requested $3.3 billion to fund microelectronics research and development initiatives, a historically large increase in funding.
We regularly file patent and trademark applications and continuations to protect innovations arising from our research and development. We also rely on a combination of trade secret, copyright and trademark laws, as well as contractual agreements, to safeguard our proprietary rights in technology and products.
We regularly file patent and trademark applications, including payment of related maintenance fees, to protect innovations and brands arising from our research and development. We also rely on a combination of trade secret, patent, copyright, and trademark laws, as well as contractual agreements, to safeguard our proprietary rights in technologies and in our products.
Within the global Tier 2 C4I market in which we participate, RSA estimated the market for 2024 to be $7.8 billion for platform and mission management, $10.1 billion for C2I and $10.6 billion for dedicated communications.
Within the global Tier 2 C4I market in which we participate, RSA estimated the market for 2025 to be $7.9 billion for platform and mission management, $10.4 billion for C2I and $10.9 billion for dedicated communications.
Total expenditures for research and development amounted to $101.3 million, $108.8 million and $107.2 million in fiscal years 2024, 2023 and 2022, respectively. As of June 28, 2024, we had 790 employees, including hardware and software architects and design engineers, primarily engaged in engineering, research, and product development activities.
Total expenditures for research and development amounted to $67.6 million, $101.3 million and $108.8 million in fiscal years 2025, 2024 and 2023, respectively. As of June 27, 2025, we had 579 employees, including hardware and software architects and design engineers, primarily engaged in engineering, research, and product development activities.
RSA estimates the 2024-2029 CAGR for these markets to be 6.0% for EW, 5.5% for radar, 5.4% for EO/IR, 7.0% for acoustics and 6.6% for weapons systems.
RSA estimates the 2025-2029 CAGR for these markets to be 6.2% for EW, 6.9% for radar, 6.0% for EO/IR, 7.0% for acoustics and 6.6% for weapons systems.
For fiscal 2024, we invested over $34.3 million to upgrade our locations to world-class facilities. We also encourage employees to give back to our communities.
For fiscal 2025, we invested over $1.8 million to upgrade our locations to world-class facilities. We also encourage employees to give back to our communities.
With forty years of technology leadership within the high-performance embedded computing industry, we have pioneered or contributed to the development of many of the defense industry’s current and emerging open standards, including standards such as RACEway, RapidIO, VXS, VPX, REDI and notably OpenVPX. These open standards allow system integrators to benefit from the interoperability of modules produced by multiple vendors.
With over forty years of technology leadership within the high-performance embedded computing industry, we have pioneered or contributed to the development of many of the defense industry’s current and emerging open standards, including standards such as RACEway, RapidIO, VXS, VPX, REDI and notably OpenVPX.
Competition We operate in a highly competitive marketplace characterized by rapidly changing technology, frequent product performance improvements, increasing speed of deployment to align with warfighters’ needs and evolving industry standards and requirements coming from our customers or the DoD. Competition typically occurs at the design stage of a prospective customer’s product, where the customer evaluates alternative technologies and design approaches.
Competition We operate in a highly competitive marketplace characterized by rapidly changing technology, frequent product performance improvements, increasing speed of deployment to align with warfighters’ needs and evolving industry standards and requirements coming from our customers or the DoD.
We are deeply invested in building the next generation of engineers and scientists with our internship and co-op programs. We offer a two-year engineering rotational program to recent graduates in electrical, firmware, software, RF and systems engineering disciplines.
We are deeply invested in building the next generation of engineers and scientists with our internship and co-op programs. We offer a two-year engineering rotational program to recent graduates in electrical, firmware, software, RF and systems engineering disciplines. During the program, employees gain insight and experience rotating through multiple engineering disciplines and upon program completion are matched with a position.
These trends include: • The aerospace and defense electronics market is expected to grow in 2024 and beyond. According to Renaissance Strategic Advisors (“RSA”), as of May 2024, the global aerospace and defense electronics market is estimated to be $154 billion in 2024, growing to $197 billion by 2029.
According to Renaissance Strategic Advisors (“RSA”), as of May 2025, the global aerospace and defense electronics market is estimated to be $157 billion in 2025, growing to $197 billion by 2029.
Expanding Margins – Drive comprehensive cost management efforts corporate-wide including improvement in gross margins across all programs, facilitating clearer accountability and streamlining our structure and processes. 4. Driving Cash Release – Enhance our cash flow conversion, including improvements in delivery and collection.
Margin Expansion – Drive comprehensive cost management efforts corporate-wide including improvement in gross margins across all programs and products. 4. Cash Release – Enhance our cash flow conversion, including improvements in delivery and collection.
Our consolidated revenues, net loss, diluted 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 loss per share, adjusted earnings per share, and adjusted EBITDA for fiscal 2023 were $973.9 million, $(28.3) million, $(0.50), $1.00 and $132.3 million, respectively.
Our consolidated revenues, net loss, diluted 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. Our consolidated revenues, net loss, diluted 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.
In seeking to limit access to sensitive information to the greatest practical extent, we routinely enter into confidentiality and assignment of invention agreements with each of our employees and consultants and nondisclosure agreements with our customers and vendors. We have licensed in the past, and expect that we may license in the future, certain of our rights to other parties.
In seeking to limit access to sensitive information to the greatest extent practicable, we routinely enter into confidentiality agreements and assignment of invention agreements with each of our employees and consultants, and execute nondisclosure agreements with our customers, suppliers, and vendors.
The United States Navy accounted for less than 10% of our revenues in fiscal 2024 and 2023, and comprised 14% of our revenues in fiscal year 2022. Northrop Grumman accounted for less than 10% of our revenues in fiscal 2024, 11% in fiscal 2023, and less than 10% in fiscal year 2022.
L3Harris accounted for less than 10% of our revenues in fiscal 2025, 12% of our revenues in fiscal 2024, and less than 10% of our revenues in fiscal 2023. Northrop Grumman accounted for less than 10% of 12 Table of Contents our revenues in fiscal 2025 and fiscal 2024, and comprised 11% in fiscal year 2023.
We are focused on the Tier 2 and Tier 3 defense technology market, which continues to grow while the total U.S. defense spending is expected to flatten over the next five years.
We are focused on the Tier 2 and Tier 3 defense technology market, which continues to grow at a faster rate than the expected increase in total U.S. defense spending.
RTX Corporation comprised 10%, 14%, and 14% of our revenues in each of the fiscal years 2024, 2023 and 2022, respectively. Lockheed Martin comprised 11%, 13%, and 10% of our revenues in each of the fiscal years 2024, 2023 and 2022, respectively.
Lockheed Martin comprised 10%, 11%, and 13% of our revenues in each of the fiscal years 2025, 2024 and 2023, respectively. The United States Navy comprised 10% of our revenues in fiscal 2025, and accounted for less than 10% of our revenues in fiscal years 2024 and 2023.
We also continue to be influential in the industry-standards organizations associated with our market segments.
These open standards allow system integrators to benefit from the interoperability of modules produced by multiple vendors. We also continue to be influential in the industry-standards organizations associated with our market segments.
Delivering Predictable Results – Continuous improvement in the performance of our programs, transition our development programs into production and mature our management systems and processes. 2. Building a Thriving Organic Growth Engine – Create a growth engine that is consistently bidding and winning new contracts to drive industry leading organic growth. 3.
Performance Excellence – Ramp critical production programs aligned with our value creation model, deliver key development programs and product innovations, and mature our management systems and processes. 2. Thriving Growth Engine – Create a growth engine that is consistently bidding and winning new contracts to drive industry leading organic growth at target margins. 3.
We work with defense prime contractors as well as directly with the DoD. We help drive subsystem development and deployment in both classified and unclassified environments.
Competition typically occurs at the design stage of a prospective 9 Table of Contents customer’s product, where the customer evaluates alternative technologies and design approaches. We work with defense prime contractors as well as directly with the DoD. We help drive subsystem development and deployment in both classified and unclassified environments.
Finally, our CES addition, due to its location in Geneva, Switzerland is helping to open more opportunities in international markets. We believe there are a number of evolving trends that are reshaping our target markets and accordingly provide us with attractive growth opportunities.
We believe there are a number of evolving trends that are reshaping our target markets and accordingly provide us with attractive growth opportunities. These trends include: • The aerospace and defense electronics market is expected to grow in 2025 and beyond.
In 2024, we reorganized to streamline and simplify operations, consolidating two divisions into a single integrated structure that unified all lines of business and matrixed business functions under a Chief Operating Officer.
In 2024, we reorganized to streamline and simplify operations, consolidating two divisions into a single integrated structure that unified all lines of business and matrixed business functions. Our U.S.-based businesses are aligned into two product-oriented business units – Signal Technologies and Processing Technologies –and a third business unit focused on more comprehensive solutions – Integrated Processing Solutions.
No single intellectual property right is solely responsible for protecting our products, processes and services. We believe the duration of our intellectual property rights is adequate relative to the expected lives of our products, processes and services.
Over time, we have accumulated a significant portfolio of issued patents and registered trademarks, including other intellectual property rights. No single intellectual property right is solely responsible for protecting our products, processes and services. We believe our policies and safeguard measures to protect our intellectual property are sufficient relative to the use and lives of our products and services.
We believe Mercury is the leading provider of commercially developed silicon purpose-built for the specific requirements of aerospace and defense customers. This capability began with our 2016 acquisition of the Microsemi Carve-Out Business, which included capabilities in trusted and secure microelectronics.
This capability began with our 2016 acquisition of the Microsemi Carve-Out Business, which included capabilities in trusted and secure microelectronics. Since the acquisition, we have made additional investments in security and advanced packaging.
Outside the U.S., we had 137 employees, and operate from locations in Canada, Spain, Switzerland, and the United Kingdom. No employees are covered by any collective bargaining or similar agreements. • Culture and Employee Engagement: We believe our workplace culture drives engagement that turns ideas into action, delivering trusted and secure solutions at the speed of innovation.
Our primary operations are in the U.S. with 2,061 employees and we operate offices in 12 states. Outside the U.S., we had 101 employees, and operate from locations in Spain, Switzerland, and the United Kingdom. No employees are covered by any collective bargaining or similar agreements.
Our U.S.-based businesses are aligned into two product-oriented business units – Signal Technologies and Processing Technologies –and a third business unit focused on more comprehensive solutions – Integrated Processing Solutions. A fourth business unit is dedicated to bringing our advanced edge processing capabilities to the international market, with facilities in the U.K., Spain, and Switzerland.
A fourth business unit is dedicated to bringing our advanced edge processing capabilities to the international market, with facilities in the U.K., Spain, and Switzerland. Our Engineering, Operations, and Mission Assurance organizations are also centralized to drive performance excellence.
We received an Environment, Social, and Governance ("ESG") score 12 Table of Contents of AAA on the Morgan Stanley Capital International ("MSCI") ESG Rating scale during 2024, placing us in the top 5% of their ratings group for aerospace and defense. • Diversity, Equity & Inclusion: Our Website discloses detailed workplace data surrounding our gender composition, racial/ethnic representation and turnover data.
We received an Environment, Social, and Governance ("ESG") score of AAA on the Morgan Stanley Capital International ("MSCI") ESG Rating scale during 2025, placing us in the top 5% of their ratings group for aerospace and defense. • Diversity and Employee Initiatives: Development of a broad talent pipeline is a business imperative at Mercury and critical to our ability to drive innovation and improve long-term results.
We also regularly conduct pay equity assessments and makes adjustments to pay levels for employees in protected classes, as appropriate, as a result of such assessments. Customers L3Harris comprised 12% of our revenues in fiscal 2024, and accounted for less than 10% of our revenues in fiscal 2023 and 2022.
We also regularly conduct pay equity assessments to help ensure the fairness of our pay practices and make adjustments as needed. Customers RTX Corporation comprised 13%, 10%, and 14% of our revenues in each of the fiscal years 2025, 2024 and 2023, respectively.
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Our Engineering, Operations, Mission Assurance, and Advanced Concepts functions are also centralized under our Chief Operating Officer, driving innovation, execution, and growth across of all our businesses.
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Our Advanced Concepts Group, combined with our integrated Growth organization and the office of the Chief Technology Officer are focused on innovation and ensuring that our Processing Platform continues to solve our customer's most challenging processing requirements into the future.
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Our Solutions and Products Since 2015, we have acquired and fully or partially integrated 15 businesses, which have added substantial capabilities to our technology portfolio including: Lewis Innovative Technologies Inc., a carve-out acquisition from Microsemi Corporation, The Athena Group, Inc., Delta Microwave LLC, Syntonic Microwave LLC, Pentek Technologies, LLC and Pentek Systems, Inc., Atlanta Micro, Inc., CES Creative Electronic Systems, S.A., Richland Technologies, LLC, GECO Avionics LLC, American Panel Corporation, Physical Optics Corporation, Avalex Technologies LLC, Themis Computer and Germane Systems LC.
Added
For example, to address customer needs for faster signal conversion in radar, communications, electronic warfare, signals 5 Table of Contents intelligence, and industrial applications, in the past year we introduced several products powered by Altera's most advanced Agilex 9 Direct RF FPGA chips that allow radio frequency signals to be directly digitized at the antenna, eliminating the analog signal down conversion stages required by legacy hardware.
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For example, to deal with the heat build-up involved in fanless compact rugged subsystems, we introduced a key technology called Air Flow-By™ that enables previously unattainable levels of processing power within a small footprint by effectively removing heat so server-class processors can perform at maximum designed power limits.
Added
DoD's FY24 budget requested $2.6 billion to fund microelectronic initiatives, and the fiscal year 25 President's Budget request includes $2.5 billion to fund microelectronics initiatives. We believe Mercury is the leading provider of commercially developed silicon purpose-built for the specific requirements of aerospace and defense customers.
Removed
In environments where air is limited, such as high-altitude operations, our Liquid-Flow-By™ technology allows maximum server-class processor performance. These innovative cooling techniques allow full performance server-class processing in rugged environments enabling new and advanced modes of operation that enhance the multi-intelligence, situational awareness and electronic warfare capabilities in military platforms.
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We cannot assure the timely replacement of canceled, delayed or reduced orders. 11 Table of Contents Human Capital At Mercury, our people are at the center of everything we do in driving Innovation that Matters®.
