MERCURY SYSTEMS INC

Previous wording

The Mercury Processing Platform is the unique advantage we provide to our customers. It comprises the innovative technologies we’ve developed and acquired for more than 40 years that bring integrated, mission-critical processing capabilities to the edge. Our processing platform spans the full breadth of signal processing—from radio frequency (“RF”) front end to the human-machine interface—to rapidly convert meaningful data, gathered in the most remote and hostile environments, into critical decisions. It allows us to offer standard products and custom solutions from silicon to system scale, including components, modules, subsystems, and systems and it embodies the customer-centric approach we take to delivering capabilities that are mission-ready, trusted and secure, software-defined, and open and modular.

Current wording

Combining technologies and expertise developed for more than 40 years, the Mercury Processing Platform offers customers a unique advantage to unleash breakthrough capabilities. It spans the full breadth of signal processing—from RF front end to the human-machine interface—to rapidly convert meaningful data, gathered in the most remote and hostile environments, into critical decisions. The Processing Platform allows Mercury to offer standard products and custom integrated solutions from silicon to system scale, including components, modules, subsystems, and systems.

Previous wording

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

Current wording

Mercury’s products and integrated solutions are deployed in more than 300 programs and across 35 countries. The company is headquartered in Andover, Massachusetts, and has more than 20 locations worldwide.

Previous wording

As of December 27, 2024, we had 2,374 employees. We employ hardware and software architects and design engineers, primarily engaged in engineering and research and product development activities to achieve our objectives to fully capitalize upon and maintain our technological leads in the high-performance, real-time sensor processing industry and in mission computing, platform management and other safety-critical applications. Our talent attraction, engagement and retention is critical to execute on our long-term strategy. We invest in our culture and values to drive employee engagement that turns ideas into action, delivering trusted and secure solutions at the speed of innovation. 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. We are committed to providing an inclusive environment that respects the varied backgrounds and viewpoints of our employees. We believe that the workforce required to grow our business and deliver creative solutions must be rich in diverse thought; and experience. Our initiatives focus on building and maintaining the talent that will create cohesive and collaborative teams that drive innovation. By adhering to these values, it will help our employees to realize their full potential at work to provide Innovation That Matters®.

Current wording

As of March 28, 2025, we had 2,200 employees. We employ hardware and software architects and design engineers, primarily engaged in engineering and research and product development activities to achieve our objectives to fully capitalize upon and maintain our technological leads in the high-performance, real-time sensor processing industry and in mission computing, platform management and other safety-critical applications. Our talent attraction, engagement and retention is critical to execute on our long-term strategy. We invest in our culture and values to drive employee engagement that turns ideas into action, delivering trusted and secure solutions at the speed of innovation. 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. We are committed to providing an inclusive environment that respects the varied backgrounds and viewpoints of our employees. We believe that the workforce required to grow our business and deliver creative solutions must be rich in diverse thought and experience. Our initiatives focus on building and maintaining the talent that will create cohesive and collaborative teams that drive innovation. By adhering to these values, it will help our employees to realize their full potential at work to provide Innovation That Matters®.

Previous wording

Our consolidated revenues, net loss, diluted net loss per share, adjusted earnings per share (“adjusted EPS”), and adjusted EBITDA for the second quarter ended December 27, 2024 were $223.1 million, ($17.6) million, ($0.30), $0.07, and $22.0 million, respectively. Our consolidated revenues, net loss, diluted net loss per share, adjusted earnings per share (“adjusted EPS”), and adjusted EBITDA for the six months ended December 27, 2024 were $427.6 million, ($35.1) million, ($0.60), $0.11, and $43.5 million, respectively. See the Non-GAAP Financial Measures section for a reconciliation to our most directly comparable GAAP financial measures.

Current wording

Our consolidated revenues, net loss, diluted net loss per share, adjusted earnings per share (“adjusted EPS”), and adjusted EBITDA for the third quarter ended March 28, 2025 were $211.4 million, ($19.2) million, ($0.33), $0.06, and $24.7 million, respectively. Our consolidated revenues, net loss, diluted net loss per share, adjusted earnings per share (“adjusted EPS”), and adjusted EBITDA for the nine months ended March 28, 2025 were $638.9 million, ($54.3) million, ($0.93), $0.17, and $68.2 million, respectively. See the Non-GAAP Financial Measures section for a reconciliation to our most directly comparable GAAP financial measures.

