MRCY 10-K & 10-Q changes, risk factors and insider trading

Sales of our products and services, primarily as a subcontractor or team member with defense prime contractors, and in some cases directly, to the U.S. government, as well as foreign governments, accounted for approximately 97%, 95%97% and 98%95% of our total net revenues in fiscal years 2025,2026, 20242025 and 2023,2024, respectively. Our products and services are incorporated into many different domestic and international defense programs. Over the lifetime of a defense program, the award of many different individual contracts and subcontracts may impact our products’ requirements. The funding of U.S. government programs is subject to Congressional appropriations. Although multiple-year contracts may be planned in connection with major procurements, Congress generally appropriates funds on a fiscal year basis even though a program may continue for many years. Consequently, programs are often only partially funded initially, and additional funds are committed only as Congress makes further appropriations and prime contracts receive such funding. The reduction or delay in funding or termination of a program in which we are involved could result in a loss of or delay in receiving anticipated future revenues attributable to that program and contracts or orders received. The U.S. government could reduce or terminate a prime contract under which we are a subcontractor or team member irrespective of the quality of our products or services. The termination of a program or the reduction in or failure to commit additional funds to a program in which we are involved could negatively impact our revenues and have a material adverse effect on our financial condition and results of operations. The U.S. defense budget frequently operates under a continuing budget resolution, which increases revenue uncertainty and volatility. For fiscal 20262027 and beyond, the potential for gridlock in Congress, a continuing budget resolution, budget sequestration, a U.S. government shutdown, or the crowding out of defense funding due to historically high budget deficits or changes in national spending priorities toward non-defense budget items could adversely impact our revenues and increase uncertainty in our business and financial planning.

Further, the funding of the defense programs that incorporate our products and services is subject to the overall U.S. government budget and appropriation decisions and other processes, which are driven by numerous factors beyond our control, including geo-political, macroeconomic, public health and political conditions. We are unable to predict the likely duration and severity of adverse economic conditions in the United States and other countries, but the longer the duration or the greater the severity, the greater the risks we face in operating our business. The near-term potential for recessionary economic conditions and possible stagflation (persistent high inflation and stagnant economic demand) presents increased risks to our business.

Economic, capital market and political conditions could adversely affect our business, results of operations,operations and financial condition.

•supply chain challenges toin sourcesourcing raw materials;

We have experienced considerable price inflation in our costs for labor and materials duringsince recentthe years,pandemic, which adversely affected our business, results of operations and financial condition. We may not be able to pass through future inflationary cost increases under our existing firmfirm-fixed-price fixed price(“FFP”) contracts and we may only be able to recoup a portion of our increased costs under our reimbursement-type contracts. Our ability to raise prices to reflect increased costs may be limited by competitive conditions in the market for our products and services. We continue to work to mitigate such pressures on our business operations as they develop.

We are dependent on a small number of customers for a large portion of our revenues. A significant decrease in the sales to or loss of any of our major customers would have a material adverse effect on our business and results of operations. In fiscal 2026, RTX Corporation accounted for 15% of our total net revenues, Lockheed Martin accounted for 11% of our total net revenues, and Northrop Grumman accounted for 10% of our total net revenues. In fiscal 2025, RTX Corporation accounted for 13% of our total net revenues and both Lockheed Martin and the U. S. Navy accounted for 10% of our total net revenues. In fiscal 2024, L3Harris accounted for 12% of our total net revenues, Lockheed Martin accounted for 11% of our total net revenues,revenues and RTX Corporation accounted for 10% of our total net revenues. In fiscal 2023, RTX Corporation accounted for 14% of our total net revenues, Lockheed Martin accounted for 13% of our total net revenues, and Northrop Grumman accounted for 11% of our total net revenues. Customers in the defense market generally purchase our products in connection with government programs that have a limited duration, leading to fluctuating sales to any particular customer in this market from year to year. In addition, our revenues are largely dependent upon the ability of customers to develop and sell products that incorporate our products. No assurance can be given that our customers will not experience financial, technical or other difficulties that could adversely affect their operations and, in turn, our results of operations. Additionally, on a limited number of programs the customer has co-manufacturing rightsrights, and customers periodically otherwise re-compete technical redesigns of components we are currently selling to them, either of which could leadleads to a shift of production on such a program away from us which in turn could lead to lower revenues.revenues overall if not fully mitigated with gains in new or existing programs. Further, new programs may yield lower margins than legacy programs, which could result in an overall reduction in gross margins.

Our markets are highly competitive, with frequent technological advances and evolving industry standards. Competitors may offer lower pricing, superior products or better delivery, reducing demand for our offerings. Operational challenges have impacted our on-time delivery, affecting visibility, design wins, bookingsvisibility and revenue. Customers may opt for lower-cost alternatives or insource previously outsourced products. Rapid technological changes could lead to new competitors, resulting in lost customers and programs. Negative perceptions regarding cost or delivery issues may further impact our ability to secure business. Limited engagement with key government-funded laboratories (e.g., DARPA, MIT Lincoln Labs and MITRE) may hinder our ability to become a design partner for defense prime contractors. As defense agencies evaluate lessons learned from modern conflicts, new entrants offering low‑cost, modular systems may gain influence in early design phases, reducing our access to future programs.

Product complexity occasionally leads to manufacturing delays. For example, in fiscal year 2024, we halted production for months on multiple secure computing programs due to a root cause analysis, materially affecting financial results and customer confidence. These challenges could recur in the future on other programs. In contrast, competitors producing simpler, lower‑cost systems may be less susceptible to similar production disruptions, further impacting our competitive position.

Several components used in our products are currently obtained from sole-source suppliers. We are dependent on a limited number of key vendors for certain critical components such as FPGAs, ASICS,ASICs, processors, memory products and specialty glass. Generally, suppliers may terminate their contracts with us without cause upon 30 days’ notice and may cease offering their products upon 180 days’ notice. If any of our sole-source suppliers limits or reduces the sale of these components, we may be unable to fulfill customer orders in a timely manner or at all. These sole-source and other suppliers are each subject to quality and performance issues, materials shortages, excess demand, reduction in capacity, and other factors that may disrupt the flow of goods to us or to our customers, which would adversely affect our business and customer relationships. There can be no assurance that these suppliers will continue to meet our requirements. The timing and extent of these impacts remain uncertain, and we expect supply chain, inflation, and pricing pressures to persist. These challenges may be further exacerbated by factors such as economic downturns, changes in trade policies, supplier capacity or quality issues, supplier financial instability, natural disasters, pandemics, or logistics disruptions. If supply arrangements are interrupted, we may not be able to find another supplier on a timely or satisfactory basis. We may incur significant set-up costs and delays in manufacturing should it become necessary to replace any key vendors due to work stoppages, shipping delays, financial difficulties, natural or manmade disasters or other factors. Carrying increased levels of inventory also increases our potential risk of future inventory obsolescence.