Removed
DoD's FY24 budget requested $2.6 billion to fund microelectronic initiatives, and the FY25 President's Budget request includes $2.5 billion to fund microelectronics initiatives. Along with Congress' passage of the Creating Helpful Incentives to Produce Semiconductors ("CHIPS") act in August 2022, DoD's investments in microelectronics further amplify the U.S. government's commitment to reinforcing the U.S. semiconductor supply chain.
Added
We believe that our success depends on our ability to foster a company-wide culture that values a broad range of solutions to problems, a wide array of skills and experiences, and multiple perspectives.
Removed
Since the acquisition, we have made additional investments in security and advanced packaging, most notably our announced $15 million capital investment in fiscal year 2020 to expand our trusted custom microelectronics business in Phoenix, Arizona, to bring cutting-edge commercial silicon to the DoD.
Added
We believe that the workforce required to grow our business and deliver creative solutions must be rich in diverse thought, experience, and culture, and are committed to providing an environment that respects the varied backgrounds and viewpoints of our employees. Our initiatives focus on building and maintaining talent that will create cohesive and collaborative teams that drive innovation.
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Our Geneva, Switzerland facility, the headquarters of our international operations, provides electronic design and manufacturing, maintenance and support services and is AS9100 and EASA Part 145 quality systems-certified.
Added
Our Board of Directors provides oversight of our people practices, including regularly reviewing workforce metrics such as those described below. • Employee Overview: As of June 27, 2025, we employed 2,162 people excluding contractors around the globe, including 579 in research and development, 112 in sales and marketing, 1,180 in manufacturing and customer support and 291 in general and administrative functions.
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We cannot assure the timely replacement of canceled, delayed or reduced orders. Employees At June 28, 2024, we employed a total of 2,364 people excluding contractors, including 790 in research and development, 126 in sales and marketing, 1,160 in manufacturing and customer support and 288 in general and administrative functions.
Added
We also use contractors on an as-needed basis. • Culture and Employee Engagement: We believe our workplace culture drives engagement that turns ideas into action, delivering trusted and secure solutions at the speed of innovation.
Removed
We have 137 employees located outside of the United States and 2,227 located in the United States. We also use contractors on an as-needed basis. Human Capital At Mercury, our people are at the center of everything we do in driving Innovation That Matters® by and for People Who Matter.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

65 edited+27 added−29 removed92 unchanged
Biggest changeThe emergence of commodity-type products as acceptable substitutes for certain of our products may cause customers to delay purchases or seek alternative solutions. The markets for our products are highly competitive and are characterized by rapidly changing technology, frequent product performance improvements, and evolving industry standards.
Biggest changeFailure to respond to competition or evolving technology could lead to customer loss and missed business opportunities. The emergence of commodity-type substitutes may cause customers to delay purchases or seek alternatives. Our markets are highly competitive, with frequent technological advances and evolving industry standards. Competitors may offer lower pricing, superior products or better delivery, reducing demand for our offerings.
On August 13, 2024, we further amended our Revolver, permanently decreased borrowing capacity to $900 million, with a temporary reduction in credit availability to $750.0 million until we meet a minimum consolidated EBITDA level of $75.0 million excluding (a) adjustments for cost savings, operating expense reductions and synergies, (b) estimate at completion (“EAC”) charges and other non-cash expenses, charges, and losses addbacks and (c) deducts to reverse EAC charges previously added back, in each case for a last twelve-month period.
On August 13, 2024, we amended our Revolver, permanently decreased borrowing capacity to $900.0 million, with a temporary reduction in credit availability to $750.0 million until we meet a minimum consolidated EBITDA level of $75.0 million excluding (a) adjustments for cost savings, operating expense reductions and synergies, (b) estimate at completion (“EAC”) charges and other non-cash expenses, charges, and losses addbacks and (c) deducts to reverse EAC charges previously added back, in each case for a last twelve-month period.
Acquisitions may pose risks to our business, including: • problems and increased costs in connection with the integration of the personnel, business systems, operations, technologies, or products of the acquired businesses; • layering of integration activity due to multiple overlapping acquisitions; • unanticipated issues, expenses, charges, or liabilities related to the acquisitions; • failure to implement our business plan for the combined business or to achieve anticipated increases in revenues and profitability; • diversion of management’s attention from our organic business; • adverse effects on business relationships with suppliers and customers, including the failure to retain key customers and programs; • acquired assets becoming impaired as a result of technical advancements or worse-than-expected performance by the acquired company; • failure to rationalize supply chain, manufacturing capacity, locations, logistics and operating models to achieve anticipated economies of scale, or disruptions to supply chain, manufacturing, or product design operations during the combination of facilities; 19 Table of Contents • failure to rationalize business, information and communication systems and to expand the IT infrastructure and security protocols throughout the enterprise; • volatility associated with accounting for earn-outs in a given transaction; • entering markets in which we have no, or limited, prior experience; • environmental liabilities at current or previous sites of the acquired business; • poor compliance programs pre-acquisition at acquired companies, which may lead to liabilities for violations, or impact the business acquired when placed under our compliance programs; • unanticipated changes in applicable laws or regulations; • potential loss of key employees; • the impact of any assumed legal proceedings; and • adverse effects on our internal control over financial reporting before the acquiree's complete integration into our control environment.
Acquisitions may pose risks to our business, including: • problems and increased costs in connection with the integration of the personnel, business systems, operations, technologies, or products of the acquired businesses; • layering of integration activity due to multiple overlapping acquisitions; • unanticipated issues, expenses, charges, or liabilities related to the acquisitions; • failure to implement our business plan for the combined business or to achieve anticipated increases in revenues and profitability; • diversion of management’s attention from our organic business; • adverse effects on business relationships with suppliers and customers, including the failure to retain key customers and programs; • acquired assets becoming impaired as a result of technical advancements or worse-than-expected performance by the acquired company; • failure to rationalize supply chain, manufacturing capacity, locations, logistics and operating models to achieve anticipated economies of scale, or disruptions to supply chain, manufacturing, or product design operations during the combination of facilities; • failure to rationalize business, information and communication systems and to expand the IT infrastructure and security protocols throughout the enterprise; • volatility associated with accounting for earn-outs in a given transaction; • entering markets in which we have no, or limited, prior experience; • environmental liabilities at current or previous sites of the acquired business; • poor compliance and document retention and retrieval programs pre-acquisition at acquired companies, which may lead to liabilities for violations, or impact the business acquired when placed under our compliance programs; 19 Table of Contents • unanticipated changes in applicable laws or regulations; • potential loss of key employees; • the impact of any assumed legal proceedings; and • adverse effects on our internal control over financial reporting before the acquiree's complete integration into our control environment.
We are also targeted by spear phishing attacks in which an email directed at a specific individual or department is disguised to appear to be from a trusted source to obtain sensitive information. Like all DoD contractors that process, store, or transmit controlled unclassified information, we must meet minimum security standards or risk losing our DoD contracts.
We are also regularly targeted by spear phishing attacks in which an email directed at a specific individual or department is disguised to appear to be from a trusted source to obtain sensitive information. Like all DoD contractors that process, store, or transmit controlled unclassified information, we must meet minimum security standards or risk losing our DoD contracts.
Another factor contributing to fluctuations in our quarterly results is the fixed nature of expenditures on personnel, facilities, information technology and marketing programs. Expense levels for these programs are based, in significant part, on expectations of future revenues. If actual quarterly revenues are below management’s expectations, our results of operations could be adversely affected.
Another factor contributing to fluctuations in our quarterly results is the fixed nature of expenditures on personnel, facilities, and information technology. Expense levels for these programs are based, in significant part, on expectations of future revenues. If actual quarterly revenues are below management’s expectations, our results of operations could be adversely affected.
We continue to work to mitigate such pressures on our business operations as they develop. The loss of one or more of our largest customers, programs, or applications could adversely affect our results of operations. We are dependent on a small number of customers for a large portion of our revenues.
We continue to work to mitigate such pressures on our business operations as they develop. The loss of one or more of our largest customers or programs could adversely affect our results of operations. We are dependent on a small number of customers for a large portion of our revenues.
Further, the preparation of financial statements in conformity with accounting principles generally accepted in the United States requires us 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.
The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires us 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.
Specifically, our debt could have important consequences to our investors, including the following: • making it more difficult for us to satisfy our obligations under our debt instruments, including, without limitation, the Revolver; and if we fail to comply with these requirements, an event of default could result; • limiting our ability to obtain additional financing to fund future working capital, capital expenditures, acquisitions, or other general corporate requirements; • requiring a substantial portion of our cash flows to be dedicated to debt service payments instead of other purposes, thereby reducing the amount of cash flows available for working capital, capital expenditures, acquisitions and other general corporate purposes; • increasing our vulnerability to general adverse economic and industry conditions; 20 Table of Contents • exposing us to the risk of increased interest rates as certain of our borrowings have variable interest rates, which could increase the cost of servicing our financial instruments and could materially reduce our profitability and cash flows; • limiting our flexibility in planning for and reacting to changes in the industry in which we compete; • placing us at a disadvantage compared to other, less leveraged competitors; and • increasing our cost of borrowing.
Specifically, our debt could have important consequences to our investors, including the following: • making it more difficult for us to satisfy our obligations under our debt instruments, including, without limitation, the Revolver; and if we fail to comply with these requirements, an event of default could result; • limiting our ability to obtain additional financing to fund future working capital, capital expenditures, acquisitions, or other general corporate requirements; • requiring a substantial portion of our cash flows to be dedicated to debt service payments instead of other purposes, thereby reducing the amount of cash flows available for working capital, capital expenditures, acquisitions and other general corporate purposes; • increasing our vulnerability to general adverse economic and industry conditions; • exposing us to the risk of increased interest rates as certain of our borrowings have variable interest rates, which could increase the cost of servicing our financial instruments and could materially reduce our profitability and cash flows; • limiting our flexibility in planning for and reacting to changes in the industry in which we compete; • placing us at a disadvantage compared to other, less leveraged competitors; and • increasing our cost of borrowing.
The reduction or delay in funding or termination of a government program in which we are involved could result in a loss of or delay in receiving anticipated future revenues attributable to that program and contracts or orders received.
The reduction or delay in funding or termination of a program in which we are involved could result in a loss of or delay in receiving anticipated future revenues attributable to that program and contracts or orders received.
For fiscal 2025 and beyond, the potential for gridlock in Congress, a continuing budget resolution, budget sequestration, a U.S. government shutdown, or the crowding out of defense funding due to historically high budget deficits or changes in national spending priorities toward non-defense budget items could adversely impact our revenues and increase uncertainty in our business and financial planning.
For fiscal 2026 and beyond, the potential for gridlock in Congress, a continuing budget resolution, budget sequestration, a U.S. government shutdown, or the crowding out of defense funding due to historically high budget deficits or changes in national spending priorities toward non-defense budget items could adversely impact our revenues and increase uncertainty in our business and financial planning.
We intend to continue to enter into development contracts and anticipate that the gross margins associated with development contract revenues will continue to be lower than gross margins from standard product sales. Many of our contracts require that our facilities remain certified at the AS91000 or ISO9001 level in order to ship products from the relevant facility.
We intend to continue to enter into development contracts and anticipate that the gross margins associated with development contract revenues will continue to be lower than gross margins from standard product sales. Many of our contracts require that our facilities remain certified at the AS9100 or ISO9001 level in order to ship products from the relevant facility.
While our revenues are generated through the sale of products and services across more than 300 programs with no single program contributing more than 10% of our annual revenues, we have experienced fluctuations in operating results due to shifts in timing or quantities across certain of our larger programs.
While our revenues are generated through the sale of products and services across hundreds of programs with no single program contributing more than 10% of our annual revenues, we have experienced fluctuations in operating results due to shifts in timing or quantities across certain of our larger programs.
Our quarterly results may be subject to fluctuations resulting from other factors, including: • delays in completion of internal product development projects; • delays in shipping hardware and software or licensing design intellectual property; • delays in acceptance testing by customers; • a change in the mix of products sold; • changes in customer or program order patterns; • production delays due to quality problems; • failure to achieve or maintain quality certifications, such as AS9100; • nonconformity with contractual or other requirements, including the need to respond to corrective action requests; • inability to scale quick reaction capability products due to low product volume; • shortages and increased costs of components; • delays due to the implementation of new tariffs or other trade barriers; • the timing of product line transitions; • declines in quarterly revenues from previous generations of products following announcement of replacement products containing more advanced technology; and • changes in estimates of completion (EAC) on fixed price engagements, which represent a substantial and increasing percentage of our business.
Our quarterly results may be subject to fluctuations resulting from other factors, including: • delays in completion of internal product development projects; • delays in shipping hardware and software or licensing design intellectual property; • delays in acceptance testing by customers; • a change in the mix of products sold; • changes in customer or program order patterns; • production delays due to quality problems; • failure to achieve or maintain quality certifications, such as AS9100; • nonconformity with contractual or other requirements, including the need to respond to corrective action requests; • inability to scale quick reaction capability products due to low product volume; • shortages and increased costs of components; • excess and obsolescence of inventory; • delays due to the implementation of new tariffs or other trade barriers; • the timing of product line transitions; 17 Table of Contents • declines in quarterly revenues from previous generations of products following announcement of replacement products containing more advanced technology; and • changes in estimates of completion (EAC) on fixed price engagements, which represent a substantial percentage of our business.
And, if we were unable to repay the amounts due and payable, the lenders under the Revolver could proceed against the collateral granted to them to secure that indebtedness. Increases in interest rates would increase the cost of servicing our financial instruments with exposure to interest rate risk and could materially reduce our profitability and cash flows.
And, if we were unable to repay the amounts due and payable, the lenders under the Revolver could proceed against the collateral granted to them to secure that indebtedness. 20 Table of Contents Increases in interest rates would increase the cost of servicing our financial instruments with exposure to interest rate risk and could materially reduce our profitability and cash flows.
In determining what the director of a Massachusetts corporation reasonably believes to be in the best interests of the corporation, a director may consider the interests of the corporation's employees, suppliers, creditors, and customers, the economy of the state, the region, and the nation, community and societal considerations and the long-term and short-term interests of the corporation and its shareholders, including the possibility that these interests may be best served by the continued independence of the corporation.