Previous wording

There were 13 weeks included in the results of operations for the second quarters ended December 27, 2024 and December 29, 2023, respectively. The results for the second quarter ended December 27, 2024 are not necessarily indicative of the results to be expected for the full fiscal year.

Current wording

There were 13 weeks included in the results of operations for the third quarters ended March 28, 2025 and March 29, 2024, respectively. The results for the third quarter ended March 28, 2025 are not necessarily indicative of the results to be expected for the full fiscal year.

Previous wording

The second quarter ended December 27, 2024 compared to the second quarter ended December 29, 2023

Current wording

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

Previous wording

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

Current wording

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

Previous wording

Total revenues increased $25.7 million, or 13.0%, to $223.1 million during the second quarter ended December 27, 2024, as compared to $197.5 million during the second quarter ended December 29, 2023. Revenues increased year over year as we pivoted our resources in fiscal 2024 to executing on our program base, including progress toward full rate production of our common processing architecture. Point in time revenue and over time revenue represented 55% and 45% of total revenues during the second quarter ended December 27, 2024, an increase of $29.1 million and decrease of $3.4 million, respectively. Point in time revenue and over time revenue represented 47% and 53% respectively, of total revenues during the second quarter ended December 29, 2023.

Current wording

Total revenues increased $3.1 million, or 1.5%, to $211.4 million during the third quarter ended March 28, 2025, as compared to $208.3 million during the third quarter ended March 29, 2024. Revenues increased year over year as we pivoted our resources in fiscal 2024 to executing on our program base, including progress toward full rate production of our common processing architecture programs. Point in time revenue and over time revenue represented 53% and 47%, respectively, of total revenues during the third quarter ended March 28, 2025, an increase of $24.9 million and decrease of $21.8 million, respectively. Point in time revenue and over time revenue represented 42% and 58% respectively, of total revenues during the third quarter ended March 29, 2024.

Previous wording

Revenue increases by product grouping were driven by the integrated solutions, components, and modules and sub-assemblies which increased $18.3 million, $3.9 million, and $3.4 million, respectively during the second quarter ended December 27, 2024 when compared to the prior period. The increase in total revenue by end application was primarily driven by the radar and other end applications with increases of $36.0 million and $14.8 million respectively, partially offset by decreases to C4I and electronic warfare of $22.5 million and $2.2 million, respectively. The increase in total revenue by platform was also driven by higher Land, Naval, Other, and Space of $16.7 million, $13.5 million, $10.1 million, and $7.3 million, respectively, partially offset by a decrease to Airborne of $21.9 million. The largest program increases were related to LTAMDS, Aegis, and MH-60R/S, partially offset by decreases in the SCAR and F/A-18 programs when compared to the prior period. There were no programs comprising 10% or more of our revenues for the second quarters ended December 27, 2024 or December 29, 2023.

Current wording

Revenue increases by product grouping were driven by the modules and sub-assemblies and integrated solutions product groupings which increased $8.3 million and $2.1 million, respectively, partially offset by components which decreased $7.3 million during the third quarter ended March 28, 2025 when compared to the prior period. The increase in total revenue by end application was primarily driven by the C4I, radar, and other end applications with increases of $12.2 million, $11.3 million, and $5.3 million respectively, partially offset by a decrease to other sensor & effector of $25.5 million. The increase in total revenue by platform was also driven by higher Other, Land, and Airborne of $11.2 million, $10.7 million, and $6.5 million, respectively, partially offset by decreases to Space and Naval of $21.4 million and $3.9 million, respectively. The largest program increases were related to KC46, a secure processing program, and F/A-18, partially offset by decreases in a strategic weapons program and the Tracking Layer program when compared to the prior period. There were no programs comprising 10% or more of our revenues for the third quarters ended March 28, 2025 or March 29, 2024.