Trade policies and export controls could significantly increase the cost of our manufacturing operations,costs, potentially reducing ourreduce gross margins and disrupt demand for our products.

We may not be able to effectively manage our relationship with contract manufacturers, and the contract manufacturers may not meet future requirements for timely delivery. We rely on contract manufacturers to build hardware sub-assemblies for certain of our products in accordance with our specifications. During the normal course of business, we may provide demand forecasts to contract manufacturers several months prior to scheduled delivery of our products to customers. If we overestimate requirements, the contract manufacturers may assess cancellation penalties or we may be left with excess inventory, which may negatively impact our earnings. If we underestimate requirements, the contract manufacturers may have inadequate inventory, which could interrupt manufacturing of our products and result in delays in shipment to customers and revenue recognition. Contract manufacturers also build products for other companies, and they may not have sufficient quantities of inventory available or sufficient internal resources to fill our orders on a timely basis or at all. These risks may be enhanced for our InternationalEMEA operations as we outsourced our former Swiss manufacturing operations to Cicor Group in June 2025, and Cicor will be transitioning manufacturing from our legacy Geneva location, which they now operate, to their other facilities in Switzerland and the United Kingdom during fiscal 2025.2027.

We market and sell products in international markets and have sales offices and manufacturing and/or engineering facilities and subsidiaries in Switzerland, Spain and the United Kingdom. Revenues from international operations accounted for 2% of our total net revenues in fiscal 2026, and accounted for 5% of our total net revenues in each fiscal 2025, 2024,2025 and 2023.2024. We also ship directly from our U.S. operations to international customers. There are inherent risks in transacting business internationally, including:

•less favorable intellectual propertyIP laws;

We have a pension plan (the “Plan”) for Swiss employees, mandated by Swiss law. Since participants of the Plan are entitled to a defined rate of interest on contributions made, the Plan meets the criteria for a defined benefit plan under U.S. GAAP. The Plan, an independent pension fund, is part of a multi-employer plan with unrestricted joint liability for all participating companies and the economic interest in the Plan’s overfunding or underfunding is allocated to each participating company based on an allocation key determined by the Plan. U.S. GAAP requires an employer to recognize the funded status of the defined benefit plan on the balance sheet, which we have presented in other long-term liabilities on our Consolidated Balance Sheets at JuneJuly 27,3, 2025.2026. The funded status may vary from year to year due to changes in the fair value of the Plan’s assets and variations on the underlying assumptions in the Plan and we may have to record an increased liability as a result of fluctuations in the value of the Plan’s assets. As of JuneJuly 27,3, 2025,2026, we had a liability of $5.3$3.1 million in Other non-current liabilities representing the net under-funded status of the Plan.

In addition, we must comply with the Foreign Corrupt Practices Act, or the FCPA, and the anti-corruption laws of the countries in which we operate. Those laws generally prohibit the giving of anything of value to win business. If we or our intermediaries fail to comply with the requirements of international applicable anti-corruption laws, governmental authorities in the United States or the countries in which we operate could seek to impose civil and criminal penalties, or restrict or limit our ability to do business, which could have a material adverse effect on our business, results of operations, financial condition,condition and cash flows.

Our business is characterized by the need for continued investment in R&D. If we fail to invest sufficiently in R&D, our products could become less attractive to potential customers and our business and financial condition could be materially and adversely affected. As a result of the need to maintain spending levels in this area and the difficulty in reducing costs associated with R&D, ourOur operating results could be materially harmed if our R&D efforts fail to result in new products or if revenues fall below expectations. As a result of our commitment to invest in R&D, spending levels of R&D expenses as a percentage of revenues may fluctuate in the future. In addition, defense prime contractors could increase their requirement for subcontractors, like us, to increase their share in the R&D costs for new programs and design wins.

•delays in shipping hardware and software or licensing design intellectual propertyIP;

•changes in estimatesEstimates ofat completionCompletion (“EAC”) on fixed price engagements, which represent a substantial percentage of our business.business, or inaccurate cost estimation at time of proposal, leading to unanticipated cost increases.

Another factor contributing to fluctuations in our quarterly results is the fixed nature of expenditures on personnel, facilities,facilities and information technology. Expense levels for these programs are based, in significant part, on expectations of future revenues. If actual quarterly revenues are below management’s expectations, our results of operations could be adversely affected.

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Over time revenue recognition is more reliant on estimates than the accounting for some of our component sales. Changes in estimates of completion ("EACs") on fixed price engagements, which represent a substantial percentage of our business, also requires judgement,judgment, including in assessing risks, estimating contract revenue and costs,costs and predicting future performance. Actual results could differ from those estimates, and changes in estimates in subsequent periods could cause our results of operations to fluctuate.

If we experience a disaster or other business continuity problem, we may not be able to recover successfully, which could cause material financial loss, loss of human capital, regulatory actions, reputational harm,harm or legal liability.

If we experience a local or regional disaster or other business continuity problem, such as an earthquake, terrorist attack, pandemic or other natural or man-made disaster, our continued success will depend, in part, on the availability of our personnel, our facilities and the proper functioning of our network, telecommunication and other business systems and operations. As we growscale our operations, the potential for natural or man-made disasters, political, economic, or infrastructure instabilities, or other country- or region-specific business continuity risks increases.

We may be subject, in the ordinary course of business, to losses resulting from product liability, cyber-attacks, accidents, natural disasters,disasters and other claims against us, for which we may have no insurance coverage. The policies limits and terms of coverage may include significant deductibles or self-insured retentions, and we cannot be certain that our insurance coverage will be sufficient to cover all future losses or claims against us. A loss that is uninsured or which exceeds policy limits may require us to pay substantial amounts, which could adversely affect our financial condition and operating results.