In determining what the director of a Massachusetts corporation reasonably believes to be in the best interests of the corporation, a director may consider the interests of the corporation's employees, suppliers, creditors, and customers, the economy of the state, the region, and the nation, community and societal considerations and the long-term and short-term interests of the corporation 24 Table of Contents and its shareholders, including the possibility that these interests may be best served by the continued independence of the corporation.
We have experienced considerable price inflation in our costs for labor and materials during recent years, which adversely affected our business, results of operations and financial condition.
Price inflation for labor and materials could adversely affect our business, results of operations and financial condition. We have experienced considerable price inflation in our costs for labor and materials during recent years, which adversely affected our business, results of operations and financial condition.
Our products and services are incorporated into many different domestic and international defense programs. Over the lifetime of a defense program, the award of many different individual contracts and subcontracts may impact our products’ requirements. The 13 Table of Contents funding of U.S. government programs is subject to Congressional appropriations.
Our products and services are incorporated into many different domestic and international defense programs. Over the lifetime of a defense program, the award of many different individual contracts and subcontracts may impact our products’ requirements. The funding of U.S. government programs is subject to Congressional appropriations.
If we are unable to repair these problems in a timely manner, we may experience a loss of or delay in revenue and significant damage to our reputation and business prospects. Many of our customers rely upon our products for mission-critical applications.
If we are unable to repair these problems in a timely manner, we may experience a loss 22 Table of Contents of or delay in revenue and significant damage to our reputation and business prospects. Many of our customers rely upon our products for mission-critical applications.
Like other defense contractors, from time to time we have 23 Table of Contents experienced the loss of proprietary data due to employees retaining proprietary information in violation of company policies and applicable regulations, resulting in investigation and remediation expenses as well as the other risks outlined above.
Like other defense contractors, from time to time we have experienced the loss of proprietary data due to employees retaining proprietary information in violation of company policies and applicable regulations, resulting in investigation and remediation expenses as well as the other risks outlined above.
Sales of our products and services, primarily as a subcontractor or team member with defense prime contractors, and in some cases directly, to the U.S. government and its agencies, as well as foreign governments and agencies, accounted for approximately 95%, 98% and 97% of our total net revenues in fiscal years 2024, 2023, and 2022, respectively.
Sales of our products and services, primarily as a subcontractor or team member with defense prime contractors, and in some cases directly, to the U.S. government, as well as foreign governments, accounted for approximately 97%, 95% and 98% of our total net revenues in fiscal years 2025, 2024 and 2023, respectively.
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 in the Plan and we may have to record an increased liability as a result of fluctuations in the value of the Plan’s assets.
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 in the Plan and we may have to record an increased liability as a result of 16 Table of Contents fluctuations in the value of the Plan’s assets.
Some of our customers may have become conditioned to wait until the end of a quarter to place orders in the 17 Table of Contents expectation of receiving a discount. Customers conditioned to seek quarter-end discounts increase risk and uncertainty in our financial forecasting and decrease our margins and profitability.
Some of our customers may have become conditioned to wait until the end of a quarter to place orders in the expectation of receiving a discount. Customers conditioned to seek quarter-end discounts increase risk and uncertainty in our financial forecasting and decrease our margins and profitability.
Changes could be accelerated due to changes in our mix of business, in federal regulations, or in the interpretation of federal regulations, which may subject us to increased oversight by the Defense Contract Audit Agency (“DCAA”) for certain of our products or services.
Changes could be accelerated due to changes in our mix of business, in federal regulations, or in the interpretation of federal regulations, which may subject us to increased oversight by the Defense Contract Audit 21 Table of Contents Agency (“DCAA”) for certain of our products or services.
We have not declared or paid cash dividends on any of our classes of capital stock to date and we currently intend to retain our future earnings, if any, to fund the development and growth of our business and for future mergers and acquisitions.
We have not declared or paid cash dividends on any of our classes of capital stock to date and we currently intend to retain our future earnings, if any, to fund the development and growth of our business, to reduce our level of debt, and for future mergers and acquisitions.
We may be 21 Table of Contents subject to multiple rebid requirements over the life of a defense program to continue to participate in such program, which can result in the loss of the program or significantly reduce our revenue or margin.
We may be subject to multiple rebid requirements over the life of a defense program to continue to participate in such program, which can result in the loss of the program or significantly reduce our revenue or margin.
We are unable to predict the likely duration and severity of adverse economic conditions in the United States and other countries, but the longer the duration or the greater the severity, the greater the risks we face in operating our business.
We are unable to predict the likely duration and severity of adverse economic conditions in the United States and other countries, but the longer the duration or the greater the 13 Table of Contents severity, the greater the risks we face in operating our business.
As of June 28, 2024, we had a swap agreement in effect that fixed $300.0 million of the total $591.5 million of outstanding borrowings under the Revolver at a rate of 4.66%. The movement of interest rates would affect the value of such swap agreement.
As of June 27, 2025, we had a swap agreement in effect that fixed $300.0 million of the total $591.5 million of outstanding borrowings under the Revolver at a rate of 4.66%. The movement of interest rates would affect the value of such swap agreement.
GAAP requires an employer to recognize the funded status of the defined benefit plan on the balance sheet, which we have presented in other long-term liabilities on our Consolidated Balance Sheets at June 28, 2024.
GAAP requires an employer to recognize the funded status of the defined benefit plan on the balance sheet, which we have presented in other long-term liabilities on our Consolidated Balance Sheets at June 27, 2025.
On December 13, 2023, a securities class action complaint was filed against us in the U.S. District Court for the District of Massachusetts. The complaint alleged that our public disclosures in SEC filings and on earnings calls were false and/or misleading .
On December 13, 2023, a securities class action complaint was filed against us in the U.S. District Court for the District of Massachusetts. The complaint alleged that our public disclosures in SEC filings and on earnings calls were false and/or misleading . We are currently defending that securities litigation.
Our business is subject to heightened risks of cyber intrusion as nation-state hackers seek access to technology used in U.S. defense programs and criminal enterprise hackers, which may or may not be affiliated with foreign governments, use ransomware attacks to disable critical infrastructure and extort companies for ransom payments.
Our business is subject to constant attempts at cyber intrusion as nation-state hackers seek access to technology used in U.S. defense programs and criminal enterprise hackers, which may or may not be affiliated with foreign governments, use ransomware attacks to disable critical infrastructure and extort companies for ransom payments.
World economic conditions and financial markets have, at times, experienced turmoil which could have material adverse impacts on our financial condition or our ability to achieve targeted results of operations due to: • reduced and delayed demand for our products; • increased risk of order cancellations or delays; • downward pressure on the prices of our products; • greater difficulty in collecting accounts receivable; and • risks to our liquidity, including the possibility that we might not have access to our cash and short-term investments or to our line of credit when needed.
Global economic conditions, financial markets and geopolitical events have, at times, experienced turmoil which could have material adverse impacts on our financial condition or our ability to achieve targeted results of operations due to: • reduced and delayed demand for our products; • increased risk of order cancellations or delays; • downward pressure on the prices of our products; • supply chain challenges to source raw materials; • greater difficulty in collecting accounts receivable; and • risks to our liquidity, including the possibility that we might not have access to our cash and short-term investments or to our line of credit when needed.
The near-term potential for recessionary economic conditions and possible stagflation (persistent high inflation and stagnant economic demand) presents increased risks to our business. Price inflation for labor and materials could adversely affect our business, results of operations and financial condition.
The near-term potential for recessionary economic conditions and possible stagflation (persistent high inflation and stagnant economic demand) presents increased risks to our business. Economic, capital market and political conditions could adversely affect our business, results of operations, and financial condition.
In fiscal 2023, RTX Corporation accounted for 14% of our total net revenues, Lockheed Martin accounted for 13% of our total net revenues, and Northrop Grumman accounted for 11% of our total net revenues. In fiscal 2022, RTX Corporation accounted for 14% of our total net revenues, the U.S.
In fiscal 2023, RTX Corporation accounted for 14% of our total net revenues, Lockheed Martin accounted for 13% of our total net revenues, and Northrop Grumman accounted for 11% of our total net revenues.
Such changes could also trigger contract coverage for a larger percentage of our contracts under the Cost Accounting Standards (“CAS”), requiring compliance with a defined set of business systems criteria. Failure to comply with applicable CAS requirements could adversely impact our ability to win future CAS-type contracts.
Such changes could also trigger contract coverage for a larger percentage of our contracts under the Cost Accounting Standards (“CAS”), requiring compliance with a defined set of business systems criteria. Failure to comply with applicable CAS requirements could adversely impact our ability to win future CAS-type contracts and subject us to 5% billing withholding on open cost type contracts.
Our business is characterized by the need for continued investment in R&D. If we fail to invest sufficiently in R&D, our products could become less attractive to potential customers and our business and financial condition could be materially and adversely affected.
Our need for continued or increased investment in R&D may increase expenses and reduce our profitability. Our business is characterized by the need for continued investment in R&D. If we fail to invest sufficiently in R&D, our products could become less attractive to potential customers and our business and financial condition could be materially and adversely affected.
As of June 28, 2024, we had a liability of $5.0 million in Other non-current liabilities representing the net under-funded status of the Plan. 16 Table of Contents In addition, we must comply with the Foreign Corrupt Practices Act, or the FCPA, and the anti-corruption laws of the countries in which we operate.
As of June 27, 2025, we had a liability of $5.3 million in Other non-current liabilities representing the net under-funded status of the Plan. In addition, we must comply with the Foreign Corrupt Practices Act, or the FCPA, and the anti-corruption laws of the countries in which we operate.
High quarterly book-ship ratios pressure our inventory and cash flow management, necessitating increased inventory balances to ensure quarterly revenue attainment. Increased inventory balances tie up additional capital, limiting our operational flexibility.
High quarterly book-ship ratios have pressured our inventory and cash flow management at various times, necessitating increased inventory balances to ensure quarterly revenue attainment. Increased inventory balances tie up additional capital, limiting our operational flexibility.
These sole-source and other suppliers are each subject 15 Table of Contents to quality and performance issues, materials shortages, excess demand, reduction in capacity, and other factors that may disrupt the flow of goods to us or to our customers, which would adversely affect our business and customer relationships.
These sole-source and other suppliers are each subject to quality and performance issues, materials shortages, excess demand, reduction in capacity, and other factors that may disrupt the flow of goods to us or to our customers, which would adversely affect our business and customer relationships. There can be no assurance that these suppliers will continue to meet our requirements.
The termination of a program or the reduction in or failure to commit additional funds to a program in which we are involved could negatively impact our revenues and have a material adverse effect on our financial condition and results of operations.
The termination of a program or the reduction in or failure to commit additional funds to a program in which we are involved could negatively impact our revenues and have a material adverse effect on our financial condition and results of operations. The U.S. defense budget frequently operates under a continuing budget resolution, which increases revenue uncertainty and volatility.
Inability to meet the qualifications to the CMMC and any amendments may increase our costs or delay the award of contracts if we are unable to certify that we satisfy such cybersecurity requirements at our Company level and into our supply chain. • The U.S. government or a defense prime contractor customer could require us to relinquish data rights to a product in connection with performing work on a defense contract, which could lead to a loss of valuable technology and intellectual property in order to participate in a government program. • The U.S. government or a defense prime contractor customer could require us to enter into cost reimbursable contracts that could offset our cost efficiency initiatives. • We anticipate that sales to our U.S. prime defense contractor customers as part of foreign military sales (“FMS”) programs will be an increasing part of our business going forward.
Further, our suppliers in general are not as prepared to comply with CMMC requirements today as we are, and thus we may have to change suppliers or delay production to the extent the application of such requirements materially effects our supply chain. • The U.S. government or a defense prime contractor customer could require us to relinquish data rights to a product in connection with performing work on a defense contract, which could lead to a loss of valuable technology and intellectual property in order to participate in a government program. • The U.S. government or a defense prime contractor customer could require us to enter into cost reimbursable contracts that could offset our cost efficiency initiatives. • We anticipate that sales to our U.S. prime defense contractor customers as part of foreign military sales (“FMS”) programs will be an increasing part of our business going forward.
Provisions in our organizational documents and Massachusetts law and other actions we have taken could make it more difficult for a third party to acquire us. 24 Table of Contents Provisions of our articles of organization and by-laws could have the effect of discouraging a third party from making a proposal to acquire us and could prevent certain changes in control, even if some shareholders might consider the proposal to be in their best interest.
Provisions of our articles of organization and by-laws could have the effect of discouraging a third party from making a proposal to acquire us and could prevent certain changes in control, even if some shareholders might consider the proposal to be in their best interest.
We market and sell products in international markets and have sales offices and manufacturing and/or engineering facilities and subsidiaries in Switzerland, Spain, the United Kingdom and Canada. Revenues from international operations accounted for 5%, 5%, and 4%, of our total net revenues in fiscal 2024, 2023, and 2022, respectively. We also ship directly from our U.S. operations to international customers.
We are exposed to risks associated with international operations and markets. We market and sell products in international markets and have sales offices and manufacturing and/or engineering facilities and subsidiaries in Switzerland, Spain and the United Kingdom. Revenues from international operations accounted for 5% of our total net revenues in each fiscal 2025, 2024, and 2023.
In addition, our revenues are largely dependent upon the ability of customers to develop and sell products that incorporate our products. No assurance can be given that our customers will not experience financial, technical or other difficulties that could adversely affect their operations and, in turn, our results of operations.
No assurance can be given that our customers will not experience financial, technical or other difficulties that could adversely affect their operations and, in turn, our results of operations.
Contract manufacturers also build products for other companies, and they may not have sufficient quantities of inventory available or sufficient internal resources to fill our orders on a timely basis or at all. We are exposed to risks associated with international operations and markets.
Contract manufacturers also build products for other companies, and they may not have sufficient quantities of inventory available or sufficient internal resources to fill our orders on a timely basis or at all. These risks may be enhanced for our International operations as we outsourced our former Swiss manufacturing operations to Cicor Group during fiscal 2025.
Our operating results, from time to time, may be below the expectations of public market analysts and investors, which could have a material adverse effect on the market price of our common stock. Market rumors or the dissemination of false or misleading information may impact our stock price.
Our stock price has been and may continue to be volatile. This volatility may or may not be related to our operating performance. Our operating results, from time to time, may be below the expectations of public market analysts and investors, which could have a material adverse effect on the market price of our common stock.
We face competition from research and product development groups and the manufacturing operations of current and potential customers, who continually evaluate the benefits of internal research, product development, and manufacturing versus outsourcing.