Previous wording

Gross margin was 27.3% for the second quarter ended December 27, 2024, an increase of 1,130 basis points from the 16.0% gross margin realized during the second quarter ended December 29, 2023. The higher gross margin was driven primarily by net EAC change impact on our programs recognized over time of approximately $4.4 million recorded in the quarter, an incremental improvement of approximately $26.2 million, or 1,355 basis points, when compared to the prior period as well as lower inventory reserves of $12.4 million. The increase in inventory reserves in fiscal 2024 related to specifically identified excess and obsolete inventory primarily resulting from a shift in customer demand for our next generation product offering. These improvements in gross margin were partially offset by higher manufacturing adjustments of $4.1 million.

Current wording

Gross margin was 27.0% for the third quarter ended March 28, 2025, an increase of 750 basis points from the 19.5% gross margin realized during the third quarter ended March 29, 2024. The higher gross margin was driven primarily by net Estimate at completion ("EAC") change impact on our programs recognized over time of approximately $3.7 million recorded in the quarter, an incremental improvement of approximately $12.3 million, or 600 basis points, when compared to the prior period as well as lower inventory reserves of $9.6 million and lower warranty provisions of $5.0 million. The increase in inventory reserves in fiscal 2024 was primarily related to programs with end of life components, where design changes have occurred, as well as configuration changes necessary to drive efficient production in our common processing architecture programs. We may experience increases in our manufacturing costs related to the imposition of tariffs on the import of components from other countries. We do not expect to see material increases to these costs in fiscal 2025, but they could impact our gross margins in fiscal 2026.

Previous wording

Selling, general and administrative expenses decreased $4.0 million, or 8.9%, to $40.5 million during the second quarter ended December 27, 2024, as compared to $44.5 million in the second quarter ended December 29, 2023. The decrease was primarily driven by lower bad debt expense of $5.0 million as well as the savings from reductions in force initiated in fiscal 2024, resulting in lower compensation costs of $4.0 million. These decreases were partially offset by higher bonus expense of $2.4 million as well as legal and consulting costs of $3.0 million.

Current wording

Selling, general and administrative expenses decreased $0.2 million, or 0.4%, to $43.0 million during the third quarter ended March 28, 2025, as compared to $43.2 million in the third quarter ended March 29, 2024. The decrease was primarily driven by lower bad debt expense of $6.4 million as well as the savings from reductions in force initiated in fiscal 2024, resulting in lower compensation costs of $6.1 million. These decreases were partially offset by higher legal and consulting costs of $5.7 million, additional bonus and stock compensation expense of $4.6 million, and higher depreciation expense of $1.3 million.

Previous wording

Research and development expenses decreased $7.1 million, or 25.0%, to $21.4 million during the second quarter ended December 27, 2024, as compared to $28.5 million during the second quarter ended December 29, 2023. The decrease during the second quarter ended December 27, 2024 was primarily driven by the savings from headcount reductions of 111 employees, initiated in fiscal 2024, resulting in lower expense of $7.7 million as well as decreased spend on outside services of $2.1 million. These decreases were partially offset by higher bonus expense of $3.1 million.

Current wording

Research and development expenses decreased $5.6 million, or 25.9%, to $16.0 million during the third quarter ended March 28, 2025, as compared to $21.6 million during the third quarter ended March 29, 2024. The decrease was primarily driven by the savings from headcount reductions of 185 R&D employees, initiated in fiscal 2024 and fiscal 2025, resulting in lower expense of $4.6 million as well as decreased spend on consultants and outside services of $2.3 million, and lower equipment and supplies expense of $2.0 million. These decreases were partially offset by higher bonus expense of $3.7 million.

Previous wording

Amortization of intangible assets decreased $1.1 million to $11.2 million during the second quarter ended December 27, 2024, as compared to $12.3 million during the second quarter ended December 29, 2023, primarily due to various developed technology and customer relationship intangibles being fully amortized in fiscal 2024.

Current wording

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

Previous wording

We recognized $0.4 million of interest income during the second quarter ended December 27, 2024, as compared to an immaterial amount during the second quarter ended December 29, 2023. The increase was driven by higher average cash and cash equivalents during the period.

Current wording

We recognized $1.3 million of interest income during the third quarter ended March 28, 2025, as compared to $0.5 million during the third quarter ended March 29, 2024. The increase was driven by higher average cash and cash equivalents during the period.