Risks Related to Our Growth Strategy, M&A and Acquisition Integration

Our growth strategy includes developing new products, adding new customers and programs within our existing markets,markets and entering new markets both domestically and internationally, developing our manufacturing capabilities, as well as identifying and integrating acquisitions and achieving revenue and cost synergies and economies of scale. Our ability to compete in new markets will depend upon several factors including, among others:

The failure to do any of the foregoing could have a material adverse effect on our business, financial condition,condition and results of operations. In addition, we may face competition in these new markets from various companies that may have substantially greater research and developmentR&D resources, marketing and financial resources, manufacturing capability and/or customer support organizations.

•problems and increased costs in connection with the integration of the personnel, business systems, operations, technologies,technologies or products of the acquired businesses;

•unanticipated issues, expenses, charges,charges or liabilities related to the acquisitions;

•failure to rationalize supply chain, manufacturing capacity, locations, logistics and operating models to achieve anticipated economies of scale, or disruptions to supply chain, manufacturing,manufacturing or product design operations during the combination of facilities;

We may not be able to maintain the levels of revenue, earnings,earnings or operating efficiency that we and our prior acquisitions had achieved or might achieve separately. You should not place undue reliance on any anticipated synergies. In addition, our competitors could try to emulate our strategy, leading to greater competition for acquisition targets which could lead to larger competitors if they succeed in emulating our strategy.

The Revolver accrues interest, at our option, at floating rates tied to Secured Overnight Financing Rate ("“SOFR"”) or the prime rate plus an applicable percentage. The applicable percentage is set at SOFR plus 1.25% and is established pursuant to a pricing grid based on our total net leverage ratio. We are exposed to the impact of interest rate changes primarily through our borrowing activities. Subject to the limits contained in the Revolver, we may incur substantial additional debt from time to time to finance working capital, capital expenditures, investments or acquisitions, or for other purposes. If we do so, the risks related to our debt could intensify. Specifically, our debt could have important consequences to our investors, including the following:

•limiting our ability to obtain additional financing to fund future working capital, capital expenditures, acquisitions,acquisitions or other general corporate requirements;

Increases in interest rates would increase the cost of servicing our financial instruments with exposure to interest rate risk and could materially reduce our profitability and cash flows. Assuming that we had $100.0 million of floating rate debt outstanding, our annual interest expense would change by approximately $1.0 million for each 100 basis point increase in interest rates. We may also incur costs related to interest rate hedges, including the termination of any such hedges. As of JuneJuly 27,3, 2025,2026, we had a swap agreement in effect that fixed $300.0 million of the total $591.5$441.5 million of outstanding borrowings under the Revolver at a rate of 4.66%. The movement of interest rates would affect the value of such swap agreement.

Limited or negative free cash flow as we experienced during certain prior periods could eventually lead to a challenge in servicing our debt. We are subject to refinancing risk as we expect to need to refinance our debt prior to the expiration of the Revolver.

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, 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 the Company’sour markets, effects of any U.S. federal government shutdown or extended continuing resolution, effects of increasingly volatile geopolitical unrestevents 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'sour 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, 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,restructurings and operational efficiency initiatives or delays in realizing such benefits, challenges in integrating acquired businesses and achieving anticipated synergies, effects of shareholder activism, increases in interest rates, changes to industrial security and cyber-security regulations and requirements and impacts from any cyber or insider threat events, including the risks from heightened, persistent, and increasingly sophisticated nation-state level cyberattacks and emerging threats associated with agentic AI-enabled cyber tools, changes in tax rates or tax regulations, changes to interest rate swaps or other cash flow hedging arrangements, changes to generally accepted accounting principles, difficulties in retaining key employees and customers, litigation, including the disputestate arisinglaw withclaim therelated formerto CEOour oversettled hisfederal resignation,securities class action lawsuit, unanticipated costs under fixed-price service and system integration engagements, and various other factors beyond our control. These risks and uncertainties also include such additional risk factors as set forth under Part I-Item 1A (Risk Factors) in this Annual Report on Form 10-K. We caution readers not to place undue reliance upon any such forward-looking statements, which speak only as of the date made. We undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date on which such statement is made.

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-criticalcustomers products and solutions are deployed bydeploy our customerssolutions for a variety of applications including sensor and radar processing, electronic warfare, avionics, weapons, and command,C4I. control,We communications, and intelligence ("C4I"). Mercury has builtdeliver a trusted, robust portfolio of proven capabilities, leveragingbuilt on the most advanced commercial silicon technologies and purpose-built to exceed the performance needs of our defense and commercial customers. Customers add their own applications and algorithms to our specialized, secure and innovative products and pre-integrated solutions. This allows them to complete their full system by integrating with their platform, the sensor technology and, increasingly, the processing from Mercury.

Our capabilities, technology, peoplepeople, culture and R&D investment strategy combine toall differentiate Mercury in ourthe aerospace and defense industry. We maintain our technological edge by investing in the critical capabilitiesbuilding blocks of processing, developing valuable IP and intellectual property (“IP” or “building blocks”) in processing, leveragingembracing open standards and openarchitectures. architecturesThis tolets adaptus quicklyrapidly thoseshape these building blocks into products and solutions for highly data-intensive applications,missions, including emerging needs in areas suchlike asAI artificialprocessing intelligenceat (“AI”).the edge.

As of JuneJuly 27,3, 2025,2026, we had 2,1622,102 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. 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.

Total revenues increased $76.7$71.6 million, or 9.2%,7.9%, to $983.6 million during fiscal 2026, as compared 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 2024.2025. Point in time revenue and over time revenue represented 53% and 47%, respectively, of total revenue during fiscal 2025.2026. PointOver time revenue increased $40.5 million and point in time revenue increased $112.3$31.1 million and over time revenue decreased $35.5 million as we transitioned many of our development programs to production.million. Point in time revenue and over time revenue represented 45%53% and 55%,47%, respectively, of total revenues during fiscal 2024.2025.