Many of our customers and potential customers have the capacity to design and internally manufacture products that are similar to our products. We face competition from research and product development groups and the manufacturing operations of current and potential customers, who continually evaluate the benefits of internal research, product development and manufacturing versus outsourcing.
While we try to maintain competitive pricing on those products that are directly comparable to products manufactured by others, in many instances our products will conform to more exacting specifications and carry a higher price than analogous products. Many of our customers and potential customers have the capacity to design and internally manufacture products that are similar to our products.
Our product performance, engineering expertise, and product quality have been important factors in our growth. While we try to maintain competitive pricing on those products that are directly comparable to products manufactured by others, in many instances our products will conform to more exacting specifications and carry a higher price than analogous products.
Navy accounted for 14% of our total net revenues, and Lockheed Martin accounted for 10% of our total net revenues. Customers in the defense market generally purchase our products in connection with government programs that have a limited duration, leading to fluctuating sales to any particular customer in this market from year to year.
Customers in the defense market generally purchase our products in connection with government programs that have a limited duration, leading to fluctuating sales to any particular customer in this market from year to year. In addition, our revenues are largely dependent upon the ability of customers to develop and sell products that incorporate our products.
In addition, we may need to invest in additional secure laboratory space to integrate efficiently subsystem level solutions and maintain quality assurance on current and future programs. 22 Table of Contents If we are unable to continue to obtain U.S. government authorization regarding the export of our products, or if current or future export laws limit or otherwise restrict our business, we could be prohibited from shipping our products to certain countries, which would harm our ability to generate revenue.
If we are unable to continue to obtain U.S. government authorization regarding the export of our products, or if current or future export laws limit or otherwise restrict our business, we could be prohibited from shipping our products to certain countries, which would harm our ability to generate revenue.
Our ability to compete effectively against other companies in our industry depends, in part, on our ability to protect our current and future proprietary technology under patent, copyright, trademark, trade secret and unfair competition laws.
If we become subject to intellectual property infringement claims, we could incur significant expenses and could be prevented from selling specific products. Our ability to compete effectively against other companies in our industry depends, in part, on our ability to protect our current and future proprietary technology under patent, copyright, trademark, trade secret and unfair competition laws.
A significant decrease in the sales to or loss of any of our major customers would have a material adverse effect on our business and results of operations.
A significant decrease in the sales to or loss of any of our major customers would have a material adverse effect on our business and results of operations. In fiscal 2025, RTX Corporation accounted for 13% of our total net revenues and both Lockheed Martin and U. S. Navy accounted for 10% of our total net revenues.
When the market price of a stock has been volatile, holders of that stock will sometimes file securities class action litigation against the company that issued the stock. If any shareholders were to file a lawsuit, we could incur substantial costs defending the lawsuit, which could also divert the time and attention of management.
If any shareholders were to file a lawsuit, we could incur substantial costs defending the lawsuit, which could also divert the time and attention of management.
Competition for hiring these employees is intense, especially individuals with specialized skills and security clearances required for our business, and we may be unable to hire and retain enough staff to implement our growth strategy or to perform on our existing commitments. 18 Table of Contents If we experience a disaster or other business continuity problem, we may not be able to recover successfully, which could cause material financial loss, loss of human capital, regulatory actions, reputational harm, or legal liability.
Competition for hiring these employees is intense, especially individuals with specialized skills and security clearances required for our business, and we may be unable to hire and retain enough staff to implement our growth strategy or to perform on our existing commitments.
We may become subject to claims that we infringe the intellectual property rights of others. We cannot assure you that, if made, these claims will not be successful. Any claim of infringement could cause us to incur substantial costs defending against the claim even if the claim is invalid and could distract management from other business.
Any claim of infringement could cause us to incur substantial costs defending against the claim even if the claim is invalid and could distract management from other business.
We may incur significant set-up costs and delays in manufacturing should it become necessary to replace any key vendors due to work stoppages, shipping delays, financial difficulties, natural or manmade disasters or other factors. Carrying increased levels of inventory also increases our potential risk of future inventory obsolescence.
If supply arrangements are interrupted, we may not be able to find another supplier on a timely or satisfactory basis. We may incur significant set-up costs and delays in manufacturing should it become necessary to replace any key vendors due to work stoppages, shipping delays, financial difficulties, natural or manmade disasters or other factors.
These developments could negatively impact our revenues and have a material adverse effect on our business and operating results. Competition from existing or new companies could cause us to experience downward pressure on prices, fewer customer orders, reduced margins, the inability to take advantage of new business opportunities and the loss of market share.
Competition from existing or new companies could cause us to experience downward pressure on prices, fewer customer orders, reduced margins, the inability to take advantage of new business opportunities and the loss of market share. We compete in highly competitive industries, and our customers generally extend the competitive pressures they face throughout their respective supply chains.
We evaluate indefinite lived intangible assets and goodwill for impairment annually in the fourth quarter, or more frequently if events or changes in circumstances indicate that the asset might be impaired. During the quarter ended March 29, 2024, we assessed potential triggering events for goodwill impairment and concluded that there was a triggering event for the Mission Systems reporting unit.
We evaluate indefinite lived intangible assets and goodwill for impairment annually in the fourth quarter, or more frequently if events or changes in circumstances indicate that the asset might be impaired. Indefinite lived intangible assets are impaired and goodwill impairment is indicated when their book value exceeds fair value.
We compete in highly competitive industries, and our customers generally extend the competitive pressures they face throughout their respective supply chains. Additionally, our markets are facing increasing industry consolidation, resulting in larger competitors who have more market share putting more downward pressure on prices and offering a more robust portfolio of products and services.
Additionally, our markets are facing increasing industry consolidation, resulting in larger competitors who have more market share putting more downward pressure on prices and offering a more robust portfolio of products and services. We are subject to competition based upon product design, performance, pricing, quality, on time delivery and support services.
While the Court dismissed the case without prejudice on July 24, 2024, it permitted the plaintiffs 30 days to file an amended complaint. We have never paid cash dividends on our common stock and we do not anticipate paying any dividends in the foreseeable future.
We have never paid cash dividends on our common stock and we do not anticipate paying any dividends in the foreseeable future.
Any judgment against us could require substantial payment in damages and could also include an injunction or other court order that could prevent us from offering certain products.
Any judgment against us could require substantial payment in damages and could also include an injunction or other court order that could prevent us from offering certain products. 23 Table of Contents Risks Related to Our Common Stock The trading price of our common stock may continue to be volatile, which may adversely affect our business, and investors in our common stock may experience substantial losses.
As we grow our operations, the potential for natural or man-made disasters, political, economic, or infrastructure instabilities, or other country- or region-specific business continuity risks increases. Risks Related to M&A and Acquisition Integration Implementation of our growth strategy may not be successful, which could affect our ability to increase revenues and profits.
As we grow our operations, the potential for natural or man-made disasters, political, economic, or infrastructure instabilities, or other country- or region-specific business continuity risks increases. Our insurance coverage, customer indemnifications or other liability protections may be inadequate to cover our significant business risks, which could have a material adverse effect on our financial position.
Additionally, on a limited number of programs the customer has co-manufacturing rights which could lead to a shift of production on such a program away from us which in turn could lead to lower revenues. 14 Table of Contents Going forward, we believe the F-35, Filthy Buzzard, F/A-18, LTAMDS, THAAD, AMCS and Aegis programs could be a large portion of our future revenues in the coming years, and the loss or cancellation of these programs could adversely affect our future results.
Additionally, on a limited number of programs the customer has co-manufacturing rights which could lead to a shift of production on such a program away from us which in turn could lead to lower revenues.
Limited or negative free cash flow as we have recently experienced, if not improved, could eventually lead to a challenge in servicing our debt. We have a significant amount of goodwill and intangible assets on our consolidated financial statements that are subject to impairment based upon future adverse changes in our business or prospects.
We have a significant amount of goodwill and intangible assets on our consolidated financial statements that are subject to impairment based upon future adverse changes in our business or prospects. At June 27, 2025, the carrying values of goodwill and identifiable intangible assets on our balance sheet were $938.1 million and $210.6 million, respectively.
The percentage of our total revenue using over time revenue accounting has increased in recent years due to M&A transactions and the movement in our business toward subsystem development. Over time revenue recognition is more reliant on estimates than the accounting for our component sales.
Over time revenue recognition is more reliant on estimates than the accounting for our component sales. Changes in estimates of completion ("EACs") on fixed price engagements, which represent a substantial percentage of our business, also requires judgement, including in assessing risks, estimating contract revenue and costs, and predicting future performance.
For example, during our fiscal year ended June 28, 2024, we stopped production for several months on multiple programs utilizing a common processing architecture in our secure computing product line while we conducted a root cause corrective analysis on the product design and manufacturing process.
For example, in fiscal year 2024, we halted production for months on multiple secure computing programs due to a root cause analysis, materially affecting financial results and customer confidence. These challenges could recur in the future on other programs.
Removed
The U.S. defense budget frequently operates under a continuing budget resolution, which increases revenue uncertainty and volatility, and 2024 being a Presidential election year increases the likelihood of operating under a continuing budget resolution.
Added
Going forward, we believe the F-35, F/A-18, KC-46, LTAMDS, SCAR, and THAAD programs could be a large portion of our future revenues in the coming years, and the loss or cancellation of these programs could adversely affect our future results. Further, new programs may yield lower margins than legacy programs, which could result in an overall reduction in gross margins.
Removed
Economic conditions could adversely affect our business, results of operations, and financial condition.
Added
Operational challenges have impacted our on-time delivery, affecting visibility, design wins, bookings and revenue. Customers may opt for lower-cost alternatives or insource previously outsourced products. Rapid technological changes could lead to new competitors, resulting in lost customers and programs. Negative perceptions regarding cost or delivery issues may further impact our ability to secure business.
Removed
Further, new programs may yield lower margins than legacy programs, which could result in an overall reduction in gross margins. If we are unable to respond adequately to our competition or to changing technology, we may lose existing customers and fail to win future business opportunities.
Added
Limited engagement with key government-funded laboratories (e.g., DARPA, MIT Lincoln Labs, and MITRE) may hinder our ability to become a design partner for defense prime contractors. 14 Table of Contents Our products are designed to operate under strict physical constraints and harsh conditions. Historically, these requirements have limited the use of lower-cost commodity systems.
Removed
Competitors may be able to offer more attractive pricing, develop products with performance features that are superior to our products, or offer higher quality or superior on time delivery, resulting in reduced demand for our products. Recently, our on-time delivery has suffered due in part to operational challenges.
Added
However, advancing technology and evolving military requirements may increase the acceptability of such alternatives. The entry of commercial server manufacturers and new competitors into aerospace and defense electronics could reduce demand for our products, negatively impacting revenue and operating results. Defense customers require frequent technological advancements for military superiority.
Removed
We may be unable to keep pace with competitors’ marketing and the lack of visibility in the marketplace may negatively impact design wins, bookings, and revenues. Customers may also decide to reduce costs and accept the least costly technically acceptable alternative to our products or services. In addition, customers may decide to insource products that they have outsourced to us.
Added
Historically, many design projects receive funding without actual deployment, and deployed systems favor subcontractors involved in the design phase. To secure future business, we must consistently provide superior technology in a timely and cost-effective manner. The design-in process is lengthy and costly, with no assurance that we will continue meeting customer specifications.
Removed
Due to the rapidly changing nature of technology, we may not become aware in advance of the emergence of new competitors into our markets. The emergence of new competitors in our markets could result in the loss of existing customers or programs and may have a negative impact on our ability to win future business.
Added
Failing to anticipate technological shifts, customer needs or demand fluctuations could negatively impact financial results, including inventory obsolescence. Building inventory ahead of contractual commitments or purchasing end-of-life materials before confirmed customer demand increases this risk. Product complexity occasionally leads to manufacturing delays.
Removed
Perceptions of Mercury as a high-cost provider or for late deliveries could cause us to lose existing customers or programs or fail to win new business. Further, our lack of strong engagements with important government-funded laboratories (e.g. DARPA, MIT Lincoln Labs, MITRE) may inhibit our ability to become subsystem solution design partners with our defense prime customers.
Added
Carrying increased levels of inventory also increases our potential risk of future inventory obsolescence. Trade policies could increase the cost of our manufacturing operations, potentially reducing our gross margins and demand for our products. Trade policies pose a risk to our manufacturing operations, potentially reducing our gross margins and impacting demand for our products.
Removed
Our products are often designed for operating under physical constraints such as limited space, weight, and electrical power. Furthermore, these products are often designed to be “rugged,” that is, to withstand enhanced environmental stress such as extended temperature range, shock, vibration, and exposure to sand or salt spray.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeITEM 1C. CYBERSECURITY We assess and identify material risks from cybersecurity threats primarily through the work of our Chief Information Officer (“CIO”) as part of our enterprise risk management (“ERM”) process. The ERM process, administered by management with input from business leaders and our global and corporate functions, monitors material risks facing Mercury, including cybersecurity threats.
Biggest changeThe ERM process, administered by management with input from business leaders and our global and corporate functions, monitors material risks facing Mercury, including cybersecurity threats. Our CIO works directly with our CFO and other members of senior management to assess cybersecurity threats as part of the ERM process.
The Compliance Committee also reviews our IT, data security and other systems, processes, policies, procedures and controls to (a) identify, assess, monitor, and mitigate cybersecurity risks; (b) identify measures to protect and safeguard against cybersecurity threats and breaches of confidential information and data and IT infrastructure and our other assets or assets of our customers or other third parties in our possession or custody; (c) support the response and management of cybersecurity threats and data breach incidents; and (d) aid in compliance with legal and regulatory requirements governing cybersecurity or data security reporting requirements.
The Compliance Committee also reviews our IT, data security and other systems, 25 Table of Contents processes, policies, procedures and controls to (a) identify, assess, monitor, and mitigate cybersecurity risks; (b) identify measures to protect and safeguard against cybersecurity threats and breaches of confidential information and data and IT infrastructure and our other assets or assets of our customers or other third parties in our possession or custody; (c) support the response and management of cybersecurity threats and data breach incidents; and (d) aid in compliance with legal and regulatory requirements governing cybersecurity or data security reporting requirements.