Previous wording

We incurred $8.4 million of interest expense during the second quarter ended December 27, 2024, as compared to $8.7 million during the second quarter ended December 29, 2023. The decrease was driven by lower average outstanding borrowings during the period on our existing credit facility (the "Revolver").

Current wording

We incurred $8.1 million of interest expense during the third quarter ended March 28, 2025, as compared to $9.3 million during the third quarter ended March 29, 2024. The decrease was driven by lower average outstanding borrowings during the period on our existing credit facility (the "Revolver").

Previous wording

Other expense, net was $3.9 million during the second quarter ended December 27, 2024, as compared to $1.1 million during the second quarter ended December 29, 2023. The second quarter ended December 27, 2024 includes $2.4 million net foreign currency translation losses, $1.1 million of financing costs, $0.1 million of consulting costs, and $0.1 million of securities class action expense. The second quarter ended December 29, 2023 includes litigation and settlement expenses of $1.4 million and $0.8 million of financing costs, partially offset by net foreign currency translation gains of $0.7 million and $0.4 million of other income.

Current wording

Other income (expense), net was $2.3 million during the third quarter ended March 28, 2025, as compared to $(2.8) million during the third quarter ended March 29, 2024. The third quarter ended March 28, 2025 includes other income of $2.7 million, related to the sale of the mc.com domain name, $1.2 million net foreign currency translation gains, $0.9 million of financing costs, $0.5 million of securities class action expense, and $0.2 million of consulting costs. The third quarter ended March 29, 2024 includes litigation and settlement expenses of $2.1 million, $0.8 million of financing costs and $0.2 million net foreign currency translation losses, partially offset by other income of $0.3 million.

Previous wording

We recorded an income tax benefit of $6.7 million and $18.1 million on a loss before income taxes of $24.3 million and $63.7 million for the second quarters ended December 27, 2024 and December 29, 2023, respectively.

Current wording

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

Previous wording

The effective tax rate for the second quarter ended December 27, 2024 differed from the federal statutory rate primarily due to federal and state research and development credits, non-deductible compensation, and state taxes. The effective tax rate for the second quarter ended December 29, 2023 differed from the federal statutory rate primarily due to federal and state research and development credits, non-deductible compensation, stock compensation shortfalls, and state taxes.

Current wording

The effective tax rate for the third quarter ended March 28, 2025 differed from the federal statutory rate primarily due to federal and state research and development credits, return to provision adjustments, non-deductible compensation, and state taxes. The effective tax rate for the third quarter ended March 29, 2024 differed from the federal statutory rate primarily due to federal and state research and development credits, non-deductible compensation, stock compensation shortfalls, and state taxes.

Previous wording

Six months ended December 27, 2024 compared to the six months ended December 29, 2023

Current wording

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

Previous wording

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

Current wording

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

Previous wording

Total revenues increased $49.1 million, or 13.0%, to $427.6 million during the six months ended December 27, 2024, as compared to $378.5 million during the six months ended December 29, 2023. Revenues increased year over year as we pivoted our resources in fiscal 2024 to executing on our program base, including progress toward full rate production of our common processing architecture. Point in time revenue and over time revenue each represented 50% of total revenues during the six months ended December 27, 2024, an increase of $45.0 million and $4.1 million, respectively. Point and time revenue and over time revenue represented 45% and 55% respectively, of total revenue during the six months ended December 29, 2023.

Current wording

Total revenues increased $52.2 million, or 8.9%, to $638.9 million during the nine months ended March 28, 2025, as compared to $586.7 million during the nine months ended March 29, 2024. Revenues increased year over year as we pivoted our resources in fiscal 2024 to executing on our program base, including progress toward full rate production of our common processing architecture programs. Point in time revenue and over time revenue represented 51% and 49%, respectively, of total revenues during the nine months ended March 28, 2025, an increase of $70.0 million and $17.8 million, respectively. Point in time revenue and over time revenue represented 44% and 56%, respectively, of total revenue during the nine months ended March 29, 2024.