We experienced revenue increases across the modules and sub-assembliessub-assemblies, components, and integrated solutions product groupings of $60.5$43.5 millionmillion, $15.1 million, and $18.7$13.0 million, respectively, partially offset by a decrease to the components product grouping of $2.5 million.respectively. The increase in total revenue was primarily driven by the other sensor and effector, radar, other,electronic warfare, and C4I end applications increases of $67.7$46.9 million, $34.4$19.1 million, $16.4 million, and $15.1$1.6 million,million respectively, partially offset by decreasesa decrease to other sensor and effector and electronic warfare end applications of $30.2$12.2 million and $10.3 million, respectively.million. We experienced increases across several of our platforms during fiscal 20252026 when compared to fiscal 20242025; Land, Other,Naval, Space, and NavalOther platforms increased $50.5$53.7 million, $43.5$23.7 million, $22.0 million, and $7.9$10.3 million,million respectively, partially offset by decreasesa decrease to the Airborne and Space platformsplatform of $20.6$38.1 million and $4.6 million, respectively.million. The largest program increases were related to LTAMDS, KC-46, MH-60R/S, THAAD and a secure processing program, an integrated space program, SEWIP, and PGK, partially offset by decreases to the SCARAegis and ADTS programs when compared to the prior period.T-45. There were no programs comprising 10% or more of our revenues for fiscal 20252026 or 2024.2025.

Gross margin was 27.9%28.6% for fiscal 2025,2026, an increase of 44070 basis points from the 23.5%27.9% gross margin realized during fiscal 2024.2025. 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 $21.1$18.7 million recorded in the period, an incremental improvement of approximately $52.2$2.3 million, or 65040 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.period.

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 judgementjudgment across the full portfolio of programs.

Selling, general and administrative expenses decreasedincreased $12.4$20.6 million, or 7.4%,13.4%, to $175.0 million during fiscal 2026 as compared to $154.4 million during fiscal 2025 as compared to $166.8 million during fiscal 2024.2025. The decreaseincrease was primarily driven by thehigher fullcompensation year impactexpense of the$20.5 reduction in force initiated in fiscal 2024, resulting in lower compensation costsmillion, of $14.4which million.$10.5 Theremillion werewas related to stock compensation. The increase was also reductionsdriven in bad debt expense andby software licensing fees and litigation and settlement expense of $14.4$3.6 million and $4.0$3.5 million, respectively. These decreasesincreases were partially offset by higherlower litigation and settlement, bonus,depreciation and consulting expense of $9.9$4.0 million, $5.0 million,million and $1.8$3.2 million, respectively.

Research and development expenses decreased $33.7$7.9 million, or 33.3%,11.7%, to $59.7 million during fiscal 2026, as compared to $67.6 million during fiscal 2025, as compared to $101.3 million for fiscal 2024.2025. The decrease was primarily driven by efficiency improvements and the savings from headcount reductions of 211approximately 270 employees, initiated across fiscal 2025 and 2026, resulting in lower expense of $25.8$13.1 million. There werewas also reductionsdecreased insoftware consultinglicense and outside service, equipment and supplies,fees and depreciation expense of $8.8$2.0 million and $1.8 million, $4.2respectively. million,These anddecreases $1.3 million, respectively,were partially offset by changes in engineering utilization and higher bonussupplies expense of $5.9$7.8 million.million and $2.3 million, respectively.

Amortization of intangible assets decreased $4.9$3.9 million to $38.9 million during fiscal 2026, as compared to $42.8 million duringfor fiscal 2025, as compared to $47.7 million for fiscal 2024, due to various developed technology, customer relationship, and backlogrelationship intangibles being fully amortized duringin fiscal 20242025 and 2025.fiscal 2026.

During fiscal 2025,2026, we incurred $7.2$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.positions, Restructuringpredominantly in research and other charges during fiscal 2024 include $26.2 million of severance costs related to workforce reductions that eliminated approximately 350 positions.development.

Acquisition costs and other related expenses were $1.3 million during fiscal 2026, as compared to $2.0 million during fiscal 2025, as compared to $1.7 million during fiscal 2024.2025. The acquisition costs and other related expenses we incurred during fiscal 20252026 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$0.5 million related to run-rate amortization of fair value adjustments from purchase accounting onas priorwell acquisitions.as an immaterial amount of costs incurred in the asset acquisition of a provider of specialized manufacturing processes.

We recognized $3.6$7.7 million of interest income in fiscal 2025,2026, as compared to $1.2$3.6 million in fiscal 2024.2025. The increase was driven by higher average cash and cash equivalents and higher average interest rates on deposits during the period.

Interest expense for fiscal 20252026 decreased to $33.4$29.6 million, as compared to $35.0$33.4 million in fiscal 2024.2025. The decrease was driven primarily by lower average rates and lower average borrowings on our Revolver during the periodperiod. onOutstanding the Revolver. Borrowingsborrowings under our Revolver were $441.5 million and $591.5 million at JuneJuly 27,3, 20252026 and June 28,27, 2024,2025, respectively.

Other expense, net was $1.0 million duringfor fiscal 2025,2026 increased to $7.3 million, as compared to $7.7$1.0 million in fiscal 2024.2025. FiscalThe 2025increase includeswas $5.3primarily driven by $1.9 million of financingother costs,expense $2.3during fiscal 2026, as compared to $6.2 million of securities class action expense, and $1.1 million of consulting costs, partially offset by other income primarilyduring 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,million. The increase was also driven by $1.1 million of net foreign currency translation losses during fiscal 2026, as wellcompared asto $1.7 million of net foreign currency translation gains during fiscal 2025. ThereThese wasincreases $4.9 million of litigation and settlement costs, $3.4 million of financing costs and $0.4 million of net foreign currency translation losses,were partially offset by otherlower incomesecurities class expense, financing costs, and consulting costs of $1.3$2.4 millionmillion, during$1.5 fiscalmillion, 2024.and $0.5 million, respectively.

We recorded an income tax provision of $0.8 million and an income tax benefit of $12.5 million and $51.6 million on losses before income taxes of $50.4$28.9 million and $189.3$50.4 million for fiscal years 20252026 and 2024,2025, respectively.

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. DueWe tohave the timing of the bill being enacted after fiscal 2025,evaluated the impact of thethis OBBBAlegislation, willwhich beresults reflectedprimarily in fiscala 2026.timing Wedifference, arewith evaluatingno thematerial impacts of this legislationimpact on futureour periods.effective tax rate.