Activities and cybersecurity incidents are reported to our cyber critical incident response team and to our CIO, who briefs our Compliance Committee, a dedicated committee of senior management focused on regulatory compliance. Our Cybersecurity Team also routinely engages with third parties, including government agencies focused on cyber resiliency, to manage risks from cybersecurity threats.
Activities and cybersecurity incidents are reported to our cyber critical incident response team, and the CISO, who briefs our Compliance Committee, a dedicated committee of senior management focused on regulatory compliance. Our Cybersecurity Team also routinely engages with third parties, including government agencies focused on cyber resiliency, to manage risks from cybersecurity threats.
To date, we have not experienced any cybersecurity incidents that have had a material affect on the Company or our financial position, results of operations and/or cash flows.
To date, we have not experienced any cybersecurity incidents that have had a material effect on the Company or our financial position, results of operations and/or cash flows.
These organizations share real-time cybersecurity threat information and best practices in protecting, detecting, and recovering from cybersecurity threats. 25 Table of Contents We maintain an insider threat program designed to identify, assess, and address potential internal risks from within our Company. Our program evaluates potential risks consistent with industry practices, customer requirements and applicable law, including privacy and other considerations.
These organizations share real-time cybersecurity threat information and best practices in protecting, detecting, and recovering from cybersecurity threats. We maintain an insider threat program designed to identify, assess, and address potential internal risks from within our Company. Our program evaluates potential risks consistent with industry practices, customer requirements and applicable law, including privacy and other considerations.
We also conduct penetration testing of our network, hold tabletop exercises of cyber incidents, and undertake cybersecurity assessments to improve our risk mitigation and assist in the determination of a potential material impact caused by a cybersecurity incident.
We also conduct penetration testing of our network and undertake cybersecurity assessments to improve our risk mitigation and assist in the determination of a potential material impact caused by a cybersecurity incident.
Our Cybersecurity Team monitors activity, scans applications and systems for vulnerabilities to risk from cybersecurity threats, and creates action plans to address and track identified cybersecurity threats until they have been remediated.
See “Item 1A - Risk Factors” in this Annual Report for a further discussion of specific risks related to cybersecurity threats. Our Cybersecurity Team monitors activity, scans applications and systems for vulnerabilities and risk from cybersecurity threats, and creates action plans to address and track identified cybersecurity threats until they have been remediated.
We could be negatively impacted by a security breach, through a cyber-attack, cyber intrusion, insider threat, supply chain incident, or other significant disruption of our IT networks and related systems. See “Item 1A - Risk Factors” in this Annual Report for a further discussion of specific risks related to cybersecurity threats.
Our CIO oversees the internal cybersecurity organization headed by our Chief Information Security Officer (our “Cybersecurity Team”). We could be negatively impacted by a security breach, through a cyber-attack, cyber intrusion, insider threat, supply chain incident, or other significant disruption of our IT networks and related systems.
Removed
Our CIO works directly with our CFO and other members of senior management to assess cybersecurity threats as part of the ERM process. Our CIO oversees the internal cybersecurity organization headed by our Chief Information Security Officer (our “Cybersecurity Team”).
Added
ITEM 1C. CYBERSECURITY We assess and identify material risks from cybersecurity threats primarily through the work of our Chief Information Officer (“CIO”) as part of our enterprise risk management (“ERM”) process and through regularly scheduled meetings of our multidisciplinary cyber critical incident response team.
Removed
Risks related to cybersecurity threats are reflected in an enterprise risk “heat map,” along with other material risks identified through the ERM process, and any mitigation plans developed to manage such risks are reported to our Board of Directors.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeFeet Commitment Andover, MA 145,262 Leased, expiring 2032 Phoenix, AZ 125,756 Leased, expiring 2033 Hudson, NH 121,553 Leased, expiring 2030 Oxnard, CA 72,673 Leased, expiring 2025 Torrance, CA 58,405 Leased, expiring 2029 Gulf Breeze, FL 51,061 Leased, expiring 2031 Torrance, CA 49,250 Leased, expiring 2025 Cypress, CA 42,770 Leased, expiring 2028 Upper Saddle River, NJ 36,223 Leased, expiring 2027 Alpharetta, GA 35,005 Leased, expiring 2028 Chantilly, VA 32,789 Leased, expiring 2025 Geneva, CH 27,287 Leased, expiring 2027 Huntsville, AL 26,900 Leased, expiring 2026 We actively manage our facilities and are in pursuit of lease extensions or alternative locations for facilities with expiration dates in the next one to two years.
Biggest changeFeet Commitment Andover, MA 145,262 Leased, expiring 2032 Phoenix, AZ 125,756 Leased, expiring 2033 Hudson, NH 121,553 Leased, expiring 2030 Torrance, CA 58,405 Leased, expiring 2029 Torrance, CA 49,250 Leased, expiring 2025 Oxnard, CA 47,774 Leased, expiring 2027 Gulf Breeze, FL 44,329 Leased, expiring 2031 Cypress, CA 42,770 Leased, expiring 2028 Upper Saddle River, NJ 36,223 Leased, expiring 2029 Alpharetta, GA 35,005 Leased, expiring 2028 Chantilly, VA 32,789 Leased, expiring 2026 Grand-Lancy, CH 27,287 Leased, expiring 2027 Huntsville, AL 26,900 Leased, expiring 2026 We actively manage our facilities and are in pursuit of lease extensions or alternative locations for facilities with expiration dates in the next one to two years.
In addition, we lease a number of smaller offices around the world primarily for sales. See Note B and Note I to the consolidated financial statements for more information regarding our obligations under leases. 26 Table of Contents
In addition, we lease a number of smaller offices around the world primarily for sales and administrative purposes. See Note B and Note I to the consolidated financial statements for more information regarding our obligations under leases.
ITEM 2. PROPERTIES The following table sets forth our significant properties as of June 28, 2024: Location Size in Sq.
ITEM 2. PROPERTIES The following table sets forth our significant properties as of June 27, 2025: Location Size in Sq.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeThe outcome of these matters, individually and in the aggregate, is not expected to have a material impact on our cash flows, results of operations, or financial position. On December 7, 2021, counsel for National Technical Systems, Inc. (“NTS”) sent us an environmental demand letter pursuant to Massachusetts General Laws Chapter 21E, Section 4A, and CERCLA 42 U.S.C.
Biggest changeThe outcome of these matters, individually and in the aggregate, is not expected to have a material impact on our cash flows, results of operations, or financial position. Please see Note K to our consolidated financial statements (under the caption "Legal Claims") for a discussion of our legal proceedings. ITEM 4. MINE SAFETY DISCLOSURES Not Applicable.
Removed
Section 9601, related to a site that NTS formerly owned at 533 Main Street, Acton, MA. 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.
Removed
NTS alleges in its demand letter that the operations of a predecessor company to Mercury that was acquired in our acquisition of the Microsemi Carve-Out Business that once owned and operated a facility at 531 Main Street, Acton, Massachusetts contributed to the groundwater contamination. NTS is seeking payment from us of NTS’s costs for any required environmental remediation.
Removed
In April 2022, we engaged in a meet and confer session with NTS pursuant to Massachusetts General Laws Chapter 21E, Section 4A to discuss the status of the environmental review performed by NTS and its licensed site professional.
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We subsequently delivered a letter to NTS outlining the deficiencies in their claim and reiterated that we are not obligated to tender a substantive response to their demand without first having received the responsive information requested in connection with the meet and confer session.
Removed
In April 2024, counsel for NTS sent additional communications on their demand that we participate in their environmental monitoring and remediation planning, and in May 2024, we responded with a rebuttal of the allegations. We believe the NTS claims are without merit and intend to defend our self vigorously.
Removed
In addition, in November 2021, we responded to a request for information from MassDEP regarding the detection of PFAS (per- and polyfluoroakyl substances) in the Acton, Massachusetts Water District’s Conant public water supply wells near the former facility at 531 Main Street, Acton, Massachusetts at a level above the standard that MassDEP published for PFAS in October 2020.
Removed
We have not been contacted by MassDEP since our response was provided in November 2021. It is too early to determine what responsibility, if any, we may have for these environmental matters. On June 19, 2023, our Board of Directors received notice of our former CEO’s resignation from his positions of President and Chief Executive Officer.
Removed
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 he had resigned with good reason during a potential change in control period.
Removed
We dispute these claims and maintain that he resigned without good reason. On September 19, 2023, our former CEO filed for binding arbitration under the employment rules of the American Arbitration Association (“AAA”). An arbitrator was appointed on November 29, 2023, and the arbitration trial has been scheduled for mid-December 2024. On March 25, 2024, the arbitrator denied Mr.
Removed
Aslett’s motion for compensation during the dispute and payment of his legal fees, preserving those matters for the arbitration trial. We intend to contest vigorously the claims under the CIC Agreement and believe that we have strong arguments that our former CEO’s claims lack merit.
Removed
If the arbitrator rules in our favor, we may still need to pay the former CEO’s reasonable legal fees, interest, and compensation during the dispute.
Removed
If instead the arbitrator rules for the former CEO, we could be liable for up to approximately $14.1 million, based on the closing price of our common stock on June 26, 2023, for accelerated equity vesting, severance and other benefits under the CIC Agreement, plus interest, legal fees and expenses and compensation during dispute, which could include Mr.
Removed
Aslett's base salary and other amounts based on the compensation, benefit and insurance plans in which he participated. We categorically deny any wrongdoing or liability under the CIC Agreement, but the outcome of potential arbitration is inherently uncertain.
Removed
Accordingly, it is reasonably possible that we will incur a liability in this matter, and we estimate the potential range of exposure from $0 to $14.1 million, plus costs and attorneys’ fees and compensation to our former CEO during the dispute.
Removed
On December 13, 2023, a securities class action complaint was filed against us, 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 our stock from December 7, 2020, through June 23, 2023.
Removed
The complaint alleged that our 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.
Removed
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.
Removed
We filed a motion to dismiss on May 24, 2024, and after the plaintiffs’ filed their opposition motion and we filed our reply to their opposition, a hearing on the motion was conducted by the Court on July 24, 2024.
Removed
On July 24, 2024, the Court dismissed the case without prejudice and permitted the plaintiffs 30 days to file an amended complaint. Subject to the terms of our by-laws and applicable Massachusetts law, Mr. Aslett, our former Chief Executive Officer, Mr. Ruppert, our former Chief Financial Officer, Mr. Ballhaus, our current Chief Executive Officer, and Mr.
Removed
Farnsworth, our current Chief Financial officer, are indemnified by us for this matter. We believe the claims in the complaint are without merit and intend to defend our self vigorously.
Removed
It is too early to determine what responsibility, if any, we will have for this matter. 27 Table of Contents On January 31, 2024, a former employee at our 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.
Removed
We believe the claims in the complaints are without merit and intend to defend our self vigorously. It is too early to determine what responsibility, if any, Mercury will have for this matter. ITEM 4. MINE SAFETY DISCLOSURES Not Applicable.

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

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Biggest changePreviously, Mr. Kupinsky served as Chief Legal Officer and General Counsel for five public and private technology companies, including Blackboard Inc. (later Anthology Inc. following its acquisition of Blackboard) from 2015 through 2024, one of the largest global education technology companies, and Tekelec, Inc., a public global telecommunications technology company serving the U.S.
Biggest changeKupinsky served as Chief Legal Officer and General Counsel for five public and private technology companies, including Blackboard Inc. (later Anthology Inc. following its acquisition of Blackboard) from 2015 through 2024, one of the largest global education technology companies, and Tekelec, Inc., a public global telecommunications technology company serving the U.S. Department of Defense until its sale to Oracle. Mr.
Ballhaus has also held senior leadership positions at BAE Systems, Boeing, and Hughes, where he led global government and commercial technology businesses particularly focused on software and IT. David E. Farnsworth , age 64, joined Mercury in July 2023 as Executive Vice President and Chief Financial Officer. Mr.
Ballhaus has also held senior leadership positions at BAE Systems, Boeing, and Hughes, where he led global government and commercial technology businesses particularly focused on software and IT. David E. Farnsworth , age 65, joined Mercury in July 2023 as Executive Vice President and Chief Financial Officer. Mr.
Ballhaus , age 57, joined the Company’s Board of Directors as a non-employee director in June 2022, was appointed interim President and Chief Executive Officer on June 24, 2023, and was appointed President and CEO effective August 15, 2023. In October 2023, Mr. Ballhaus became the Company’s Chairman of the Board effective with the annual meeting of shareholders. Mr.
Ballhaus , age 58, joined the Company’s Board of Directors as a non-employee director in June 2022, was appointed interim President and Chief Executive Officer on June 24, 2023, and was appointed President and CEO effective August 15, 2023. In October 2023, Mr. Ballhaus became the Company’s Chairman of the Board effective with the annual meeting of shareholders. Mr.
Ballhaus has significant experience in the aerospace, defense, and technology industries, including multiple CEO roles, as well as experience in operational transformations and delivering strong results. He previously served as Chairman and CEO of Blackboard, Inc., a leading EdTech company, from 2016 until its merger with Anthology in 2021.
Ballhaus has significant experience in the aerospace, defense, and technology industries, including 26 Table of Contents multiple CEO roles, as well as experience in operational transformations and delivering strong results. He previously served as Chairman and CEO of Blackboard, Inc., a leading EdTech company, from 2016 until its merger with Anthology in 2021.
Steven V. Ratner , age 48, joined Mercury in May 2022 as Senior Vice President and Chief Human Resources Officer and in September 2023 he became the Company’s Executive Vice President, Chief Human Resources Officer. Mr. Ratner brings more than 20 years of human resources leadership experience with extensive HR strategy, compensation, and employee engagement expertise.
Ratner , age 49, joined Mercury in May 2022 as Senior Vice President and Chief Human Resources Officer and in September 2023 he became the Company’s Executive Vice President, Chief Human Resources Officer. Mr. Ratner brings more than 25 years of human resources leadership experience with extensive HR strategy, compensation, and employee engagement expertise.
Department of Defense until its sale to Oracle. Mr. Kupinsky was also Chief Counsel for FirstNet, a multibillion-dollar independent government agency building a nationwide network for first responders. Earlier in his career he served as a trial attorney for the U.S. Department of Justice and as a law clerk on the U.S. Court of Appeals for the Federal Circuit.
