MERCURY SYSTEMS INC
For the period ended Jul 3, 2026. Filed Aug 18, 2026.
View on SEC.govAbout this filing
A company's yearly report to the SEC, with audited financial statements. It is the fullest account a company gives of its business, its finances and the risks it sees.
FY2026 · Filed Aug 18, 2026
MRCY$79.62+8.3%Stored close · as of Nov 9, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-K
Period ended 2025-06-27; filed 2025-08-11.
0001049521-25-000024
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-K
Period ended 2026-07-03; filed 2026-08-18.
0001049521-26-000045
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 145 previous paragraphs and 142 current paragraphs.
87 unchanged; 43 reworded; 12 added; 15 removed; 0 previous and 0 current paragraphs rearranged.
Tables are not compared: 7 previous and 7 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (12)
Current report
Mercury Systems is a global leader in aerospace and defense electronics, providing breakthrough capabilities in signal and data processing. With a four-decade legacy of innovation that spans silicon to systems and RF front ends to effectors, we accelerate commercial technology adoption to deliver powerful and secure mission-critical processing solutions to the edge. We are headquartered in Andover, Massachusetts, and have multiple locations worldwide. Our end-to-end processing ecosystem, the Mercury Processing Platform, is built on technologies we have developed and acquired over 40 years. Our technologies are available as standard products or custom solutions from silicon to system scale to ensure interoperability, reduced complexity, optimized performance and speed development.
Current report
On November 3, 2025, the Board of Directors authorized a new share repurchase program for the purchase of up to $200.0 million of our outstanding common stock. The program has no expiration date and repurchases may be made through open market or privately negotiated transactions from time to time at prevailing market prices. The timing and amount of repurchases will depend on market conditions and other factors. Repurchased shares are accounted for as authorized and unissued shares. All share repurchases are made in accordance with Rule 10b-18. As of July 3, 2026, there was $185.0 million available for future share repurchases under this share repurchase program See Note O in the accompanying consolidated financial statements for more information on our share repurchase program.
Current report
On November 4, 2025, we executed Amendment No. 7 to the Revolver. This amendment extended the maturity date of the credit facility by five years to November 4, 2030 with a facility size of $850.0 million. We had $591.5 million in outstanding borrowings prior to the closing of Amendment No. 7. On April 30, 2026, we repaid $150.0 million of the Revolver, leaving $441.5 million drawn on the Revolver as of that date. The repayment was funded with available cash on hand and did not affect our assessment of liquidity or capital resources. We remained in compliance with all applicable financial covenants both before and after the partial repayment. We continue to evaluate opportunities to further reduce outstanding borrowings under the facility depending on market conditions, operational requirements and cash flows. See Note L in the accompanying consolidated financial statements for further discussions of the Revolver.
Current report
On March 3, 2026, we completed the asset acquisition of a provider of specialized manufacturing processes that support key Mercury programs that are ramping into production.
Current report
On June 1, 2026, we entered into a $100.0 million committed Receivables Purchase Agreement ("RPA") with a new party. The RPA has an initial term of one year. Pursuant to the RPA, the new party committed to purchase receivables at a discount from a list of certain of our customers, maintaining a balance of purchased receivables at or below $100.0 million. On June 4, 2026, we terminated the Receivables Purchase and Servicing Agreement ("RPSA") in conjunction with entering into the new RPA.
Current report
There were 53 weeks and 52 weeks included in the results of operations for fiscal 2026 and fiscal 2025, respectively.
Current report
Selling, general and administrative expenses increased $20.6 million, or 13.4%, to $175.0 million during fiscal 2026 as compared to $154.4 million during fiscal 2025. The increase was primarily driven by higher compensation expense of $20.5 million, of which $10.5 million was related to stock compensation. The increase was also driven by software licensing fees and litigation and settlement expense of $3.6 million and $3.5 million, respectively. These increases were partially offset by lower depreciation and consulting expense of $4.0 million and $3.2 million, respectively.
Current report
Acquisition costs and other related expenses were $1.3 million during fiscal 2026, as compared to $2.0 million during fiscal 2025. The acquisition costs and other related expenses we incurred during fiscal 2026 includes $0.5 million related to run-rate amortization of fair value adjustments from purchase accounting as well as an immaterial amount of costs incurred in the asset acquisition of a provider of specialized manufacturing processes.
Current report
On November 4, 2025, we executed Amendment No. 7 to the Revolver. This amendment extended the maturity date of the credit facility by five years to November 4, 2030, with a facility size of $850.0 million.
Current report
On June 1, 2026, we entered into a $100.0 million committed RPA with a new party. The RPA has an initial term of one year. Pursuant to the RPA, the new party committed to purchase receivables at a discount from a list of certain of our customers, maintaining a balance of purchased receivables at or below $100.0 million. We had $72.3 million of factored accounts receivable, of which $71.9 million was included within Accounts receivable, net of allowance for credit losses on our Consolidated Balance Sheet and $0.4 million was recorded in Due to factoring facility on our Consolidated Balance Sheet as of July 3, 2026. We incurred factoring fees of approximately $1.7 million during fiscal 2026. We had $60.0 million of factored accounts receivable, of which $52.2 million was included within Accounts receivable, net of allowance for credit losses on our Consolidated Balance Sheet and $7.8 million was recorded in Due to factoring facility on our Consolidated Balance Sheet as of June 27, 2025. We incurred factoring fees of approximately $1.8 million during fiscal 2025.
Current report
Share Repurchase Agreement
Current report
On November 3, 2025, the Board of Directors authorized a new share repurchase program for the purchase of up to $200.0 million of our outstanding common stock. The program has no expiration date and repurchases may be made through open market or privately negotiated transactions from time to time at prevailing market prices. The timing and amount of repurchases will depend on market conditions and other factors. Repurchased shares are accounted for as authorized and unissued shares. All share repurchases are made in accordance with Rule 10b-18. During fiscal 2026, 222 shares of our common stock were repurchased under the share repurchase program at an average cost of $67.70 per share. As of July 3, 2026, there was $185.0 million available for future share repurchases under this share repurchase program.