Previous wording

Revenue increases by product groupings were driven by the integrated solutions, modules and sub-assemblies and components which increased $26.1 million, $11.7 million and $11.3 million, respectively. The increase in total revenue by end application was primarily driven by the radar, other, and other sensor and effector increases of $43.1 million, $29.1 million, and $4.7 million respectively, partially offset by decreases to C4I and electronic warfare of $27.4 million and $0.3 million, respectively. The increase in total revenue by platform was also driven by higher Other, Land, Space and Naval of $30.3 million, $25.3 million, $16.6 million, and $13.0 million, respectively, partially offset by a decrease to Airborne of $36.1 million. The largest program increases were related to the LTAMDS, Aegis and MH-60R/S programs, partially offset by decreases to the SCAR and AARGM programs when compared to the prior period. There were no programs comprising 10% or more of our revenues for the six months ended December 27, 2024 or December 29, 2023.

Current wording

Revenue increases by product groupings were driven by the integrated solutions, modules and sub-assemblies, and components product groupings which increased by $28.2 million, $20.0 million and $4.0 million, respectively. The increase in total revenue by end application was primarily driven by the radar and other end applications increases of $54.4 million and $34.3 million, respectively, partially offset by decreases to other sensor & effector and C4I of $20.9 million and $15.2 million, respectively. The increase in total revenue by platform was also driven by higher Other, Land, and Naval of $41.5 million, $35.9 million, and $9.2 million, respectively, partially offset by decreases to Airborne and Space of $29.6 million and $4.8 million, respectively. The largest program increases were related to LTAMDS, MH-60R/S, Aegis, and a secure processing program, partially offset by decreases to the SCAR and Tracking Layer programs when compared to the prior period. There were no programs comprising 10% or more of our revenues for the nine months ended March 28, 2025 or March 29, 2024.

Previous wording

Gross margin was 26.3% for the six months ended December 27, 2024, an increase of 460 basis points from the 21.7% gross margin realized during the six months ended December 29, 2023. The higher gross margin was driven primarily by net EAC change impact on our programs recognized over time of approximately $12.7 million recorded in the period, an incremental improvement of approximately $35.2 million, or 969 basis points, when compared to the prior period as well as lower inventory reserves of $9.4 million, partially offset by higher manufacturing adjustments of $12.3 million.

Current wording

Gross margin was 26.6% for the nine months ended March 28, 2025, an increase of 570 basis points from the 20.9% gross margin realized during the nine months ended March 29, 2024. The higher gross margin was driven primarily by net EAC change impact on our programs recognized over time of approximately $16.4 million recorded in the period, an incremental improvement of approximately $47.6 million, or 830 basis points, when compared to the prior period as well as lower inventory reserves of $19.0 million and lower warranty provisions of $5.1 million, partially offset by higher manufacturing adjustments of $11.1 million. We may experience increases in our manufacturing costs related to the imposition of tariffs on the import of components from other countries. We do not expect to see material increases to these costs in fiscal 2025, but they could impact our gross margins in fiscal 2026.

Previous wording

Selling, general and administrative expenses decreased $6.6 million, or 8.2%, to $73.7 million during the six months ended December 27, 2024, as compared to $80.3 million during the six months ended December 29, 2023. The decrease was primarily driven by the reduction in force initiated in fiscal 2024, resulting in lower costs of $8.6 million, lower bad debt expense of $4.8 million, lower software licensing fees of $2.2 million, lower directors fees of $0.6 million, and lower facilities expense of $0.5 million. These decreases were partially offset by higher stock-based compensation of $3.5 million, higher bonus expense of $3.1 million, as well as higher legal and consulting costs of $3.7 million.

Current wording

Selling, general and administrative expenses decreased $6.7 million, or 5.4%, to $116.7 million during the nine months ended March 28, 2025, as compared to $123.4 million during the nine months ended March 29, 2024. The decrease was primarily driven by the reduction in force initiated in fiscal 2024, resulting in lower compensation costs of $14.7 million, lower bad debt expense of $11.2 million, lower software licensing fees of $3.1 million, as well as lower equipment and supplies expense of $0.8 million. These decreases were partially offset by higher bonus and stock-based compensation of $11.2 million as well as higher legal and consulting costs of $9.3 million.