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, ourOur working capital decreasedbalance, primarilywhich relatedwe todefine unbilledas receivablesTotal current assets less Cash and deferredcash revenue. As we completed our challenged programsequivalents and receivedTotal follow-oncurrent productionliabilities, awards,as bothof ourJuly unbilled3, receivables2026 andwas inventory$430.6 havemillion, begun converting to cash, which is reducing our working capital balances. During fiscal 2025, our working capital balance declined $90.1 millionas compared to the$448.7 priormillion year.as of June 27, 2025.

During fiscal 2025,2026, we didmade notpayments haveof any$150.0 million on the Revolver with no additional borrowings or repayments.borrowings. As of JuneJuly 27,3, 2025,2026, the Company was in compliance with all covenants and conditions under the Revolver. The borrowing capacity as defined under the Revolver as of JuneJuly 27,3, 20252026 is approximately $900.0$850.0 million, less outstanding borrowings of $591.5$441.5 million. See Note L in the accompanying consolidated financial statements for further discussion of the Revolver.

On August 13, 2024, we entered into a $60.0 million committed receivables purchase and servicing agreement (“RPSA”) with a new party.RPSA. The RPSA hashad 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$60.0 million. WeOn hadDecember $52.210, 2025, we amended the RPSA to increase the facility from $60.0 million ofto factored$75.0 accountsmillion. receivable as ofOn June 27,4, 20252026, andwe incurredterminated factoringthe fees of approximately $1.8 millionRPSA in fiscalconjunction 2025.with Weentering hadinto $33.8a millionnew ofreceivables factoredpurchase accounts receivable as of June 28, 2024 and incurred factoring fees of approximately $1.9 million in fiscal 2024.agreement.

Our cash and cash equivalents increaseddecreased by $128.6$94.8 million during fiscal 20252026 primarily as the result of $138.9the $150.0 million providedrepayment 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 byon the saleRevolver, of our mc.com domain name, and $1.9 million provided by other investing activities. These inflows were partially offset by $19.8$34.3 million invested in purchases of property and equipment, $4.5$15.0 million of cash paid infor shares of the assetCompany's acquisitioncommon ofstock Starunder Labthe share repurchase program, and $2.2$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.

During fiscal 2025,2026, we invested $13.5$35.7 million, aan decreaseincrease of $20.8$22.2 million, as compared to $34.3$13.5 million during fiscal 20242025. primarilyDuring duefiscal to2026, lowerwe purchases ofpurchased property and equipment of $14.5$34.3 million,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, partially offset by $4.5 million of cash paid in the asset acquisition of Star Lab.activities.

During fiscal 2025,2026, we had $162.7 million in cash used in financing activities, as compared to $1.4 million in cash provided by financing activities, as compared to $82.7 millionactivities during fiscal 2024.2025. 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, as compared to net borrowings of $80.0 million during fiscal 2024.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.

The following is a schedule of our commitments and contractual obligations outstanding at JuneJuly 27,3, 20252026:

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$269.2 million at JuneJuly 27,3, 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.2026.

We had a liability at June 27, 2025 of $4.0$3.5 million for uncertain tax positions that have been taken or are expected to be taken in various income tax returns.returns as of July 3, 2026. We do not know the ultimate resolution of these uncertain tax positions and as such, do not know the ultimate timing of payments related to this liability. Accordingly, these amounts are not included in the above table.

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

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.

(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.

(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.

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 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 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, failure to meet contractual performance specifications, adherence to required manufacturing standards, capacity underutilization, increases in scrap or inventory write-offs, failure to achieve or maintain manufacturing quality certifications, such as AS9100, failure to achieve or maintain qualified business systems, such as those required by the DFARS, adverse findings in government audits or investigations, the impact of supply chain disruption, inflation and labor shortages, among other things, on program execution and the resulting effect on customer satisfaction, inability to fully realize the expected benefits from acquisitions, restructurings, and operational efficiency initiatives or delays in realizing such benefits, challenges in integrating acquired businesses and achieving anticipated synergies, effects of shareholder activism, increases in interest rates, changes to industrial security and cyber-security regulations and requirements and impacts from any cyber or insider threat events, including the risks from heightened, persistent, and increasingly sophisticated nation-state level cyberattacks and emerging threats associated with agentic AI-enabled cyber tools, changes in tax rates or tax regulations, changes to interest rate swaps or other cash flow hedging arrangements, changes to generally accepted accounting principles, difficulties in retaining key employees and customers, litigation, including the federal securities class action lawsuit and related claims, unanticipated costs under fixed-price service and system integration engagements, and various other factors beyond our control. These risks and uncertainties also include such additional risk factors as are discussed in our filings with the U.S. Securities and Exchange Commission, including our Annual Report on Form 10-K for the fiscal year ended June 27, 2025. We caution readers not to place undue reliance upon any such forward-looking statements, which speak only as of the date made. We undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date on which such statement is made.

As of DecemberMarch 26,27, 2025,2026, we had 2,1352,117 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®.

Our consolidated revenues, net loss, diluted net loss per share, adjusted earnings per share (“adjusted EPS”), and adjusted EBITDA for the secondthird quarter ended DecemberMarch 26,27, 20252026 were $232.9$235.8 million, $15.1$2.9 million, $0.26,$0.04, $0.16,$0.27, and $30.0$36.1 million, respectively. Our consolidated revenues, net loss, diluted net loss per share, adjusted earnings per share (“adjusted EPS”), and adjusted EBITDA for the sixnine months ended DecemberMarch 26,27, 20252026 were $458.1$693.8 million, $27.6$30.5 million, $0.47,$0.51, $0.41,$0.68, and $65.6$101.7 million, respectively. See the Non-GAAP Financial Measures section for a reconciliation to our most directly comparable GAAP financial measures.

There were 13 weeks included in the results of operations for the secondthird quarters ended DecemberMarch 26,27, 20252026 and DecemberMarch 27,28, 2024,2025, respectively. There were 2639 weeks during the sixnine months ended DecemberMarch 26,27, 20252026 and DecemberMarch 27,28, 2024,2025, respectively. The results for the secondthird quarter and sixnine months ended DecemberMarch 26,27, 20252026 are not necessarily indicative of the results to be expected for the full fiscal year.