Removed paragraphs (15)
Previous report
Mercury Systems is a technology company that delivers mission-critical processing to the edge to solve the most pressing aerospace and defense challenges. Mercury’s products and solutions are deployed in more than 300 programs and across 35 countries. The Company is headquartered in Andover, Massachusetts, and has over 20 locations worldwide.
Previous report
The Mercury Processing Platform is the unique advantage we provide to our customers. It comprises the innovative technologies we’ve developed and acquired for more than 40 years that bring integrated, mission-critical processing capabilities to the edge. Our processing platform spans the full breadth of signal processing—from RF front end to the human-machine interface—to rapidly convert meaningful data, gathered in the most remote and hostile environments, into critical decisions. It allows us to offer standard products and custom solutions from silicon to system scale, including components, modules, subsystems, and systems and it embodies the customer-centric approach we take to delivering capabilities that are mission-ready, trusted and secure, software-defined, and open and modular.
Previous report
Our deep, long-standing relationships with leading high-tech and other commercial companies, coupled with our targeted research and development (“R&D”) investments and industry-leading trusted and secure design and manufacturing capabilities, are the foundational tenets of this highly successful model. We are leading the development and adaptation of commercial technology for aerospace and defense solutions. From chip-scale to system scale and from data, including RF to digital to decision, we make mission-critical technologies safe, secure, affordable and relevant for our customers.
Previous report
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.
Previous report
On August 15, 2023, we announced William L. Ballhaus has been appointed President and Chief Executive Officer.
Previous report
On August 9, 2023, we approved and initiated a workforce reduction that, together with the consolidation of 1MPACT into our operations organization, eliminated approximately 150 positions resulting in $9.5 million of severance costs. Our plan enacted several immediate cost savings measures that simplified our organizational structure, facilitated clearer accountability, and aligned our priorities, including: (i) embedded the 1MPACT value creation initiatives and execution into the Company’s operations; (ii) streamlined organizational structure and removed areas of redundancy between corporate and divisional organizations; and (iii) reduced selling, general, and administrative headcount and rebalanced discretionary and third party spend to better align with our priority areas.
Previous report
On November 7, 2023, we entered into Amendment No. 5 (“Amendment No. 5”) to the Company’s Credit Agreement dated May 2, 2016, as amended to date. Due to the uncertainty surrounding a government shutdown or prolonged continuing resolution and the potential impact on the second quarter and fiscal 2024 results, we proactively executed Amendment No. 5 to allow for a temporary increase in the Consolidated Total Net Leverage Ratio covenant requirement from 4.50 to 5.25 for the second quarter ended December 29, 2023. As part of Amendment No. 5, we agreed to a temporary reduction of Revolver capacity to $750.0 million through the earlier of May 15, 2024 or the filing of the compliance certificate for the period ended March 29, 2024. We had $576.5 million in outstanding borrowings both prior to and following the closing of Amendment No. 5. See Note L in the accompanying consolidated financial statements for further discussions of the Revolver.
Previous report
On January 12, 2024, we adopted a plan to consolidate our Mission Systems and Microelectronics divisions into one unified structure that incorporates multiple business units and functions, under the leadership of an Executive Vice President, Chief Operating Officer effective as of January 22, 2024. This consolidation was designed to simplify our organizational structure, facilitate clearer accountability, and align to our priorities. On January 12, 2024, we approved and initiated workforce reductions that eliminated approximately 100 positions resulting in an additional $9,841 of severance costs for fiscal 2024. See Note H in the accompanying consolidated financial statements for further discussions of restructuring charges incurred during the year.
Previous report
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.
Previous report
Selling, general and administrative expenses decreased $12.4 million, or 7.4%, to $154.4 million during fiscal 2025 as compared to $166.8 million during fiscal 2024. The decrease was primarily driven by the full year impact of the reduction in force initiated in fiscal 2024, resulting in lower compensation costs of $14.4 million. There were also reductions in bad debt expense and software licensing fees of $14.4 million and $4.0 million, respectively. These decreases were partially offset by higher litigation and settlement, bonus, and consulting expense of $9.9 million, $5.0 million, and $1.8 million, respectively.
Previous report
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.
Previous report
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 report
On September 27, 2022, we entered into an uncommitted receivables purchase agreement (“RPA”), pursuant to which we could offer to sell certain customer receivables, subject to the terms and conditions of the RPA. On August 13, 2024, we terminated the RPA in conjunction with entering into a new receivables purchase and service agreement.
Previous report
(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.
Previous report
(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.
Reworded paragraphs (43)
Previous wording
From time to time, information provided, statements made by our employees or information included in our filings with the Securities and Exchange Commission (“SEC”) may contain statements that are not historical facts but that are “forward-looking statements,” which involve risks and uncertainties. You can identify these statements by the words “may,” “will,” “could,” “should,” “would,” “plans,” “expects,” “anticipates,” “continue,” “estimate,” “project,” “intend,” “likely,” “forecast,” “probable,” “potential,” and similar expressions. These forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those projected or anticipated. Such risks and uncertainties include, but are not limited to, continued funding of defense programs, the timing and amounts of such funding, general economic and business conditions, including unforeseen weakness in the Company’s markets, effects of any U.S. federal government shutdown or extended continuing resolution, effects of geopolitical unrest and regional conflicts, competition, changes in technology and methods of marketing, delays in or cost increases related to completing development, engineering and manufacturing programs, changes in customer order patterns, changes in product mix, continued success in technological advances and delivering technological innovations, changes in, or in the U.S. government’s interpretation of, federal export control or procurement rules and regulations, including tariffs, changes in, or in the interpretation or enforcement of, environmental rules and regulations, market acceptance of the Company's products, shortages in or delays in receiving components, supply chain delays or volatility for critical components, production delays or unanticipated expenses including due to quality issues or manufacturing execution issues, adherence to required manufacturing standards, capacity underutilization, increases in scrap or inventory write-offs, failure to achieve or maintain manufacturing quality certifications, such as AS9100, failure to achieve or maintain qualified business systems, such as those required by the DFARS, the impact of supply chain disruption, inflation and labor shortages, among other things, on program execution and the resulting effect on customer satisfaction, inability to fully realize the expected benefits from acquisitions, restructurings, and operational efficiency initiatives or delays in realizing such benefits, challenges in integrating acquired businesses and achieving anticipated synergies, effects of shareholder activism, increases in interest rates, changes to industrial security and cyber-security regulations and requirements and impacts from any cyber or insider threat events, changes in tax rates or tax regulations, changes to interest rate swaps or other cash flow hedging arrangements, changes to generally accepted accounting principles, difficulties in retaining key employees and customers, l…
Excerpt shortened here; the source contains the full paragraph.