Kupinsky was also Chief Counsel for FirstNet, a multibillion-dollar independent government agency building a nationwide network for first responders. Earlier in his career he served as a trial attorney for the U.S. Department of Justice and as a law clerk on the U.S. Court of Appeals for the Federal Circuit. Steven V.
Removed
Stephanie Georges , age 61, joined Mercury in April 2019 as Senior Vice President and Chief Marketing Officer and in September 2023 she became the Company’s Executive Vice President and Chief Communications Officer. Prior to Mercury, she was Senior Vice President and Chief Marketing Officer at Maxar Technologies from 2017 to 2019 and its predecessor, DigitalGlobe.
Added
In March 2025, Mr. Farnsworth was appointed as a non-voting Board advisor at V2X Inc., a leading facilities management, logistics and network communications services company. Mr.
Removed
She has also served as Executive Vice President of Corporate Strategy and Development at CenturyLink and at Qwest Communications International. Before joining Qwest, Ms.
Added
Farnsworth is serving as a Board advisor at V2X Inc., until the earlier of his election to the Board of Directors at their 2026 annual meeting of shareholders or an earlier vacancy on their Board. Stuart H. Kupinsky , age 57, joined Mercury in February 2024 as Executive Vice President, Chief Legal Officer, and Corporate Secretary. Previously, Mr.
Removed
Georges spent 18 years covering the Telecommunications Services sector as a top-ranked sell-side analyst at Morgan Stanley and Salomon Brothers where she led the global telecommunications services equity research team and was the lead U.S. telecommunications services analyst. Stuart H. Kupinsky , age 56, joined Mercury in February 2024 as Executive Vice President, Chief Legal Officer, and Corporate Secretary.
Added
He has held numerous HR leadership positions throughout his career. 27 Table of Contents PART II
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He has held numerous HR leadership positions throughout his career. Charles R. Wells, IV , age 52, joined the Company in November 2021 as Executive Vice President and President of Mercury’s Microelectronics Division, and in January 2024 he became the Company's Executive Vice President and Chief Operating Officer. Mr.
Removed
Wells has more than 25 years’ experience across multiple disciplines including engineering, business 28 Table of Contents development, program management and executive management.
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Previously, he served as Vice President and General Manager for the Unmanned & Integrated Solutions Business Unit of Teledyne FLIR from 2018 to 2021 with full P&L responsibility while ensuring high levels of product quality and customer satisfaction.
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Earlier in his career, he worked as a Department of Defense civilian supporting the development and fielding of world-wide C4ISR networks and information systems. He also held positions in Northrop Grumman and ICX Technologies and served as a private consultant for large aerospace and defense companies. 29 Table of Contents PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

3 edited+0 added−0 removed3 unchanged
Biggest changeNet Share Settlement Plans The following table includes information with respect to net share settlements we made of our common stock during the fiscal year ended June 28, 2024: Period of Net Share Settlement Total Number of Shares Net Settled (1) Average Price Per Share July 1, 2023 - September 29, 2023 — $ — September 30, 2022 - December 29, 2023 — $ — December 30, 2023 - March 29, 2024 — $ — March 30, 2023 - June 28, 2024 1 $ 31.58 Total 1 (1) Represents shares we net settled in connection with the surrender of shares to cover the minimum taxes on vesting of restricted stock.
Biggest changeNet Share Settlement Plans During fiscal 2025, we made no net share settlements of our common stock in connection with the surrender of shares to cover the minimum taxes on vesting of restricted stock. Share Repurchase Plans During fiscal 2025, we had no active share repurchase programs.
Presented in thousands. Share Repurchase Plans During fiscal 2024, we had no active share repurchase programs. Equity Compensation Plans The information required by this item is incorporated by reference to our Proxy Statement for the Shareholders Meeting.
Equity Compensation Plans The information required by this item is incorporated by reference to our Proxy Statement for the Shareholders Meeting.
High Low 2024 Fourth quarter $ 32.45 $ 26.61 Third quarter $ 36.05 $ 26.23 Second quarter $ 39.31 $ 31.69 First quarter $ 40.38 $ 33.40 2023 Fourth quarter $ 52.36 $ 31.50 Third quarter $ 56.19 $ 44.56 Second quarter $ 53.58 $ 41.78 First quarter $ 63.66 $ 40.60 As of June 28, 2024, we had 656 record shareholders and 32,036 nominee holders.
High Low 2025 Fourth quarter $ 53.87 $ 41.52 Third quarter $ 49.88 $ 39.67 Second quarter $ 43.91 $ 32.35 First quarter $ 40.12 $ 28.35 2024 Fourth quarter $ 32.45 $ 26.61 Third quarter $ 36.05 $ 26.23 Second quarter $ 39.31 $ 31.69 First quarter $ 40.38 $ 33.40 As of June 27, 2025, we had 461 record shareholders and 45,709 nominee holders.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

75 edited+24 added−46 removed91 unchanged
Biggest changeWe expect to continue to incur expenses similar to the adjusted EBITDA financial adjustments described above, and investors should not infer from our presentation of this non-GAAP financial measure that these costs are unusual, infrequent or non-recurring. 39 Table of Contents The following table reconciles our net (loss) income, the most directly comparable GAAP financial measure, to our adjusted EBITDA: For the Fiscal Years Ended (In thousands) June 28, 2024 June 30, 2023 July 1, 2022 Net (loss) income $ (137,640) $ (28,335) $ 11,275 Other non-operating adjustments, net (592) (1,589) 2,932 Interest (expense) income, net 33,816 24,106 5,663 Income tax (benefit) provision (51,635) (20,207) 7,120 Depreciation 40,369 43,777 33,150 Amortization of intangible assets 47,661 53,552 60,267 Restructuring and other charges (1) 26,170 6,981 27,445 Impairment of long-lived assets — — — Acquisition, financing and other third party costs (2) 4,370 10,019 13,608 Fair value adjustments from purchase accounting 710 356 (2,009) Litigation and settlement expense, net 4,927 495 1,908 COVID related expenses — 67 689 Stock-based and other non-cash compensation expense (3) 41,257 43,031 38,459 Adjusted EBITDA $ 9,413 $ 132,253 $ 200,507 (1) Restructuring and other charges for fiscal 2024 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 product lines.
Biggest changeThe following table reconciles our net loss, the most directly comparable GAAP financial measure, to our adjusted EBITDA: For the Fiscal Years Ended (In thousands) June 27, 2025 June 28, 2024 June 30, 2023 Net loss $ (37,904) $ (137,640) $ (28,335) Other non-operating adjustments, net (7,742) (592) (1,589) Interest expense (income), net 29,823 33,816 24,106 Income tax (benefit) provision (12,520) (51,635) (20,207) Depreciation 39,178 40,369 43,777 Amortization of intangible assets 42,849 47,661 53,552 Restructuring and other charges (1) 7,216 26,170 6,981 Impairment of long-lived assets — — — Acquisition, financing and other third party costs (2) 6,638 4,370 10,019 Fair value adjustments from purchase accounting 617 710 356 Litigation and settlement expense, net 13,010 4,927 495 COVID related expenses — — 67 Stock-based and other non-cash compensation expense (3) 38,273 41,257 43,031 Adjusted EBITDA $ 119,438 $ 9,413 $ 132,253 (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.
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.
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.
(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.
(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.
We undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date on which such statement is made. OVERVIEW Mercury Systems is a technology company that delivers mission-critical processing power to the edge to solve the most pressing aerospace and defense challenges.
We undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date on which such statement is made. OVERVIEW Mercury Systems is a technology company that delivers mission-critical processing to the edge to solve the most pressing aerospace and defense challenges.
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.
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.
We bear the 42 Table of Contents 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.
We bear the 39 Table of Contents 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.
NON-GAAP FINANCIAL MEASURES In our periodic communications, we discuss certain important measures that are not calculated according to U.S. generally accepted accounting principles (“GAAP”), including adjusted EBITDA, adjusted loss, adjusted loss per share, and free cash flow.
NON-GAAP FINANCIAL MEASURES In our periodic communications, we discuss certain important measures that are not calculated according to U.S. generally accepted accounting principles (“GAAP”), including adjusted EBITDA, adjusted income (loss), adjusted earnings (loss) per share, and free cash flow.
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.
This allows them to complete their full system by integrating with their platform, the sensor technology and, increasingly, the processing from Mercury. 29 Table of Contents 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 31 Table of Contents 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 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.
As a leading manufacturer of essential components, products, modules and subsystems, we sell to all of the top defense prime contractors, the U.S. government and original equipment manufacturers (“OEM”) commercial aerospace companies.
As a leading manufacturer of essential components, products, modules and subsystems, we sell to the top U.S. and European defense prime contractors, the U.S. government and original equipment manufacturers (“OEM”) commercial aerospace companies.
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, 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 such as semiconductors, production delays or unanticipated expenses including due to quality issues or manufacturing execution issues, capacity underutilization, increases in scrap or inventory write-offs, failure to achieve or maintain manufacturing quality certifications, such as AS9100, the impact of supply chain disruption, inflation and labor shortages, among other things, on program execution and the resulting effect on customer satisfaction, inability to fully realize the expected benefits from acquisitions, restructurings, and operational efficiency initiatives or delays in realizing such benefits, challenges in integrating acquired businesses and achieving anticipated synergies, effects of shareholder activism, increases in interest rates, changes to industrial security and cyber-security regulations and requirements and impacts from any cyber or insider threat events, changes in tax rates or tax regulations, such as the deductibility of internal research and development, changes to interest rate swaps or other cash flow hedging arrangements, changes to generally accepted accounting principles, difficulties in retaining key employees and customers, litigation, including the dispute arising with the former CEO over his resignation, unanticipated costs under fixed-price service and system integration engagements, and various other factors beyond our control.
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.
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 $9,548 of severance costs.
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.
Receivables Purchase Agreement On September 27, 2022, we entered into an uncommitted receivables purchase agreement (“RPA”), pursuant to which we may offer to sell certain customer receivables, subject to the terms and conditions of the RPA.
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.
During fiscal 2025, on August 13, 2024, we executed Amendment No. 6 to the Revolver, decreasing the permanent borrowing capacity to $900.0 million, with a temporary reduction in credit availability to $750.0 million until we meet a minimum consolidated EBITDA level of $75.0 million excluding (a) adjustments for cost savings, operating expense reductions and synergies, (b) EAC charges and other non-cash expenses, charges, and losses addbacks and (c) deducts to reverse EAC charges previously added back, in each case for a last twelve-month period.
On August 13, 2024, we executed Amendment No. 6 to the Revolver, decreasing the permanent borrowing capacity to $900.0 million, with a temporary reduction in credit availability to $750.0 million until we met a minimum consolidated EBITDA level of $75.0 million excluding (a) adjustments for cost savings, operating expense reductions and synergies, (b) EAC charges and other non-cash expenses, charges, and losses addbacks and (c) deducts to reverse EAC charges previously added back, in each case for a last twelve-month period.
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.
We believe that these non-GAAP financial adjustments are useful to investors because they allow investors to evaluate the effectiveness of the methodology and 36 Table of Contents 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.
Finally, we 43 Table of Contents compared the estimates of our fair values to our total market capitalization to assess the reasonableness of our reporting units’ combined determined fair value.
Finally, we 40 Table of Contents compared the estimates of our fair values to our total market capitalization to assess the reasonableness of our reporting units’ combined determined fair value.
B USINESS D EVELOPMENTS : F ISCAL 2024 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.
F ISCAL 2024 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.
There has been no change to the Company's conclusion of one operating and reportable segment in fiscal 2024.
There has been no change to the Company's conclusion of one operating and reportable segment in fiscal 2025.
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 28, 2024, we had 2,364 employees.
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.
Total revenue recognized under contracts over time was 55% and 56% of revenues for the fiscal years ended June 28, 2024 and June 30, 2023, 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.
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. 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.
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 41 Table of Contents ultimate settlement.
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 45% and 44% of revenues for the fiscal years ended June 28, 2024 and June 30, 2023, respectively.
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.
These losses are recognized in advance of contract performance and as of June 28, 2024, approximately $4.6 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.
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. For over time contracts, we typically leverage the input method, using a cost-to-cost measure of progress.
We had a liability at June 28, 2024 of $7.7 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.
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.
We do not have any majority-owned subsidiaries that are not consolidated in the financial statements. Additionally, we do not have an interest in, or relationships with, any special purpose entities. 38 Table of Contents RELATED PARTY TRANSACTIONS During fiscal 2024 and 2023, we did not engage in any related party transactions.
We do not have any majority-owned subsidiaries that are not consolidated in the financial statements. Additionally, we do not have an interest in, or relationships with, any special purpose entities. RELATED PARTY TRANSACTIONS During fiscal 2025 and 2024, we did not engage in any related party transactions.
A CQUISITION C OSTS AND O THER R ELATED E XPENSES Acquisition costs and other related expenses were $1.7 million during fiscal 2024, as compared to $8.4 million during fiscal 2023.
A CQUISITION C OSTS AND O THER R ELATED E XPENSES Acquisition costs and other related expenses were $2.0 million during fiscal 2025, as compared to $1.7 million during fiscal 2024.
We intend to use the proceeds from financings using the shelf registration statement for general corporate purposes, which may include the following: • the acquisition of other companies or businesses; • the repayment and refinancing of debt; • capital expenditures; • working capital; and • other purposes as described in the prospectus supplement. 36 Table of Contents We have an unlimited amount available under the shelf registration statement.
We intend to use the proceeds from financings using the shelf registration statement for general corporate purposes, which may include the following: • the acquisition of other companies or businesses; • the repayment and refinancing of debt; • capital expenditures; • working capital; and • other purposes as described in the prospectus supplement.
The following table reconciles cash provided by (used in) operating activities, the most directly comparable GAAP financial measure, to free cash flow: For the Fiscal Years Ended (In thousands) June 28, 2024 June 30, 2023 July 1, 2022 Net cash provided by (used in) operating activities $ 60,382 $ (21,254) $ (18,869) Purchase of property and equipment (34,291) (38,796) (27,656) Free cash flow $ 26,091 $ (60,050) $ (46,525) 41 Table of Contents CRITICAL ACCOUNTING POLICIES AND SIGNIFICANT JUDGMENTS AND ESTIMATES We have identified the policies discussed below as critical to understanding our business and our results of operations.