Previous wording

Research and development expenses decreased $20.6 million, or 34.1%, to $39.8 million during the six months ended December 27, 2024, as compared to $60.3 million during the six months ended December 29, 2023. The decrease was primarily driven by the savings from headcount reductions of 111 employees, initiated in fiscal 2024, resulting in lower expense of $18.1 million, as well as decreased spend on outside services, supplies, and consulting services of $6.5 million. These decreases were partially offset by higher bonus expense of $3.7 million.

Current wording

Research and development expenses decreased $26.2 million, or 32.0%, to $55.7 million during the nine months ended March 28, 2025, as compared to $81.9 million during the nine months ended March 29, 2024. The decrease was primarily driven by the savings from headcount reductions of 185 employees, initiated in fiscal 2024 and fiscal 2025, resulting in lower expense of $22.6 million, as well as decreased spend on outside services, supplies, and consulting services of $10.8 million. These decreases were partially offset by higher bonus expense of $7.4 million.

Previous wording

Restructuring and other charges were $2.3 million during the six months ended December 27, 2024, as compared to $9.5 million during the six months ended December 29, 2023. Restructuring and other charges during the six months ended December 27, 2024 are primarily related to severance related charges. Restructuring and other charges during the six months ended December 29, 2023 include $9.5 million of severance costs related to a workforce reduction that eliminated approximately 150 positions.

Current wording

Restructuring and other charges were $7.2 million during the nine months ended March 28, 2025, as compared to $19.4 million during the nine months ended March 29, 2024. Restructuring and other charges during the nine months ended March 28, 2025 related to severance related charges primarily related to the reduction in workforce initiated January 29, 2025. Restructuring and other charges during the nine months ended March 29, 2024 include $19.4 million of severance costs related to workforce reductions that eliminated approximately 250 positions.

Previous wording

Acquisition costs and other related expenses were $0.4 million during the six months ended December 27, 2024, as compared to $1.2 million during the six months ended December 29, 2023. The acquisition costs and other related expenses we incurred during the six months ended December 27, 2024 includes $0.4 million related to run-rate amortization of fair value adjustments from purchase accounting. Acquisition costs and other related expenses during the six months ended December 29, 2023 includes $0.4 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.

Current wording

Acquisition costs and other related expenses were $0.7 million during the nine months ended March 28, 2025, as compared to $1.4 million during the nine months ended March 29, 2024. The acquisition costs and other related expenses we incurred during the nine months ended March 28, 2025 includes $0.5 million related to run-rate amortization of fair value adjustments from purchase accounting and $0.2 million related to the acquisition of Star Lab and disposal of our manufacturing operations in Plan-Les-Ouates, Switzerland. Acquisition costs and other related expenses during the nine months ended March 29, 2024 includes $0.5 million related to run-rate amortization of fair value adjustments from purchase accounting, $0.3 million related to the conclusion of the Board of Directors' review of strategic alternatives, as well as $0.3 million for third-party advisory fees in connection with engagements by activist investors.

Previous wording

We recognized $1.0 million of interest income during the six months ended December 27, 2024, as compared to $0.1 million during the six months ended December 29, 2023. The increase was driven by higher average cash and cash equivalents during the period.

Current wording

We recognized $2.2 million of interest income during the nine months ended March 28, 2025, as compared to $0.7 million during the nine months ended March 29, 2024. The increase was driven by higher average cash and cash equivalents during the period.

Previous wording

We incurred $17.3 million of interest expense during the six months ended December 27, 2024, as compared to $16.5 million during the six months ended December 29, 2023. The increase was higher average outstanding borrowings during the period on our existing credit facility (the "Revolver").

Current wording

We incurred $25.4 million of interest expense during the nine months ended March 28, 2025, as compared to $25.9 million during the nine months ended March 29, 2024. The decrease was driven by lower average outstanding borrowings during the period on the Revolver.

Previous wording

Other expense, net increased $2.3 million to $5.2 million during the six months ended December 27, 2024 as compared to $2.9 million during the six months ended December 29, 2023. There were $3.4 million of financing costs, $0.9 million of net foreign currency translation losses, $0.7 million of consulting costs, and $0.3 million of securities class action expense, partially offset by other income of $0.2 million during the six months ended December 27, 2024. There was $1.9 million of litigation and settlement costs, $1.4 million of financing costs and $0.3 million of net foreign currency translation losses, partially offset by other income of $0.7 million during the six months ended December 29, 2023.