Current wording
From time to time, information provided, statements made by our employees or information included in our filings with the SEC may contain statements that are not historical facts but that are “forward-looking statements,” which involve risks and uncertainties. You can identify these statements by the words “may,” “will,” “could,” “should,” “would,” “plans,” “expects,” “anticipates,” “continue,” “estimate,” “project,” “intend,” “likely,” “forecast,” “probable,” “potential,” and similar expressions. These forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those projected or anticipated. Such risks and uncertainties include, but are not limited to, cost increases, our inability to increase production and deliver products on time and with appropriate quality, continued funding of defense programs, the timing and amounts of such funding, general economic and business conditions, including unforeseen weakness in our markets, effects of any U.S. federal government shutdown or extended continuing resolution, effects of increasingly volatile geopolitical events and regional conflicts, competition, changes in technology and methods of marketing, delays in or cost increases related to completing development, engineering and manufacturing programs, changes in customer order patterns, changes in product mix, continued success in technological advances and delivering technological innovations, changes in, or in the U.S. government’s interpretation of, federal export control or procurement rules and regulations, including tariffs, changes in, or in the interpretation or enforcement of, environmental rules and regulations, market acceptance of our products, shortages or delays in receiving components, supply chain delays or volatility for critical components, production delays or unanticipated expenses including due to quality issues or manufacturing execution issues, failure to meet contractual performance specifications, adherence to required manufacturing standards, capacity underutilization, increases in scrap or inventory write-offs, failure to achieve or maintain manufacturing quality certifications, such as AS9100, failure to achieve or maintain qualified business systems, such as those required by the DFARS, adverse findings in government audits or investigations, the impact of supply chain disruption, inflation and labor shortages, among other things, on program execution and the resulting effect on customer satisfaction, inability to fully realize the expected benefits from acquisitions, restructurings and operational efficiency initiatives or delays in realizing such benefits, challenges in integrating acquired businesses and achieving anticipated synergies, effects of shareholder activism, increases in interest rates, changes to industrial security and cyber-security regulations and requirements and impacts from any cyber or insider threat events, including the risks from heightened, p…
Excerpt shortened here; the source contains the full paragraph.
Previous wording
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. Our mission-critical products and solutions are deployed by our customers for a variety of applications including sensor and radar processing, electronic warfare, avionics, weapons, and command, control, communications, and intelligence ("C4I"). Mercury has built a trusted, robust portfolio of proven capabilities, leveraging the most advanced commercial silicon technologies and purpose-built to exceed the performance needs of our defense and commercial customers. Customers add their own applications and algorithms to our specialized, secure and innovative products and pre-integrated solutions. This allows them to complete their full system by integrating with their platform, the sensor technology and, increasingly, the processing from Mercury.
Current wording
As a leading manufacturer of essential components, modules and subsystems, we sell to the top U.S. and European defense prime contractors, the U.S. government and OEM commercial aerospace companies. Our customers deploy our solutions for a variety of applications including sensor and radar processing, electronic warfare, avionics, weapons, and C4I. We deliver a trusted, robust portfolio of proven capabilities, built on the most advanced commercial silicon technologies to exceed the performance needs of our defense and commercial customers.
Previous wording
Our capabilities, technology, people and R&D investment strategy combine to differentiate Mercury in our industry. We maintain our technological edge by investing in critical capabilities and intellectual property (“IP” or “building blocks”) in processing, leveraging open standards and open architectures to adapt quickly those building blocks into solutions for highly data-intensive applications, including emerging needs in areas such as artificial intelligence (“AI”).
Current wording
Our capabilities, technology, people, culture and R&D strategy all differentiate Mercury in the aerospace and defense industry. We maintain our technological edge by investing in the critical building blocks of processing, developing valuable IP and embracing open standards and architectures. This lets us rapidly shape these building blocks into products and solutions for highly data-intensive missions, including emerging areas like AI processing at the edge.
Previous wording
As of June 27, 2025, we had 2,162 employees. 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. 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.
Current wording
As of July 3, 2026, we had 2,102 employees. Our consolidated revenues, net loss, diluted net loss per share, adjusted earnings per share and adjusted EBITDA for fiscal 2026 were $983.6 million, $(29.7) million, $(0.50), $1.06 and $150.2 million, respectively. Our consolidated revenues, net loss, diluted net loss per share, adjusted earnings per share and adjusted EBITDA for fiscal 2025 were $912.0 million, $(37.9) million, $(0.65), $0.64 and $119.4 million, respectively. See the Non-GAAP Financial Measures section for a reconciliation to our most directly comparable GAAP financial measures.
Previous wording
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. Revenues increased year over year as we pivoted our resources in fiscal 2025 to executing on our program base, including progress toward full rate production of our common processing architecture programs, following the prioritization of resources to execute our challenged programs in fiscal 2024. Point in time revenue and over time revenue represented 53% and 47%, respectively, of total revenue during fiscal 2025. Point in time revenue increased $112.3 million and over time revenue decreased $35.5 million as we transitioned many of our development programs to production. Point in time revenue and over time revenue represented 45% and 55%, respectively, of total revenues during fiscal 2024.