The following table reconciles cash provided by (used in) 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) Purchase of property and equipment (19,803) (34,291) (38,796) Free cash flow $ 119,048 $ 26,091 $ (60,050) 38 Table of Contents CRITICAL ACCOUNTING POLICIES AND SIGNIFICANT JUDGMENTS AND ESTIMATES We have identified the policies discussed below as critical to understanding our business and our results of operations.
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. During fiscal 2024, we borrowed $105.0 million and paid down $25.0 million.
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.
The effective tax rate for fiscal 2023 differed from the federal statutory rate primarily due to federal and state research and development tax credits, releases to reserves for unrecognized income tax benefits and state taxes, partially offset by valuation allowances recorded and tax provisions 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.
We expect to continue to incur expenses similar to the adjusted income and adjusted EPS financial adjustments described above, and investors should not infer from our presentation of these non-GAAP financial measures that these costs are unusual, infrequent or non-recurring. 40 Table of Contents The following table reconciles net (loss) income and diluted (loss) earnings per share, the most directly comparable GAAP financial measures, to adjusted income and adjusted EPS: For the Fiscal Years Ended (In thousands, except per share data) June 28, 2024 June 30, 2023 July 1, 2022 Net (loss) income and diluted (loss) earnings per share $ (137,640) $ (2.38) $ (28,335) $ (0.50) $ 11,275 $ 0.20 Other non-operating adjustments, net (592) (1,589) 2,932 Amortization of intangible assets 47,661 53,552 60,267 Restructuring and other charges (1) 26,170 6,981 27,445 Impairment of long-lived assets — — — Acquisition, financing and other third party costs (2) 4,370 10,019 13,608 Fair value adjustments from purchase accounting 710 356 (2,009) Litigation and settlement expense, net 4,927 495 1,908 COVID related expenses — 67 689 Stock-based and other non-cash compensation expense (3) 41,257 43,031 38,459 Impact to income taxes (4) (26,621) (27,776) (32,309) Adjusted (loss) income and adjusted (loss) earnings per share $ (39,758) $ (0.69) $ 56,801 $ 1.00 $ 122,265 $ 2.19 Diluted weighted-average shares outstanding 57,738 56,874 55,901 (1) Restructuring and other charges for fiscal 2024 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 product lines.
We expect to continue to incur expenses similar to the adjusted income and adjusted EPS financial adjustments described above, and investors should not infer from our presentation of these non-GAAP financial measures that these costs are unusual, infrequent or non-recurring. 37 Table of Contents The following table reconciles net loss and diluted loss per share, the most directly comparable GAAP financial measures, to adjusted income and adjusted EPS: For the Fiscal Years Ended (In thousands, except per share data) June 27, 2025 June 28, 2024 June 30, 2023 Net loss and diluted loss per share $ (37,904) $ (0.65) $ (137,640) $ (2.38) $ (28,335) $ (0.50) Other non-operating adjustments, net (7,742) (592) (1,589) Amortization of intangible assets 42,849 47,661 53,552 Restructuring and other charges (1) 7,216 26,170 6,981 Impairment of long-lived assets — — — Acquisition, financing and other third party costs (2) 6,638 4,370 10,019 Fair value adjustments from purchase accounting 617 710 356 Litigation and settlement expense, net 13,010 4,927 495 COVID related expenses — — 67 Stock-based and other non-cash compensation expense (3) 38,273 41,257 43,031 Impact to income taxes (4) (25,091) (26,621) (27,776) Adjusted income (loss) and adjusted diluted earnings (loss) per share $ 37,866 $ 0.64 $ (39,758) $ (0.69) $ 56,801 $ 1.00 Diluted weighted-average shares outstanding 59,203 57,738 56,874 (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.
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 Charles R.
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.
The acquisition costs and other related expenses we incurred during fiscal 2024 includes $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 35 Table of Contents by activist investors.
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.
If it becomes more likely than not that a tax asset will be used for which a reserve has been provided, we reverse the 44 Table of Contents related valuation allowance. If our actual future taxable income by tax jurisdiction differs from estimates, additional allowances or reversals of reserves may be necessary.
If it becomes more likely than not that a tax asset will be used for which a reserve has been provided, we reverse the related valuation allowance. If our actual future taxable income by tax jurisdiction differs from estimates, additional allowances or reversals of reserves may be necessary. We use a two-step approach to recognize and measure uncertain tax positions.
I NCOME T AXES We recorded an income tax benefit of $51.6 million and $20.2 million on losses before income taxes of $189.3 million and $48.5 million for fiscal years 2024 and 2023, 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 utilize the latest and best information available when revising our estimates and apply consistent judgement across the full portfolio of programs. S ELLING , G ENERAL AND A DMINISTRATIVE Selling, general and administrative expenses increased $6.2 million, or 3.8%, to $166.8 million during fiscal 2024 as compared to $160.6 million during fiscal 2023.
We utilize the latest and best information available when revising our estimates and apply consistent judgement across the full portfolio of programs. S ELLING , G ENERAL AND A DMINISTRATIVE Selling, general and administrative expenses decreased $12.4 million, or 7.4%, to $154.4 million during fiscal 2025 as compared to $166.8 million during fiscal 2024.
We use a two-step approach to recognize and measure uncertain tax positions. First, the tax position must be evaluated to determine the likelihood that it will be sustained upon external examination. 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.
First, the tax position must be evaluated to determine the likelihood that it will be sustained upon external examination. 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.
On August 13, 2024, during fiscal 2025, we entered into Amendment No. 6 (“Amendment No. 6”) to our credit agreement dated May 2, 2016, as amended to date.
B USINESS D EVELOPMENTS : F ISCAL 2025 On August 13, 2024, we entered into Amendment No. 6 (“Amendment No. 6”) to our credit agreement dated May 2, 2016, as amended to date.
The discount rates for Microelectronics and Mission Systems were 9.0%, and 8.5%, respectively. The annual testing indicated that the Mission Systems reporting unit had an estimated fair value in excess of their carrying value of 5.0% and the Microelectronics reporting unit had an estimated fair value that substantially exceeded its carrying value.
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.
During fiscal 2024, our working capital balance declined $93.3 million compared to the prior year. 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.
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.
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.
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. 30 Table of Contents 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.
The largest program decreases were related to the LTAMDS, THAAD and F-16 programs, partially offset by increases to the SCAR and a strategic weapons programs when compared to the prior period. There were no programs comprising 10% or more of our revenues for fiscal 2024 and 2023.
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. There were no programs comprising 10% or more of our revenues for fiscal 2025 or 2024.
Our consolidated revenues, net loss, diluted net loss per share, adjusted loss per share and adjusted EBITDA for fiscal 2023 were $973.9 million, $(28.3) million, $(0.50), $1.00 and $132.3 million, respectively. See the Non-GAAP Financial Measures section for a reconciliation to our most directly comparable GAAP financial measures.
Our consolidated revenues, net loss, diluted net loss per share, adjusted 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. See the Non-GAAP Financial Measures section for a reconciliation to our most directly comparable GAAP financial measures.
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 2024 are related to financing costs, and the conclusion of the Board's review of strategic alternatives.
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.
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 2024 are related to financing costs, and the conclusion of the Board's review of strategic alternatives.
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.
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.
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. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS See Note B to consolidated financial statements (under the caption “Recently Issued Accounting Pronouncements”).
There was $2.3 million of financing costs and $2.1 million of litigation and settlement costs, partially offset by net foreign currency translation gains of $1.6 million during fiscal 2023.
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.
The following tables set forth, for the periods indicated, financial data from the Consolidated Statements of Operations and Comprehensive (Loss) Income: (In thousands) Fiscal 2024 As a % of Total Net Revenue Fiscal 2023 As a % of Total Net Revenue Net revenues $ 835,275 100.0 % $ 973,882 100.0 % Cost of revenues 639,374 76.5 657,154 67.5 Gross margin 195,901 23.5 316,728 32.5 Operating expenses: Selling, general and administrative 166,786 20.1 160,637 16.5 Research and development 101,328 12.1 108,799 11.2 Amortization of intangible assets 47,661 5.7 53,552 5.5 Restructuring and other charges 26,170 3.1 6,981 0.7 Acquisition costs and other related expenses 1,710 0.2 8,444 0.8 Total operating expenses 343,655 41.2 338,413 34.7 Loss from operations (147,754) (17.7) (21,685) (2.2) Interest income 1,199 0.1 1,053 0.1 Interest expense (35,015) (4.2) (25,159) (2.6) Other expense, net (7,705) (0.9) (2,751) (0.3) Loss before income taxes (189,275) (22.7) (48,542) (5.0) Income tax benefit (51,635) (6.2) (20,207) (2.1) Net loss $ (137,640) (16.5) % $ (28,335) (2.9) % R EVENUES Total revenues decreased $138.6 million, or 14.2%, to $835.3 million during fiscal 2024, as compared to $973.9 million during fiscal 2023.
The following tables set forth, for the periods indicated, financial data from the Consolidated Statements of Operations and Comprehensive Loss: (In thousands) Fiscal 2025 As a % of Total Net Revenue Fiscal 2024 As a % of Total Net Revenue Net revenues $ 912,020 100.0 % $ 835,275 100.0 % Cost of revenues 657,526 72.1 639,374 76.5 Gross margin 254,494 27.9 195,901 23.5 Operating expenses: Selling, general and administrative 154,412 16.9 166,786 20.1 Research and development 67,647 7.4 101,328 12.1 Amortization of intangible assets 42,849 4.7 47,661 5.7 Restructuring and other charges 7,216 0.8 26,170 3.1 Acquisition costs and other related expenses 1,997 0.2 1,710 0.2 Total operating expenses 274,121 30.0 343,655 41.2 Loss from operations (19,627) (2.1) (147,754) (17.7) Interest income 3,607 0.4 1,199 0.1 Interest expense (33,430) (3.7) (35,015) (4.2) Other expense, net (974) (0.1) (7,705) (0.9) Loss before income tax benefit (50,424) (5.5) (189,275) (22.7) Income tax benefit (12,520) (1.4) (51,635) (6.2) Net loss $ (37,904) (4.1) % $ (137,640) (16.5) % R EVENUES Total revenues increased $76.7 million, or 9.2%, to $912.0 million during fiscal 2025, as compared to $835.3 million during fiscal 2024.
The decrease in total revenue was primarily driven by the radar, C4I, and electronic warfare end applications decreases of $119.1 million, $25.6 million, and $23.9 million, respectively, partially offset by increases to other sensor and effector end applications of $16.4 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 had $591.5 million in outstanding borrowings both prior to and following the closing of Amendment No. 6.
We had $591.5 million in outstanding borrowings both prior to and following the closing of Amendment No. 6. See Note L in the accompanying consolidated financial statements for further discussions of the Revolver.
G ROSS M ARGIN Gross margin was 23.5% for fiscal 2024, a decrease of 900 basis points from the 32.5% gross margin realized during fiscal 2023.
G ROSS M ARGIN Gross margin was 27.9% for fiscal 2025, an increase of 440 basis points from the 23.5% gross margin realized during fiscal 2024.
The remaining $43.0 million was incurred across certain other development and production programs based on facts and circumstances in the year. 34 Table of Contents 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 28, 2024 June 30, 2023 Gross favorable $ 17,622 $ 12,291 Gross unfavorable (90,867) (68,557) Net impact of changes in estimates $ (73,245) $ (56,266) The changes in estimates are assessed based on historical results and cumulative adjustments are recorded to recognize revenue to date based on changes in estimated margin on programs, including impact of contract amendments, factored for potential risks and opportunities.
We 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 Gross favorable $ 26,642 $ 17,622 Gross unfavorable (47,712) (90,867) Net impact of changes in estimates $ (21,070) $ (73,245) 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.
All of the Restructuring and Other Charges is classified as Operating expenses in the Consolidated Statements of Operations and Comprehensive (Loss) Income and any remaining restructuring obligations are expected to be paid within the next twelve months.
Restructuring and other charges during fiscal 2024 include $26.2 million of severance costs related to workforce reductions that eliminated approximately 350 positions. 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.
We experienced decreases across several of our platforms during fiscal 2024 when compared to fiscal 2023; Airborne, Land, and Naval platforms decreased $60.9 million, $50.3 million, and $36.0 million, respectively, partially offset by an increase to Other platforms of $8.6 million.
We experienced increases across several of our platforms during fiscal 2025 when compared to fiscal 2024; 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.
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.
R ESEARCH AND D EVELOPMENT Research and development expenses decreased $7.5 million, or 6.9%, to $101.3 million during fiscal 2024, as compared to $108.8 million for fiscal 2023.
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. R ESEARCH AND D EVELOPMENT Research and development expenses decreased $33.7 million, or 33.3%, to $67.6 million during fiscal 2025, as compared to $101.3 million for fiscal 2024.
I NTEREST E XPENSE Interest expense for fiscal 2024 increased to $35.0 million, as compared to $25.2 million in fiscal 2023. The increase was driven by an increase in interest rates and higher average borrowings on our Revolver. Borrowings under our Revolver were $591.5 million and $511.5 million at June 28, 2024 and June 30, 2023, respectively.
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. 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.
The lower gross margin was driven by net EAC change impacts to revenue programs recognized over time and higher manufacturing adjustments of $44.9 million, related to inventory reserves, warranty expense, scrap, and certain other non-recurring cost adjustments.
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.
On January 12, 2024, we initiated and approved a workforce reduction that eliminated approximately 100 positions resulting in $9.8 million of severance costs. On June 17, 2024, we approved and initiated workforce reductions that eliminated an additional 100 positions resulting in $6.8 million of severance costs.
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.
The RPSA has an initial term of two years. Pursuant to the RPSA, the new party has committed to purchase receivables at a discount rate from a list of our customers, maintaining a balance of purchased receivables at or below $60 million.
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 continue to maintain a valuation allowance on the majority of our foreign net operating loss carryforwards and state research and development tax credit carryforwards. Based on forecasted taxable income and the scheduled reversal of the remaining deferred tax assets, we believe it is more likely than not that all other deferred tax assets will be realized.
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. The realizability of deferred tax assets is continuously monitored, and the need for a valuation allowance is reassessed each reporting period based on the best available information.
Purchase obligations represent open non-cancelable purchase commitments for certain inventory components and services used in normal operations. The purchase commitments covered by these agreements are for less than one year and aggregated $122.2 million at June 28, 2024.
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.