The secondthird quarter ended DecemberMarch 26,27, 20252026 compared to the secondthird quarter ended DecemberMarch 27,28, 20242025

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

Total revenues increased $9.7$24.4 million, or 4.4%,11.5%, to $232.9$235.8 million during the secondthird quarter ended DecemberMarch 26,27, 2025,2026, as compared to $223.1$211.4 million during the secondthird quarter ended DecemberMarch 27,28, 2024.2025. Revenues increased year over year as we continued to execute on our program base, and continued toward full rate production of our common processing architecture programs.base. Point in time revenue and over time revenue represented 55%52% and 45%,48%, respectively, of total revenues during the secondthird quarter ended DecemberMarch 26,27, 2025,2026, an increase of $6.6$9.8 million and $3.3$14.6 million, respectively. Point in time revenue and over time revenue represented 55%53% and 45%47% respectively, of total revenues during the secondthird quarter ended DecemberMarch 27,28, 2024.2025.

Revenue increases were driven by the modules and sub-assemblies as well as the componentsintegrated solutions product grouping which increased $14.4$17.5 million and $3.6$11.0 million, respectively, partially offset by the integrated solutionscomponents product grouping which decreased $8.3$4.1 million during the secondthird quarter ended DecemberMarch 26,27, 2025,2026, when compared to the prior period. The increase in total revenue was primarily driven by the radar, electronic warfare, C4I, and other sensor and effectoreffector, radar, and electronic warfare end applications with increases of $6.5$17.3 million, $3.6 million, $2.5$8.9 million, and $1.8$8.6 millionmillion, respectively, partially offset by C4I and other end applications which decreased $4.7$7.0 million.million and $3.4 million, respectively. The increase in total revenue was also driven by the Land, Other,Space, and Naval platforms with increases of $14.3$19.0 million, $5.7$13.9 million, and $1.7$12.0 million, respectively, partially offset by a decreasedecreases to the Airborne platformand Other platforms of $12.0$17.7 million.million and $2.8 million, respectively. The largest program increases were related to twoLTAMDS, secure processing programsPWSA, and SEWIP, partially offset by decreasesa decrease in Aegis and an electronic warfare programF/A-18 when compared to the prior period. There were no programs comprising 10% or more of our revenues for the secondthird quarters ended DecemberMarch 26,27, 20252026 or DecemberMarch 27,28, 2024.2025.

Gross margin was 26.0%29.3% for the secondthird quarter ended DecemberMarch 26,27, 2025,2026, aan decreaseincrease of 130230 basis points from the 27.3%27.0% gross margin realized during the secondthird quarter ended DecemberMarch 27,28, 2024.2025. The lowerhigher gross margin was driven primarily by execution on lower margin programs, higher scrap of $3.1 million, higher inventory reserves of $2.4 million, partially offset by lower manufacturing variances of $5.3 million and net estimate at completion ("EAC") change impact on our programs recognized over time of approximately $3.5$2.1 million recorded in the quarter, an incremental improvement of approximately $0.9$1.6 million, or 5080 basis points, when compared to the prior period. WeThe mayincrease experiencewas increasesalso indriven ourby lower net manufacturing costsvariances related$4.1 tomillion, thepartially impositionoffset by higher inventory reserves of tariffs$3.3 on the import of components from other countries. We have not seen material increases to these costs in the second quarter of fiscal 2026, but they could impact our gross margins in the future.million.

Research and development expenses decreased $6.0$1.0 million, or 28.0%,6.1%, to $15.4$15.0 million during the secondthird quarter ended DecemberMarch 26,27, 2025,2026, as compared to $21.4$16.0 million during the secondthird quarter ended DecemberMarch 27,28, 2024.2025. The decrease was primarily driven by efficiency improvements and the savings from headcount reductions of approximately 225120 employees, initiated inacross fiscal 2025,2025 and 2026, resulting in lower expense of $4.1$5.9 million. WeThere was also sawdecreased decreaseddepreciation expense onof supply,$0.4 depreciation,million and softwareoutside licensingservice feesexpense of $1.0$0.4 million,million. $0.6These million,decreases were partially offset by higher engineering utilization of $4.4 million and $0.4supplies million,expense respectively.of $1.3 million.

We recognized $9.7$9.6 million of amortization of intangible assets during the secondthird quarter ended DecemberMarch 26,27, 2025,2026, as compared to $11.2$10.2 million during the secondthird quarter ended DecemberMarch 27,28, 2024,2025, primarily due to various customer relationship intangibles being fully amortized in fiscal 2025.

There was an immaterial amount of acquisition costs and other related expensesexpenses, including costs incurred in the asset acquisition of a provider of specialized manufacturing processes, during the secondthird quarters ended DecemberMarch 26,27, 20252026 and DecemberMarch 27,28, 2024.2025.

We recognized $1.6$2.5 million of interest income during the secondthird quarter ended DecemberMarch 26,27, 2025,2026, as compared to $0.4$1.3 million during the secondthird quarter ended DecemberMarch 27,28, 2024.2025. The increase was driven by higher average cash and cash equivalents during the period.

We incurred $7.8$7.3 million of interest expense during the secondthird quarter ended DecemberMarch 26,27, 2025,2026, as compared to $8.4$8.1 million during the secondthird quarter ended DecemberMarch 27,28, 2024.2025. The decrease was driven by lower interest rates during the period on our existing credit facility (the "Revolver").

OTHER EXPENSE,(EXPENSE) INCOME, NET

Other expense, net was $0.4$3.1 million during the secondthird quarter ended DecemberMarch 26,27, 2025,2026, as compared to $3.9other income, net of $2.3 million during the secondthird quarter ended DecemberMarch 27,28, 2024.2025. The secondthird quarter ended DecemberMarch 26,27, 20252026 includes $1.5a $1.9 million adjustment related to the disposal of our former manufacturing operations in Switzerland, $0.6 million of financing costs, partiallyand offset by $0.2$0.5 million of net foreign currency translation gains.losses. The secondthird quarter ended DecemberMarch 27,28, 20242025 includes $2.4other income of $2.7 million, related to the sale of the mc.com domain name, $1.2 million net of foreign currency translation losses,gains, $1.1$0.9 million of financing costs, $0.1 million of consulting costs, and $0.1$0.5 million of securities class action expense.expense, and $0.2 million of consulting costs.