Current wording
Total revenues increased $71.6 million, or 7.9%, to $983.6 million during fiscal 2026, as compared to $912.0 million during fiscal 2025. Point in time revenue and over time revenue represented 53% and 47%, respectively, of total revenue during fiscal 2026. Over time revenue increased $40.5 million and point in time revenue increased $31.1 million. Point in time revenue and over time revenue represented 53% and 47%, respectively, of total revenues during fiscal 2025.
Previous wording
We experienced revenue increases across the modules and sub-assemblies and integrated solutions product groupings of $60.5 million and $18.7 million, respectively, partially offset by a decrease to the components product grouping of $2.5 million. The increase in total revenue was primarily driven by the radar, other, and C4I end applications increases of $67.7 million, $34.4 million, and $15.1 million, respectively, partially offset by decreases to other sensor and effector and electronic warfare end applications of $30.2 million and $10.3 million, respectively. We experienced 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. 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.
Current wording
We experienced revenue increases across the modules and sub-assemblies, components, and integrated solutions product groupings of $43.5 million, $15.1 million, and $13.0 million, respectively. The increase in total revenue was primarily driven by the other sensor and effector, radar, electronic warfare, and C4I end applications increases of $46.9 million, $19.1 million, $16.4 million, and $1.6 million respectively, partially offset by a decrease to other end applications of $12.2 million. We experienced increases across several of our platforms during fiscal 2026 when compared to fiscal 2025; Land, Naval, Space, and Other platforms increased $53.7 million, $23.7 million, $22.0 million, and $10.3 million respectively, partially offset by a decrease to the Airborne platform of $38.1 million. The largest program increases were related to a secure processing program, an integrated space program, SEWIP, and PGK, partially offset by Aegis and T-45. There were no programs comprising 10% or more of our revenues for fiscal 2026 or 2025.
Previous wording
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 higher gross margin was primarily driven by net EAC change impact on our programs recognized over time of $21.1 million recorded in the period, an incremental improvement of approximately $52.2 million, or 650 basis points, when compared to the prior period as well as lower manufacturing adjustments of $16.4 million, related to inventory reserves, warranty expense, and certain other non-recurring cost adjustments. We may experience increases in our manufacturing costs related to the imposition of tariffs on the import of components from other countries. See Item 1A. Risk Factors for discussion on potential impact from tariffs. We did not see material increases to these costs in fiscal 2025, but they could impact our gross margins in fiscal 2026.
Current wording
Gross margin was 28.6% for fiscal 2026, an increase of 70 basis points from the 27.9% gross margin realized during fiscal 2025. The higher gross margin was primarily driven by lower manufacturing variances of $15.8 million, partially offset by higher scrap, inventory reserves, and warranty provisions of $3.8 million, $2.3 million, and $1.1 million, respectively. The increase was also driven by net EAC change impact on our programs recognized over time of $18.7 million recorded in the period, an incremental improvement of approximately $2.3 million, or 40 basis points, when compared to the prior period.
Previous wording
The changes in estimates are assessed based on historical results and cumulative adjustments are recorded to recognize revenue to date based on changes in estimated margin on programs, factored for potential risks and opportunities. We utilize the latest and best information available when revising our estimates and apply consistent judgement across the full portfolio of programs.
Current wording
The changes in estimates are assessed based on historical results and cumulative adjustments are recorded to recognize revenue to date based on changes in estimated margin on programs, factored for potential risks and opportunities. We utilize the latest and best information available when revising our estimates and apply consistent judgment across the full portfolio of programs.
Previous wording
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. 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.
Current wording
Research and development expenses decreased $7.9 million, or 11.7%, to $59.7 million during fiscal 2026, as compared to $67.6 million for fiscal 2025. The decrease was primarily driven by efficiency improvements and the savings from headcount reductions of approximately 270 employees, initiated across fiscal 2025 and 2026, resulting in lower expense of $13.1 million. There was also decreased software license fees and depreciation expense of $2.0 million and $1.8 million, respectively. These decreases were partially offset by changes in engineering utilization and higher supplies expense of $7.8 million and $2.3 million, respectively.
Previous wording
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.
Current wording
Amortization of intangible assets decreased $3.9 million to $38.9 million during fiscal 2026, as compared to $42.8 million for fiscal 2025, due to various customer relationship intangibles being fully amortized in fiscal 2025 and fiscal 2026.
Previous wording
During fiscal 2025, we incurred $7.2 million of restructuring and other charges, related to severance related charges primarily associated with the reduction in workforce initiated January 29, 2025 that eliminated approximately 145 positions. Restructuring and other charges during fiscal 2024 include $26.2 million of severance costs related to workforce reductions that eliminated approximately 350 positions.
Current wording
During fiscal 2026, we incurred $5.9 million of restructuring and other charges, related to severance related charges associated with workforce reductions initiated during the period that eliminated approximately 100 positions, predominantly in selling, general and administrative, research and development, and manufacturing. Restructuring and other charges during fiscal 2025 related to severance related charges primarily associated with the reduction in workforce initiated January 29, 2025 that eliminated approximately 145 positions, predominantly in research and development.
Previous wording
Acquisition costs and other related expenses were $2.0 million during fiscal 2025, as compared to $1.7 million during fiscal 2024. The acquisition costs and other related expenses we incurred during fiscal 2025 includes $1.4 million related to the sale of our manufacturing operations in Plan-Les-Ouates, Switzerland and the associated supply agreement with Cicor Group and $0.6 million related to run-rate amortization of fair value adjustments from purchase accounting on prior acquisitions.
Current wording
Acquisition costs during fiscal 2025 included $1.4 million related to the sale of our manufacturing operations in Switzerland and the associated supply agreement with Cicor Group as well as $0.6 million related to run-rate amortization of fair value adjustments from purchase accounting on prior acquisitions.
Previous wording
We recognized $3.6 million of interest income in fiscal 2025, as compared to $1.2 million in fiscal 2024. The increase was driven by higher average cash and cash equivalents during the period.
Current wording
We recognized $7.7 million of interest income in fiscal 2026, as compared to $3.6 million in fiscal 2025. The increase was driven by higher average cash and cash equivalents and higher average interest rates on deposits during the period.