Current wording

Other expense, net decreased $2.8 million to $2.9 million during the nine months ended March 28, 2025, as compared to $5.7 million during the nine months ended March 29, 2024. There was $4.3 million of financing costs, $0.9 million of consulting costs, and $0.8 million of securities class action expense, partially offset by other income of $2.9 million, primarily related to the sale of the mc.com domain name, and $0.3 million of net foreign currency translation gains during the nine months ended March 28, 2025. There was $4.0 million of litigation and settlement costs, $2.1 million of financing costs and $0.5 million of net foreign currency translation losses, partially offset by other income of $0.9 million during the nine months ended March 29, 2024.

Previous wording

We recorded an income tax benefit of $12.3 million and $31.2 million on a loss before income taxes of $47.4 million and $113.5 million for the six months ended December 27, 2024 and December 29, 2023, respectively.

Current wording

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

Previous wording

During the six months ended December 27, 2024 and December 29, 2023, we recognized a tax provision of $0.4 and $1.6 million related to stock compensation shortfalls, respectively.

Current wording

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

Previous wording

The effective tax rate for the six months ended December 27, 2024 differed from the federal statutory rate primarily due to federal and state research and development credits, non-deductible compensation, and state taxes. The effective tax rate for the six months ended December 29, 2023 differed from the federal statutory rate primarily due to federal and state research and development credits, non-deductible compensation, stock compensation shortfalls, and state taxes.

Current wording

The effective tax rate for the nine months ended March 28, 2025 differed from the federal statutory rate primarily due to federal and state research and development credits, return to provision adjustments, non-deductible compensation, and state taxes. The effective tax rate for the nine months ended March 29, 2024 differed from the federal statutory rate primarily due to federal and state research and development credits, non-deductible compensation, stock compensation shortfalls, and state taxes.

Previous wording

Our primary sources of liquidity come from existing cash and cash generated from operations, our Revolver, our ability to raise capital under our universal shelf registration statement and our ability to factor our receivables. Our near-term fixed commitments for cash expenditures consist primarily of payments under operating leases and inventory purchase commitments. We have experienced growth in our working capital balances and, in particular, related to unbilled receivables and inventory over the last several years. As we receive follow-on production awards, we believe that both unbilled receivables and inventory is expected to convert to cash reducing our working capital balances.

Current wording

Our primary sources of liquidity come from existing cash and cash generated from operations, our Revolver, our ability to raise capital under our universal shelf registration statement and our ability to factor our receivables. Our near-term fixed commitments for cash expenditures consist primarily of payments under operating leases and inventory purchase commitments. We have experienced growth in our working capital balances and, in particular, related to unbilled receivables and inventory over the last several years. As we have received follow-on production awards, our unbilled receivables began to convert to cash reducing our working capital balances during the nine months ended March 28, 2025. As we receive follow-on production awards, we believe that both unbilled receivables and inventory should convert to cash further reducing our working capital balances.

Previous wording

On November 7, 2023, due to the uncertainty surrounding a government shutdown or prolonged continuing resolution and the potential impact on the second quarter and fiscal 2024 results, we proactively executed Amendment No. 5 to the Revolver, as amended to date, with a syndicate of commercial banks and Bank of America, N.A acting as the administrative agent allowing for a temporary increase in the Consolidated Total Net Leverage Ratio covenant requirement from 4.50 to 5.25 for the second quarter ended December 29, 2023. As part of Amendment No. 5, the Company 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.

Current wording

On November 7, 2023, due to the uncertainty surrounding a government shutdown or prolonged continuing resolution and the potential impact on the second quarter and fiscal 2024 results, we proactively executed Amendment No. 5 to the Revolver, as amended to date, with a syndicate of commercial banks and Bank of America, N.A acting as the administrative agent allowing for a temporary increase in the Consolidated Total Net Leverage Ratio covenant requirement from 4.50 to 5.25 for the second quarter ended December 29, 2023. As part of Amendment No. 5, we agreed to a temporary reduction of Revolver capacity to $750.0 million through the earlier of May 15, 2024 or the filing of the compliance certificate for the period ended March 29, 2024.