We recorded an income tax provision of $0.2 million and an income tax benefit of $2.4 million and $6.7$2.6 million on a loss before income taxes of $17.5$2.7 million and $24.3$21.8 million for the secondthird quarters ended DecemberMarch 26,27, 20252026 and DecemberMarch 27,28, 2024,2025, respectively.

During the secondthird quarterquarters ended DecemberMarch 26,27, 20252026 and DecemberMarch 27,28, 2024,2025, we recognized a tax benefit of $1.0$0.3 million related to stock compensation windfalls and a tax provision of less than $0.1 million related to stock compensation shortfalls, respectively.

The effective tax rate for the secondthird quarter ended DecemberMarch 26,27, 20252026 differed from the federal statutory rate primarily due to federal and state research and development credits, non-deductible compensation, stock compensation windfalls, and state taxes. The effective tax rate for the secondthird quarter ended DecemberMarch 27,28, 20242025 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.

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 expenseprovision limitation and immediate expensing of domestic research and development expenditures. We have evaluated the potential impact of this legislation and expect it to result primarily in a timing difference, with no material impact on our effective tax rate.

SixNine months ended DecemberMarch 26,27, 20252026 compared to the sixnine months ended DecemberMarch 27,28, 20242025

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

Total revenues increased $30.5$54.9 million, or 7.1%,8.6%, to $458.1$693.8 million during the sixnine months ended DecemberMarch 26,27, 2025,2026, as compared to $427.6$638.9 million during the sixnine months ended DecemberMarch 27,28, 2024.2025. Revenues increased year over year as we continued to execute on our program base, and continued toward full rate production of our common processing architecture programs.base. Point in time revenue and over time revenue represented 54%53% and 46%,47%, respectively, of total revenues during the sixnine months ended DecemberMarch 26,27, 2025,2026, an increase of $31.7$41.5 million and decrease of $1.2$13.4 million, respectively. Point in time revenue and over time revenue each represented 50%51% and 49%, respectively, of total revenue during the sixnine months ended DecemberMarch 27,28, 2024.2025.

Revenue increases by were driven by the modules and sub-assemblies, as well as the components product grouping which increased $34.7 millionsub-assemblies and $4.3 million, respectively, partially offset by the integrated solutions product groupinggroupings which decreasedincreased $8.5$52.2 million and $2.5 million, respectively, when compared to the prior period. The increase in total revenue was primarily driven by the C4I, other sensor and effector, C4I, radar, and radarelectronic warfare end applications with increases of $28.6$22.4 million, $5.2$21.7 million, $12.0 million, and $3.1$6.8 million, respectively, partially offset by decreasesa decrease to other end applications and electronic warfare of $4.6$8.0 million and $1.8 million, respectively.million. The increase in total revenue was also driven by the Land, Other,Space, Space,Naval, and NavalOther platforms with increases of $22.8$41.9 million, $11.6$17.1 million, $3.2$12.7 million, and $0.7$8.8 million, respectively, partially offset by a decrease to the Airborne platform of $7.8$25.6 million. The largest program increases were related to twoa secure processing programs,program, KC-46,an F/A-18,integrated space program, SEWIP, PWSA, and an electronic warfare program,KC-46, partially offset by Aegis.T-45 and a secure processing program. There were no programs comprising 10% or more of our revenues for the sixnine months ended DecemberMarch 26,27, 20252026 or DecemberMarch 27,28, 2024.2025.

Gross margin was 27.0%27.8% for the sixnine months ended DecemberMarch 26,27, 2025,2026, an increase of 70120 basis points from the 26.3%26.6% gross margin realized during the sixnine months ended DecemberMarch 27,28, 2024.2025. The higher gross margin was driven primarily by lower manufacturing variances of $12.7 million and net estimate at completion ("EAC") change impact on our programs recognized over time of $7.5$9.6 million recorded in the period, an incremental improvement of approximately $5.2$6.7 million, or 100120 basis points, when compared to the prior period,period. The increase was also driven by lower manufacturing variances of $12.8 million, partially offset by higher scrap and inventory reserves of $3.5$4.8 million and $1.5 million, respectively. We may experience increases in our manufacturing costs related to the impositionscrap of tariffs$3.4 on the import of components from other countries. We have not seen material increases to these costs in fiscal 2026, but they could impact our gross margins in the future.million.

Selling, general and administrative expenses increased $14.4$10.5 million, or 19.5%,9.0%, to $88.0$127.2 million during the sixnine months ended DecemberMarch 26,27, 2025,2026, as compared to $73.7$116.7 million during the sixnine months ended DecemberMarch 27,28, 2024.2025. The increase was primarily driven by higher compensation, litigation and settlement expense, compensation costs,settlement, and software licensing fees expense of $7.2$8.4 million, $7.0$4.5 million, and $1.5$2.5 million, respectively. These increases were partially offset by lower consultingdepreciation and depreciationconsulting expense of $1.3$3.1 million and $1.2$2.2 million, respectively. The litigation and settlement expense incurred during the six months ended December 26, 2025 was primarily comprised of $7.1 million related to the dispute with our former CEO, which was settled during the current quarter, as compared to $1.4 million during the six months ended December 27, 2024. Litigation and settlement expense also included $2.0 million related to contract matters as compared to $0.2 million during the six months ended December 27, 2024.

Research and development expenses decreased $11.2$12.1 million, or 28.1%,21.8%, to $28.6$43.6 million during the sixnine months ended DecemberMarch 26,27, 2025,2026, as compared to $39.8$55.7 million during the sixnine months ended DecemberMarch 27,28, 2024.2025. The decrease was primarily driven by efficiency improvements and the savings from headcount reductions of 225approximately 120 employees, initiated inacross fiscal 2025,2025 and 2026, resulting in lower expense of $9.5$16.0 million,million. asThere wellwas asalso decreased expense on depreciation, software licenselicensing fees, outside services, and outside servicesconsulting of $1.1$1.6 million, $0.8$1.2 million, and$1.0 $0.6million, $0.4 million, respectively. These decreases were partially offset by higher supplyengineering utilization of $5.8 million and supplies expense of $1.2$2.5 million.