Previous wording
Interest expense for fiscal 2025 decreased to $33.4 million, as compared to $35.0 million in fiscal 2024. 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.
Current wording
Interest expense for fiscal 2026 decreased to $29.6 million, as compared to $33.4 million in fiscal 2025. The decrease was driven primarily by lower average rates and lower average borrowings on our Revolver during the period. Outstanding borrowings under our Revolver were $441.5 million and $591.5 million at July 3, 2026 and June 27, 2025, respectively.
Previous wording
Other expense, net was $1.0 million during fiscal 2025, as compared to $7.7 million in fiscal 2024. Fiscal 2025 includes $5.3 million of financing costs, $2.3 million of securities class action expense, and $1.1 million of consulting costs, partially offset by other income primarily related to the gain associated with the sale of manufacturing operations to Cicor Group of $3.3 million and the sale of our mc.com domain name of $2.7 million, as well as $1.7 million of net foreign currency translation gains during fiscal 2025. There was $4.9 million of litigation and settlement costs, $3.4 million of financing costs and $0.4 million of net foreign currency translation losses, partially offset by other income of $1.3 million during fiscal 2024.
Current wording
Other expense, net for fiscal 2026 increased to $7.3 million, as compared to $1.0 million in fiscal 2025. The increase was primarily driven by $1.9 million of other expense during fiscal 2026, as compared to $6.2 million of other income during fiscal 2025 related to the gain associated with the sale of manufacturing operations to Cicor Group of $3.3 million and the sale of our mc.com domain name of $2.7 million. The increase was also driven by $1.1 million of net foreign currency translation losses during fiscal 2026, as compared to $1.7 million of net foreign currency translation gains during fiscal 2025. These increases were partially offset by lower securities class expense, financing costs, and consulting costs of $2.4 million, $1.5 million, and $0.5 million, respectively.
Previous wording
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.
Current wording
We recorded an income tax provision of $0.8 million and an income tax benefit of $12.5 million on losses before income taxes of $28.9 million and $50.4 million for fiscal years 2026 and 2025, respectively.
Previous wording
The effective tax rate for fiscal 2024 differed from the federal statutory rate primarily due to federal and state research and development tax credits and state taxes, partially offset by tax provisions related to stock compensation.
Current wording
The effective tax rate for fiscal 2026 differed from the federal statutory rate primarily due to nondeductible compensation and valuation allowances recorded, partially offset by tax benefits related to stock compensation.
Previous wording
On July 4, 2025, the One Big Beautiful Bill Act (“OBBBA”) was enacted, which includes a broad range of tax provisions and extended and modified certain provisions of the Tax Cuts and Jobs Act ("TCJA"), including, but not limited to, restoration of 100% bonus depreciation, EBITDA-based interest expense limitation and immediate expensing of domestic research and development expenditures. Due to the timing of the bill being enacted after fiscal 2025, the impact of the OBBBA will be reflected in fiscal 2026. We are evaluating the impacts of this legislation on future periods.
Current wording
On July 4, 2025, the One Big Beautiful Bill Act (“OBBBA”) was enacted, which includes a broad range of tax provisions and extended and modified certain provisions of the Tax Cuts and Jobs Act ("TCJA"), including, but not limited to, EBITDA-based interest expense limitation and immediate expensing of domestic research and development expenditures. We have evaluated the impact of this legislation, which results primarily in a timing difference, with no material impact on our effective tax rate.
Previous wording
Our primary sources of liquidity come from existing cash and cash generated from operations, our Revolver, and our ability to raise capital under our universal shelf registration statement. Our near-term fixed commitments for cash expenditures consist primarily of payments under operating leases and inventory purchase commitments. 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.
Current wording
Our primary sources of liquidity come from existing cash and cash generated from operations, our Revolver, and our ability to raise capital under our universal shelf registration statement. Our near-term fixed commitments for cash expenditures consist primarily of payments under operating leases and inventory purchase commitments. Our working capital balance, which we define as Total current assets less Cash and cash equivalents and Total current liabilities, as of July 3, 2026 was $430.6 million, as compared to $448.7 million as of June 27, 2025.
Previous wording
During fiscal 2025, we did not have any additional borrowings or repayments. As of June 27, 2025, the Company was in compliance with all covenants and conditions under the Revolver. The borrowing capacity as defined under the Revolver as of June 27, 2025 is approximately $900.0 million, less outstanding borrowings of $591.5 million. See Note L in the accompanying consolidated financial statements for further discussion of the Revolver.
Current wording
During fiscal 2026, we made payments of $150.0 million on the Revolver with no additional borrowings. As of July 3, 2026, the Company was in compliance with all covenants and conditions under the Revolver. The borrowing capacity as defined under the Revolver as of July 3, 2026 is approximately $850.0 million, less outstanding borrowings of $441.5 million. See Note L in the accompanying consolidated financial statements for further discussion of the Revolver.
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 at a discount from a list of certain of our customers, maintaining a balance of purchased receivables at or below $60 million. We had $52.2 million of factored accounts receivable as of June 27, 2025 and incurred factoring fees of approximately $1.8 million in fiscal 2025. We had $33.8 million of factored accounts receivable as of June 28, 2024 and incurred factoring fees of approximately $1.9 million in fiscal 2024.
Current wording
On August 13, 2024, we entered into a $60.0 million committed RPSA. The RPSA had an initial term of two years. Pursuant to the RPSA, the new party committed to purchase receivables at a discount from a list of certain of our customers, maintaining a balance of purchased receivables at or below $60.0 million. On December 10, 2025, we amended the RPSA to increase the facility from $60.0 million to $75.0 million. On June 4, 2026, we terminated the RPSA in conjunction with entering into a new receivables purchase agreement.
Previous wording
Our cash and cash equivalents increased by $128.6 million during fiscal 2025 primarily as the result of $138.9 million provided by operating activities, $6.2 million of proceeds from sale of manufacturing operations to Cicor Group, $3.7 million of proceeds from employee stock plans, $2.7 million provided by the sale of our mc.com domain name, and $1.9 million provided by other investing activities. These inflows were partially offset by $19.8 million invested in purchases of property and equipment, $4.5 million of cash paid in the asset acquisition of Star Lab and $2.2 million of cash paid in deferred financing and offering costs.