Investing Activities During fiscal 2024, we invested $34.3 million, a decrease of $4.3 million, as compared to $38.6 million during fiscal 2023 primarily due to lower purchases of property and equipment. Financing Activities During fiscal 2024, we had $82.7 million in cash provided by financing activities, as compared to $65.4 million during fiscal 2023.
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.
See Note L in the accompanying consolidated financial statements for further discussion of 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. See Note L in the accompanying consolidated financial statements for further discussion of the Revolver.
A MORTIZATION OF I NTANGIBLE A SSETS Amortization of intangible assets decreased $5.9 million to $47.7 million during fiscal 2024, as compared to $53.6 million for fiscal 2023, primarily due to the backlog from our Avalex acquisition becoming fully amortized in fiscal 2023, and various other developed technologies, and customer relationship intangibles from previous acquisitions becoming fully amortized during fiscal 2024.
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. 32 Table of Contents 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.
The increase during fiscal 2024 was primarily due to an inflow of $76.5 million from accounts receivable, unbilled receivables and costs in excess of billings as compared to a $58.7 million outflow in fiscal 2023. Fiscal 2024 included a lower outflow due to the benefit for deferred income taxes.
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.
CASH FLOWS For the Fiscal Years Ended (In thousands) June 28, 2024 June 30, 2023 Net cash provided by (used in) operating activities $ 60,382 $ (21,254) Net cash used in investing activities $ (34,291) $ (38,561) Net cash provided by financing activities $ 82,680 $ 65,429 Net increase in cash and cash equivalents $ 108,958 $ 5,909 Cash and cash equivalents at end of year $ 180,521 $ 71,563 Our cash and cash equivalents increased by $109.0 million during fiscal 2024 primarily as the result of $80.0 million net borrowings on our Revolver and $60.4 million provided by operating activities, partially offset by $34.3 million invested in purchases of property and equipment. 37 Table of Contents Operating Activities During fiscal 2024, we had an inflow of $60.4 million in cash from operating activities compared to a $21.3 million outflow during fiscal 2023.
CASH FLOWS For the Fiscal Years Ended (In thousands) June 27, 2025 June 28, 2024 Net cash provided by operating activities $ 138,851 $ 60,382 Net cash used in investing activities $ (13,500) $ (34,291) Net cash provided by financing activities $ 1,412 $ 82,680 Net increase in cash and cash equivalents $ 128,578 $ 108,958 Cash and cash equivalents at end of year $ 309,099 $ 180,521 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.
During fiscal 2024, we had $80.0 million of net borrowings on our Revolver as compared to $60.0 million of net borrowings during fiscal 2023. In fiscal 2024, we also had $4.6 million of proceeds from employee stock plans, as compared to $5.5 million in fiscal 2023.
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.
We factored accounts receivable and incurred factoring fees of approximately $33.8 million and $1.9 million, respectively, in fiscal 2024. We factored accounts receivable and incurred factoring fees of approximately $30.5 million and $0.6 million, respectively, in fiscal 2023. On August 13, 2024, we entered into a $60.0 million committed receivables purchase and servicing agreement (“RPSA”) with a new party.
On August 13, 2024, we terminated the RPA in conjunction with entering into a new receivables purchase and service agreement. 34 Table of Contents 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.
C OMMITMENTS AND C ONTRACTUAL O BLIGATIONS The following is a schedule of our commitments and contractual obligations outstanding at June 28, 2024: (In thousands) Total Less Than 1 Year 1-3 Years 3-5 Years More Than 5 Years Operating leases $ 89,190 $ 15,286 $ 27,516 $ 23,482 $ 22,906 Purchase obligations 122,195 122,195 — — — $ 211,385 $ 137,481 $ 27,516 $ 23,482 $ 22,906 See Note B and Note I to the consolidated financial statements for more information regarding our obligations under leases.
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. 35 Table of Contents C OMMITMENTS AND C ONTRACTUAL O BLIGATIONS The following is a schedule of our commitments and contractual obligations outstanding at June 27, 2025: (In thousands) Total Less Than 1 Year 1-3 Years 3-5 Years More Than 5 Years Operating leases $ 74,742 $ 14,368 $ 27,045 $ 20,388 $ 12,941 Purchase obligations 206,386 181,186 18,900 6,300 — $ 281,128 $ 195,554 $ 45,945 $ 26,688 $ 12,941 See Note B and Note I to the consolidated financial statements for more information regarding our obligations under leases.
As a result, we are observing a temporary volume shift in our total revenue, including our point in 33 Table of Contents time revenue and over time revenue which decreased by approximately $56.3 million and $82.3 million, respectively. Over time revenue represented 55% of total revenues during fiscal 2024, as compared to 56% of total revenues during fiscal 2023.
Point in time revenue and over time revenue represented 53% and 47%, respectively, of total revenue during fiscal 2025. Point in time revenue increased $112.3 million and 31 Table of Contents over time revenue decreased $35.5 million as we transitioned many of our development programs to production.
We experienced growth in our working capital balances and, in particular, related to unbilled receivables and inventory over fiscal 2022 and 2023. As we complete our challenged programs and then receive follow-on production awards, we believe that both unbilled receivables and inventory is expected to convert to cash reducing our working capital balances.
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.
The decrease was primarily due to lower compensation expense of $1.9 million associated with headcount reductions of 128 employees in fiscal 2024 as well as higher CRAD of $15.4 million in the period, partially offset by higher bonus expenses of $3.1 million.
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.
F ISCAL 2023 The Company has applied the FAST Act Modernization and Simplification of Regulation S-K, which limits the discussion to the two most recent fiscal years. Refer to Item 7 of the Company's Form 10-K issued on August 15, 2023 for prior year discussion related to fiscal 2023.
See Note H in the accompanying consolidated financial statements for further discussions of restructuring charges incurred during the year. RESULTS OF OPERATIONS: F ISCAL 2025 V S . F ISCAL 2024 Refer to Item 7 of the Company's Form 10-K issued on August 13, 2024 for prior year discussion related to fiscal 2024.
O THER E XPENSE, N ET Other expense, net was $7.7 million during fiscal 2024, as compared to $2.8 million in fiscal 2023. Fiscal 2024 includes $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.
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.
Removed
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.
Added
On January 29, 2025, we executed a workforce reduction that eliminated approximately 145 positions, which resulted in restructuring charges of $4.9 million for employee separation costs, which costs are classified as restructuring and other charges within our statement of operations and other comprehensive income.
Removed
Wells, IV, who was appointed as our 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.
Added
The headcount savings, primarily within R&D and cost of revenues, are expected to yield annualized savings of approximately $15 million, a portion of which is expected to be reinvested in the business with the remainder supporting improved profitability and operating leverage for our fiscal year 2026.
Removed
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.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

14 edited+0 added−10 removed22 unchanged
Biggest changeThere were $591.5 million of outstanding borrowings against the Revolver at June 28, 2024. 45 Table of Contents C ONCENTRATION O F C REDIT R ISK Financial instruments that potentially expose the Company to concentrations of credit risk consist principally of cash, cash equivalents, accounts receivable, unbilled receivables and costs in excess of billings.
Biggest changeC ONCENTRATION O F C REDIT R ISK Financial instruments that potentially expose the Company to concentrations of credit risk consist principally of cash, cash equivalents, accounts receivable, unbilled receivables and costs in excess of billings. We place our cash and cash equivalents with financial institutions with high credit quality.
F OREIGN C URRENCY R ISK We operate primarily in the United States; however, we conduct business outside the United States through our foreign subsidiaries in Switzerland, the United Kingdom, Spain, and Canada where business is largely transacted in non-U.S. dollar currencies. Accordingly, we are subject to exposure from adverse movements in the exchange rates of local currencies.
F OREIGN C URRENCY R ISK We operate primarily in the United States; however, we conduct business outside the United States through our foreign subsidiaries in Switzerland, the United Kingdom and Spain where business is largely transacted in non-U.S. dollar currencies. Accordingly, we are subject to exposure from adverse movements in the exchange rates of local currencies.
We may, however, hedge such exposure to foreign currency exchange rate fluctuations in the future. 46 Table of Contents R EPORT OF I NDEPENDENT R EGISTERED P UBLIC A CCOUNTING F IRM To the Shareholders and Board of Directors Mercury Systems, Inc.: Opinions on the Consolidated Financial Statements and Internal Control Over Financial Reporting We have audited the accompanying consolidated balance sheets of Mercury Systems, Inc. and subsidiaries (the Company) as of June 28, 2024 and June 30, 2023, the related consolidated statements of operations and comprehensive (loss) income, shareholders’ equity, and cash flows for each of the fiscal years in the three-year period ended June 28, 2024, and the related notes and financial statement schedule II - valuation and qualifying accounts (collectively, the consolidated financial statements).
We may, however, hedge such exposure to foreign currency exchange rate fluctuations in the future. 42 Table of Contents R EPORT OF I NDEPENDENT R EGISTERED P UBLIC A CCOUNTING F IRM To the Shareholders and Board of Directors Mercury Systems, Inc.: Opinions on the Consolidated Financial Statements and Internal Control Over Financial Reporting We have audited the accompanying consolidated balance sheets of Mercury Systems, Inc. and subsidiaries (the Company) as of June 27, 2025 and June 28, 2024, the related consolidated statements of operations and comprehensive loss, shareholders’ equity, and cash flows for each of the years in the three-year period ended June 27, 2025, and the related notes and financial statement schedule II - valuation and qualifying accounts (collectively, the consolidated financial statements).
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of June 28, 2024 and June 30, 2023, and the results of its operations and its cash flows for each of the fiscal years in the three-year period ended June 28, 2024, in conformity with U.S. generally accepted accounting principles.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of June 27, 2025 and June 28, 2024, and the results of its operations and its cash flows for each of the years in the three-year period ended June 27, 2025, in conformity with U.S. generally accepted accounting principles.
Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of June 28, 2024 based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of June 27, 2025 based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
We also have audited the Company’s internal control over financial reporting as of June 28, 2024, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
We also have audited the Company’s internal control over financial reporting as of June 27, 2025, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. 47 Table of Contents Critical Audit Matters The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments.
Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. 43 Table of Contents Critical Audit Matters The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments.
We perform ongoing credit evaluations of our customers’ financial condition and limit the amount of credit extended when deemed necessary. As of June 28, 2024, five customers accounted for 51% of our receivables, unbilled receivables and costs in excess of billings.
We perform ongoing credit evaluations of our customers’ financial condition and limit the amount of credit extended when deemed necessary. As of June 27, 2025, five customers accounted for 48% of our receivables, unbilled receivables and costs in excess of billings.
Estimate of total contract costs to be incurred for certain fixed price contract revenue recognized over time As discussed in Note B to the consolidated financial statements, revenue recognized over time for the year ended June 28, 2024 represented 55% of total revenues.
Estimate of total contract costs to be incurred for certain fixed price contract revenue recognized over time As discussed in Note B to the consolidated financial statements, revenue recognized over time for the year ended June 27, 2025 represented 47% of total revenues.
The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
We place our cash and cash equivalents with financial institutions with high credit quality. As of June 28, 2024 and June 30, 2023, we had $180.5 million and $71.6 million, respectively, of cash and cash equivalents on deposit or invested with our financial and lending institutions. We provide credit to customers in the normal course of business.
As of June 27, 2025 and June 28, 2024, we had $309.1 million and $180.5 million, respectively, of cash and cash equivalents on deposit or invested with our financial and lending institutions. We provide credit to customers in the normal course of business.
As of June 30, 2023, five customers accounted for 48% of our receivables, unbilled receivables and costs in excess of billings.
As of June 28, 2024, five customers accounted for 51% of our receivables, unbilled receivables and costs in excess of billings.
We inspected correspondence, if any, between the Company and the customers for the selected contracts as part of our evaluation of contract progress.
We inspected correspondence, if any, between the Company and the customers for the selected contracts as part of our evaluation of contract progress. /s/ KPMG LLP We have served as the Company’s auditor since 2006. Boston, Massachusetts August 11, 2025 44 Table of Contents
We utilize interest rate derivatives to mitigate interest rate exposure with respect to our financing arrangements.
We utilize interest rate derivatives to mitigate interest rate exposure with respect to our financing arrangements. There were $591.5 million of outstanding borrowings against the Revolver at June 27, 2025.
Removed
Valuation of goodwill for the Mission Systems reporting unit as of an interim period As discussed in Notes B and F to the consolidated financial statements, the Company’s consolidated goodwill balance as of June 28, 2024 was 938.1 million, which included goodwill related to the Mission Systems reporting unit.
Removed
Annually, or whenever events or changes in circumstances indicate potential asset impairment has occurred, the Company assesses goodwill for impairment.
Removed
As a result of the sustained decline in the Company’s stock price and overall market capitalization during the third quarter ended March 29, 2024, along with other qualitative considerations, management concluded that there was a triggering event for its Mission Systems reporting unit that required an interim impairment test.
Removed
We identified the evaluation of the fair value of Mission Systems reporting unit goodwill as a critical audit matter. Subjective and challenging auditor judgment and specialized skills and knowledge were required to evaluate certain assumptions used to determine the fair value of the reporting unit in the Company’s third quarter impairment test.
Removed
These assumptions included forecasted revenue growth rates including the terminal growth rate, margin rates, and net working capital adjustments used in determining the forecasted cash flows, and the discount rate.
Removed
Minor changes to these assumptions could have had a significant effect on the fair value determined and the resulting assessment of the carrying value of the Mission Systems reporting unit goodwill. The following are the primary procedures we performed to address this critical audit matter.
Removed
We evaluated the design and tested the operating effectiveness of certain internal controls related to the Company’s goodwill impairment process, including certain controls related to management’s determination of the above assumptions. We evaluated the Company’s ability to forecast cash flows by comparing historical forecasts to actual results.
Removed
We also assessed the current industry, macroeconomic and market conditions and trends, and the Company’s historical results in evaluating the assumptions described above.
Removed
We involved valuation professionals with specialized skills and knowledge, who assisted in: • evaluating the terminal growth rate by comparing to publicly available market data • evaluating the discount rate used by the Company by comparing the Company’s inputs to the discount rate to publicly available data for comparable entities and assessing the resulting discount rate 48 Table of Contents /s/ KPMG LLP We have served as the Company’s auditor since 2006.
Removed
Boston, Massachusetts August 13, 2024 49 Table of Contents

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