Previous wording

During the second quarter and six months ended December 27, 2024, we did not have any additional borrowings or repayments. As of December 27, 2024, the Company was in compliance with all covenants and conditions under the Revolver and expects to be within our covenant and conditions for the remainder of the year. The borrowing capacity as defined under the Revolver as of December 27, 2024 is approximately $750.0 million, less outstanding borrowings of $591.5 million.

Current wording

During the third quarter and nine months ended March 28, 2025, we did not have any additional borrowings or repayments. As of March 28, 2025, we were in compliance with all covenants and conditions under the Revolver and expect to be within our covenants and conditions for the remainder of the year. The borrowing capacity as defined under the Revolver as of March 28, 2025 is approximately $900.0 million, less outstanding borrowings of $591.5 million.

Previous wording

On August 13, 2024, we entered into a $60.0 million committed receivables purchase and servicing agreement (“RPSA”) with a new party. The RPSA has an initial term of two years. Pursuant to the RPSA, the new party has committed to purchase receivables from a certain number of agreed upon customers, maintaining a balance of purchased receivables at or below $60.0 million. We factored accounts receivable and incurred factoring fees of approximately $58.1 million and $0.8 million, respectively, for the six months ended December 27, 2024. We factored accounts receivable and incurred factoring fees of approximately $48.2 million and $1.3 million respectively, for the six months ended December 29, 2023.

Current wording

On August 13, 2024, we entered into a $60.0 million committed receivables purchase and servicing agreement (“RPSA”) with a new party. The RPSA has an initial term of two years. Pursuant to the RPSA, the new party has committed to purchase receivables from a certain number of agreed upon customers, maintaining a balance of purchased receivables at or below $60.0 million. We factored accounts receivable and incurred factoring fees of approximately $55.1 million and $1.3 million, respectively, for the nine months ended March 28, 2025. We factored accounts receivable and incurred factoring fees of approximately $44.2 million and $1.6 million respectively, for the nine months ended March 29, 2024.

Previous wording

Our cash and cash equivalents increased by $62.0 million from June 28, 2024 to December 27, 2024, as the result of $70.8 million of cash provided by operating activities, $1.9 million other investing activities, and $1.5 million proceeds from employee stock plans, partially offset by $9.8 million invested in purchases of property and equipment, and $2.2 million of cash paid in deferred financing and offering costs.

Current wording

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

Previous wording

During the six months ended December 27, 2024, we had an inflow of $70.8 million in cash from operating activities compared to a $6.4 million inflow during the six months ended December 29, 2023. The higher inflow during the six months ended December 27, 2024 was primarily due to a lower net loss of $47.2 million, higher inflow from deferred revenues and customer advances of $38.1 million, lower benefit for deferred income taxes of $15.3 million, and an income tax refund received of $0.2 million as compared to income tax payments of $13.9 million during the six months ended December 29, 2023. This activity was partially offset by a lower inflow from accounts receivable, unbilled receivables and costs in excess of billings of $38.2 million and a $4.8 million lower provision for bad debt. The six months ended December 29, 2023 also included a $7.4 million inflow from the cash settlement for the termination of the interest rate swap.

Current wording

During the nine months ended March 28, 2025, we had an inflow of $100.8 million in cash from operating activities compared to a $11.4 million outflow during the nine months ended March 29, 2024. The inflow during the nine months ended March 28, 2025 was primarily due to a lower net loss of $72.6 million, higher inflow from deferred revenues and customer advances of $53.7 million, lower prepaid income taxes of $25.0 million, lower outflow from accounts payable, accrued expenses, and accrued compensation of $20.6 million, and an income tax refund received of $5.3 million as compared to income tax payments of $25.9 million during the nine months ended March 29, 2024. This activity was partially offset by a lower inflow from accounts receivable, unbilled receivables, and costs in excess of billings of $37.5 million and a $11.2 million lower provision for bad debt. The nine months ended March 29, 2024 also included a $7.4 million inflow from the cash settlement for the termination of the interest rate swap.

Previous wording

During the six months ended December 27, 2024, we invested $7.9 million, a decrease of $8.1 million, as compared to $16.0 million during the six months ended December 29, 2023 primarily due to $6.2 million lower purchases of property and equipment and an inflow of $1.9 million due to other investing activities.

Current wording

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