Current wording
Our cash and cash equivalents decreased by $94.8 million during fiscal 2026 primarily as the result of the $150.0 million repayment on the Revolver, $34.3 million invested in purchases of property and equipment, $15.0 million of cash paid for shares of the Company's common stock under the share repurchase program, and $3.2 million of cash paid in deferred financing and offering costs. These outflows were partially offset by $102.4 million provided by operating activities and $5.4 million of proceeds from employee stock plans.
Previous wording
During fiscal 2025, we had an inflow of $138.9 million in cash from operating activities compared to a $60.4 million inflow during fiscal 2024. The increase during fiscal 2025 was primarily due to a lower net loss of $99.7 million, higher inflow from deferred revenues and customer advances of $32.6 million, lower outflow from the benefit for deferred income taxes of $20.9 million, a higher inflow from other non-current assets of $8.1 million and an inflow from accounts payable, accrued expenses, and accrued compensation of $8.1 million, as compared to an outflow of $0.7 million due to accounts payable, accrued expenses, and accrued compensation in the prior period. This activity was partially offset by a lower inflow from accounts receivable, unbilled receivables, and costs in excess of billings of $46.5 million and a lower provision for bad debt of $14.4 million. Fiscal 2024 also included a $7.4 million inflow from the cash settlement for the termination of the interest rate swap.
Current wording
During fiscal 2026, we had an inflow of $102.4 million in cash from operating activities compared to a $138.9 million inflow during fiscal 2025. The reduced inflow during fiscal 2026 was primarily due to lower inventory of $27.4 million, lower deferred revenues and customer advances of $26.0 million, lower prepaid expenses and other current assets of $12.2 million, and a lower inflow from depreciation and amortization expense of $9.3 million. This activity was partially offset by a higher stock-based compensation expense of $16.1 million and an inflow of $1.8 million from the benefit for deferred income taxes, as compared to an outflow of $10.6 million in the prior period.
Previous wording
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.
Current wording
During fiscal 2026, we invested $35.7 million, an increase of $22.2 million, as compared to $13.5 million during fiscal 2025. During fiscal 2026, we purchased property and equipment of $34.3 million and paid $1.4 million of cash in the asset acquisition of a provider of specialized manufacturing processes. During fiscal 2025, we purchased property and equipment of $19.8 million and paid $4.5 million of cash in the asset acquisition of Star Lab, partially offset by the proceeds from the sale of manufacturing operations to Cicor Group of $6.2 million, $2.7 million provided by the sale of mc.com, and an inflow of $1.9 million provided by other investing activities.
Previous wording
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. 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.
Current wording
During fiscal 2026, we had $162.7 million in cash used in financing activities, as compared to $1.4 million in cash provided by financing activities during fiscal 2025. During fiscal 2026, we made payments of $150.0 million on the Revolver with no additional borrowings. Fiscal 2026 included $15.0 million of cash paid for shares of the Company's common stock under the share repurchase program, and $3.2 million of cash paid in financing costs in conjunction with the amendment to our Revolver during the second quarter of fiscal 2026. This activity was partially offset by $5.4 million of proceeds from employee stock plans. During fiscal 2025, we made no borrowings or repayments on the Revolver. Fiscal 2025 included $3.7 million of proceeds from employee stock plans, partially offset by $2.2 million of cash paid in deferred financing in conjunction with the amendment to our Revolver during the first quarter of fiscal 2025.
Previous wording
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.
Current wording
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 $269.2 million at July 3, 2026.
Previous wording
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. Accordingly, these amounts are not included in the above table.
Current wording
We had a liability of $3.5 million for uncertain tax positions that have been taken or are expected to be taken in various income tax returns as of July 3, 2026. We do not know the ultimate resolution of these uncertain tax positions and as such, do not know the ultimate timing of payments related to this liability. Accordingly, these amounts are not included in the above table.
Previous wording
Our standard product sales and license agreements entered into in the ordinary course of business typically contain an indemnification provision pursuant to which we indemnify, hold harmless, and agree to reimburse the indemnified party for losses suffered or incurred in connection with certain intellectual property infringement claims by any third party with respect to our products. Such provisions generally survive termination or expiration of the agreements. The potential amount of future payments we could be required to make under these indemnification provisions is, in some instances, unlimited.
Current wording
Our standard product sales and license agreements entered into in the ordinary course of business typically contain an indemnification provision pursuant to which we indemnify, hold harmless, and agree to reimburse the indemnified party for losses suffered or incurred in connection with certain IP infringement claims by any third party with respect to our products. Such provisions generally survive termination or expiration of the agreements. The potential amount of future payments we could be required to make under these indemnification provisions is, in some instances, unlimited.
Previous wording
Adjusted EBITDA is defined as net income before other non-operating adjustments, interest income and expense, income taxes, depreciation, amortization of intangible assets, restructuring and other charges, impairment of long-lived assets, acquisition, financing and other third party costs, fair value adjustments from purchase accounting, litigation and settlement income and expense, COVID related expenses, and stock-based and other non-cash compensation expense. We use adjusted EBITDA as an important indicator of the operating performance of our business. We use adjusted EBITDA in internal forecasts and models when establishing internal operating budgets, supplementing the financial results and forecasts reported to our board of directors, determining a portion of bonus compensation for executive officers and other key employees based on operating performance, evaluating short-term and long-term operating trends in our operations and allocating resources to various initiatives and operational requirements. We believe that adjusted EBITDA permits a comparative assessment of our operating performance, relative to our performance based on our GAAP results, while isolating the effects of charges that may vary from period to period without any correlation to underlying operating performance. We believe that these non-GAAP financial adjustments are useful to investors because they allow investors to evaluate the effectiveness of the methodology and information used by management in our financial and operational decision-making. We believe that trends in our adjusted EBITDA are valuable indicators of our operating performance.
Current wording
Adjusted EBITDA is defined as net income before other non-operating adjustments, interest income and expense, income taxes, depreciation, amortization of intangible assets, restructuring and other charges, impairment of long-lived assets, acquisition, financing and other third party costs, fair value adjustments from purchase accounting, litigation and settlement income and expense, and stock-based and other non-cash compensation expense. We use adjusted EBITDA as an important indicator of the operating performance of our business. We use adjusted EBITDA in internal forecasts and models when establishing internal operating budgets, supplementing the financial results and forecasts reported to our board of directors, determining a portion of bonus compensation for executive officers and other key employees based on operating performance, evaluating short-term and long-term operating trends in our operations and allocating resources to various initiatives and operational requirements. We believe that adjusted EBITDA permits a comparative assessment of our operating performance, relative to our performance based on our GAAP results, while isolating the effects of charges that may vary from period to period without any correlation to underlying operating performance. We believe that these non-GAAP financial adjustments are useful to investors because they allow investors to evaluate the effectiveness of the methodology and information used by management in our financial and operational decision-making. We believe that trends in our adjusted EBITDA are valuable indicators of our operating performance.
Previous wording
(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. 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.
Current wording
(1) Restructuring and other charges are related to management's decision to undertake certain actions to realign our cost structure through workforce reductions and the closure of certain facilities, businesses and lines of business. These charges are typically related to acquisitions and organizational redesign programs initiated as part of discrete post-acquisition integration activities. We believe these items are non-routine and may not be indicative of ongoing operating results.
Previous wording
(2) Acquisition, financing and other third party costs for fiscal 2025 are related to costs associated with the sale of manufacturing operations to Cicor Group and financing costs.
Current wording
(2) Acquisition, financing and other third party costs for fiscal 2026 are related to costs incurred in the asset acquisition of a provider of specialized manufacturing processes. Acquisition, financing and other third party costs for fiscal 2025 are related to costs associated with the sale of manufacturing operations to Cicor Group and financing costs.
Previous wording
Adjusted income and adjusted EPS exclude the impact of certain items and, therefore, have not been calculated in accordance with GAAP. We believe that exclusion of these items assists in providing a more complete understanding of our underlying results and trends and allows for comparability with our peer company index and industry. These non-GAAP financial measures may not be computed in the same manner as similarly titled measures used by other companies. We use these measures along with the corresponding GAAP financial measures to manage our business and to evaluate our performance compared to prior periods and the marketplace. We define adjusted income as net income before other non-operating adjustments, amortization of intangible assets, restructuring and other charges, impairment of long-lived assets, acquisition, financing and other third party costs, fair value adjustments from purchase accounting, litigation and settlement income and expense, COVID related expenses, and stock-based and other non-cash compensation expense. The impact to income taxes includes the impact to the effective tax rate, current tax provision and deferred tax provision. Adjusted EPS expresses adjusted income on a per share basis using weighted average diluted shares outstanding.
Current wording
Adjusted income and adjusted EPS exclude the impact of certain items and, therefore, have not been calculated in accordance with GAAP. We believe that exclusion of these items assists in providing a more complete understanding of our underlying results and trends and allows for comparability with our peer company index and industry. These non-GAAP financial measures may not be computed in the same manner as similarly titled measures used by other companies. We use these measures along with the corresponding GAAP financial measures to manage our business and to evaluate our performance compared to prior periods and the marketplace. We define adjusted income as net income before other non-operating adjustments, amortization of intangible assets, restructuring and other charges, impairment of long-lived assets, acquisition, financing and other third party costs, fair value adjustments from purchase accounting, litigation and settlement income and expense, and stock-based and other non-cash compensation expense. The impact to income taxes includes the impact to the effective tax rate, current tax provision and deferred tax provision. Adjusted EPS expresses adjusted income on a per share basis using weighted average diluted shares outstanding.
Previous wording
(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. 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.
Current wording
(1) Restructuring and other charges are related to management's decision to undertake certain actions to realign our cost structure through workforce reductions and the closure of certain facilities, businesses and lines of business. These charges are typically related to acquisitions and organizational redesign programs initiated as part of discrete post-acquisition integration activities. We believe these items are non-routine and may not be indicative of ongoing operating results.
Previous wording
(2) Acquisition, financing and other third party costs for fiscal 2025 are related to costs associated with the sale of manufacturing operations to Cicor Group and financing costs.
Current wording
(2) Acquisition, financing and other third party costs for fiscal 2026 are related to costs incurred in the asset acquisition of a provider of specialized manufacturing processes. Acquisition, financing and other third party costs for fiscal 2025 are related to costs associated with the sale of manufacturing operations to Cicor Group and financing costs.
Previous wording
The following table reconciles cash provided by (used in) operating activities, the most directly comparable GAAP financial measure, to free cash flow:
Current wording
The following table reconciles cash provided by operating activities, the most directly comparable GAAP financial measure, to free cash flow:
Previous wording
We recognize revenue at a point in time or over time as the performance obligations are met. A performance obligation is a promise in a contract to transfer a distinct good or service to the customer. Contracts with distinct performance obligations recognized at a point in time, with or without an allocation of the transaction price, totaled 53% and 45% of revenues for the fiscal years ended June 27, 2025 and June 28, 2024, respectively. Total revenue recognized under contracts over time was 47% and 55% of revenues for the fiscal years ended June 27, 2025 and June 28, 2024, respectively.
Current wording
We recognize revenue at a point in time or over time as the performance obligations are met. 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% of revenues for the fiscal years ended July 3, 2026 and June 27, 2025, respectively. Total revenue recognized under contracts over time was 47% revenues for the fiscal years ended July 3, 2026 and June 27, 2025, respectively.
Previous wording
Revenue is recognized over time (versus point in time recognition) for long-term contracts with development, production and service activities where the performance obligations are satisfied over time. These over time contracts involve the design, development, manufacture, or modification of complex modules and sub-assemblies or integrated subsystems and related services. Revenue is recognized over time, given: (i) our performance creates or enhances an asset that the customer controls as the asset is created or enhanced; or (ii) our performance creates an asset with no alternative use to us and (iii) we have an enforceable right to payment for performance completed to date. We consider the nature of these contracts and the types of products and services provided when determining the proper accounting for a particular contract. These contracts include both fixed-price and cost reimbursable contracts. Our cost reimbursable contracts typically include cost-plus fixed fee and time and material (“T&M”) contracts. We consider whether contracts should be combined or segmented, and based on this assessment, we combine closely related contracts when all the applicable criteria are met. The combination of two or more contracts requires judgment in determining whether the intent of entering into the contracts was effectively to enter into a single contract, which should be combined to reflect an overall profit rate. Similarly, we may separate an arrangement, which may consist of a single contract or group of contracts, with varying rates of profitability, only if the applicable criteria are met. Judgment also is involved in determining whether a single contract or group of contracts may be segmented based on how the arrangement and the related performance criteria were negotiated. The decision to combine a group of contracts or segment a contract could change the amount of revenue and gross profit recorded in a given period. For all types of contracts, we recognize anticipated contract losses as soon as they become known and estimable. These losses are recognized in advance of contract performance and as of June 27, 2025, approximately $4.5 million of these costs were in Accrued expenses on our Consolidated Balance Sheet.
Current wording
Revenue is recognized over time (versus point in time recognition) for long-term contracts with development, production and service activities where the performance obligations are satisfied over time. These over time contracts involve the design, development, manufacture, or modification of complex modules and sub-assemblies or integrated subsystems and related services. Revenue is recognized over time, given: (i) our performance creates or enhances an asset that the customer controls as the asset is created or enhanced; or (ii) our performance creates an asset with no alternative use to us and (iii) we have an enforceable right to payment for performance completed to date. We consider the nature of these contracts and the types of products and services provided when determining the proper accounting for a particular contract. These contracts include both fixed-price and cost reimbursable contracts. Our cost reimbursable contracts typically include cost-plus fixed fee and Time and Material (“T&M”) contracts. We consider whether contracts should be combined or segmented, and based on this assessment, we combine closely related contracts when all the applicable criteria are met. The combination of two or more contracts requires judgment in determining whether the intent of entering into the contracts was effectively to enter into a single contract, which should be combined to reflect an overall profit rate. Similarly, we may separate an arrangement, which may consist of a single contract or group of contracts, with varying rates of profitability, only if the applicable criteria are met. Judgment also is involved in determining whether a single contract or group of contracts may be segmented based on how the arrangement and the related performance criteria were negotiated. The decision to combine a group of contracts or segment a contract could change the amount of revenue and gross profit recorded in a given period. For all types of contracts, we recognize anticipated contract losses as soon as they become known and estimable. These losses are recognized in advance of contract performance and as of July 3, 2026, approximately $4.0 million of these costs were in Accrued expenses on our Consolidated Balance Sheet.
Previous wording
We value our inventory at the lower of cost (first-in, first-out) or its net realizable value. We write down inventory for excess and obsolescence based upon assumptions about future demand, product mix and possible alternative uses. Actual demand, product mix and alternative usage may be higher or lower resulting in variations in on our gross margin.
Current wording
We value our inventory at the lower of cost (first-in, first-out) or its net realizable value. We write down inventory for excess and obsolescence based upon assumptions about future demand, product mix and possible alternative uses. Actual demand, product mix and alternative usage may be higher or lower resulting in variations in our gross margin.
Previous wording
Key assumptions of the forecast model over expected revenues, expenses, capital expenditures, and working capital, as well as discount factors and income tax rates are subject to a high degree of judgement and complexity. We make every effort to forecast future financial performance as accurately as possible with the information available at the time the forecast is developed. These assumptions were reviewed by management and compared to assumptions used in prior analyses and were deemed reasonable. There were no material changes in the key assumptions during the periods presented.
Current wording
Key assumptions of the forecast model over expected revenues, expenses, capital expenditures, and working capital, as well as discount factors and income tax rates are subject to a high degree of judgment and complexity. We make every effort to forecast future financial performance as accurately as possible with the information available at the time the forecast is developed. These assumptions were reviewed by management and compared to assumptions used in prior analyses and were deemed reasonable. There were no material changes in the key assumptions during the periods presented.
Previous wording
There are inherent uncertainties and management judgement required in these determinations and risks to the forecast included but are not limited to program/product execution, transition from development to production programs, industry related make-buy decisions, and global market conditions. Changes in these estimates and assumptions could materially affect the results of our tests for goodwill impairment. We continuously monitor and evaluate relevant events and circumstances that could unfavorably impact our significant assumptions used in testing goodwill, including macroeconomic conditions, industry and market considerations, financial performance and expectations of projected financial performance and cash flows, and changes in our stock price in relation to the carrying value of its reporting units, among other relevant factors. It is possible that future changes in such circumstances, or in the inputs and assumptions used in estimating the fair value of our reporting units, could require us to perform an interim impairment assessment and record an impairment charge. In addition, we use the market approach, which compares the reporting unit to publicly traded companies and transactions involving similar businesses, to support the conclusions of the income approach.
Current wording
There are inherent uncertainties and management judgment required in these determinations and risks to the forecast included but are not limited to program/product execution, transition from development to production programs, industry related make-buy decisions, and global market conditions. Changes in these estimates and assumptions could materially affect the results of our tests for goodwill impairment. We continuously monitor and evaluate relevant events and circumstances that could unfavorably impact our significant assumptions used in testing goodwill, including macroeconomic conditions, industry and market considerations, financial performance and expectations of projected financial performance and cash flows, and changes in our stock price in relation to the carrying value of its reporting units, among other relevant factors. It is possible that future changes in such circumstances, or in the inputs and assumptions used in estimating the fair value of our reporting units, could require us to perform an interim impairment assessment and record an impairment charge. In addition, we use the market approach, which compares the reporting unit to publicly traded companies and transactions involving similar businesses, to support the conclusions of the income approach.
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