We recognized $9.7$29.5 million of amortization of intangible assets during the sixnine months ended DecemberMarch 26,27, 2025,2026, as compared to $11.2$32.6 million during the sixnine months ended DecemberMarch 27,28, 2024,2025, primarily due to various customer relationship intangibles being fully amortized in fiscal 2025.

Restructuring and other charges were $5.6 million during the sixnine months ended DecemberMarch 26,27, 2025,2026, as compared to $2.3$7.2 million during the sixnine months ended DecemberMarch 27,28, 2024.2025. Restructuring and other charges during the sixnine months ended DecemberMarch 26,27, 20252026 were primarily severance related charges associated with workforce reductions initiated during the six months endedperiod that eliminated approximately 100 positions. Restructuring and other charges during the sixnine months ended DecemberMarch 27,28, 2024 are primarily2025 related to severance related charges.charges primarily related to the reduction in workforce initiated January 29, 2025.

We recognized $3.7$6.2 million of interest income during the sixnine months ended DecemberMarch 26,27, 2025,2026, as compared to $1.0$2.2 million during the sixnine months ended DecemberMarch 27,28, 2024.2025. The increase was driven by higher average cash and cash equivalents during the period.

We incurred $15.7$23.1 million of interest expense during the sixnine months ended DecemberMarch 26,27, 2025,2026, as compared to $17.3$25.4 million during the sixnine months ended DecemberMarch 27,28, 2024.2025. The decrease was driven by lower interest rates during the period on the Revolver.

Other expense, net decreasedincreased $2.7 million to $2.5$5.6 million during the sixnine months ended DecemberMarch 26,27, 2025,2026, as compared to $5.2$2.9 million during the sixnine months ended DecemberMarch 27,28, 2024.2025. There was $2.3$2.9 million of financing costscosts, a $1.9 million adjustment related to the disposal of our former manufacturing operations in Switzerland, and $0.6$1.1 million of net foreign currency translation losses during the sixnine months ended DecemberMarch 26,27, 2025.2026. During the sixnine months ended DecemberMarch 27,28, 2024,2025, there werewas $3.4$4.3 million of financing costs, $0.9 million of net foreign currency translation losses, $0.7 million of consulting costs, and $0.3$0.8 million of securities class action expense, partially offset by other income of $0.2$2.9 million.million, primarily related to the sale of the mc.com domain name, and $0.3 million of net foreign currency translation gains.

We recorded an income tax benefit of $6.4$6.2 million and $12.3$15.0 million on a loss before income taxes of $34.0$36.7 million and $47.4$69.2 million for the sixnine months ended DecemberMarch 26,27, 20252026 and DecemberMarch 27,28, 2024,2025, respectively.

During the sixnine months ended DecemberMarch 26,27, 20252026 and DecemberMarch 27,28, 2024,2025, we recognized a tax benefit of $2.1$2.4 million related to stock compensation windfalls and a tax provision of $0.4 million related to stock compensation shortfalls, respectively.

The effective tax rate for the sixnine months ended DecemberMarch 26,27, 20252026 differed from the federal statutory rate primarily due to federal and state research and development credits, non-deductible compensation, stock compensation windfalls, and state taxes. The effective tax rate for the sixnine months ended DecemberMarch 27,28, 20242025 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.

On July 4, 2025, the OBBBA was enacted, which includes a broad range of tax provisions and extended and modified certain provisions of the TCJA, including, but not limited to, restoration of 100% bonus depreciation, EBITDA-based interest expenseprovision limitation and immediate expensing of domestic research and development expenditures. We have evaluated the potential impact of this legislation and expect it to result primarily in a timing difference, with no material impact on our effective tax rate.

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. As of theMarch six27, months ended December 26, 2025,2026, our working capital balance decreased $34.6$14.3 million, or 8%,3%, as compared to the balance as of June 27, 2025.

We have a 5-year Revolver with a maturity extended to November 4, 2030. The borrowing capacity as defined under the Revolver as of DecemberMarch 26,27, 20252026 is the total availability of $850.0 million less outstanding borrowings of $591.5 million and outstanding letters of credit of $5.9$4.2 million. During the sixnine months ended DecemberMarch 26,27, 2025,2026, we made no borrowings or repayments. As of DecemberMarch 26,27, 2025,2026, we were in compliance with all covenants and conditions under the Revolver.

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 $60.0 million. On December 10, 2025, the Company amended the RPSA to increase the facility from $60.0 million to $75.0 million. We had $75.0 million of factored accounts receivable, of which $42.7$60.9 million was included as a contra account within Accounts receivable, net of allowance for credit losses on our Consolidated Balance Sheet and $32.3$14.1 million was recorded in Due to factoring facility on our Consolidated Balance Sheet as of DecemberMarch 26,27, 2025.2026. We incurred factoring fees of approximately $1.0$1.4 million during the sixnine months ended DecemberMarch 26,27, 2025.2026. We had $60.0 million of factored accounts receivable, of which $58.1$55.1 million was included as a contra account within Accounts receivable, net of allowance for credit losses on our Consolidated Balance Sheet and $1.9$4.9 million was recorded in Due to factoring facility on our Consolidated Balance Sheet as of DecemberMarch 27,28, 2024.2025. We incurred factoring fees of approximately $0.8$1.3 million during the sixnine months ended DecemberMarch 27,28, 2024.2025.

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 the secondthird quarter and six months ended DecemberMarch 26,27, 2025,2026, 221,510no shares of ourthe Company's common stock were repurchased under the share repurchase program. During the nine months ended March 27, 2026, 221,510 shares of the Company's common stock were repurchased and immediately retired under the share repurchase program at an average cost of $67.70 per share. As of DecemberMarch 26,27, 2025,2026, there was $185.0 million available for future share repurchases under this share repurchase program.

Our cash and cash equivalents increased by $25.9$22.7 million from June 27, 2025 to DecemberMarch 26,27, 2025,2026, as the result of $53.8$60.2 million of cash provided by operating activities, partially offset by $20.7 million invested in purchases of property and equipment, $15.0 million of cash paid in the purchase and retirement of common stockstock, and $12.5$1.4 million investedof cash paid in purchasesthe asset acquisition of propertya andprovider equipment.of specialized manufacturing processes.

During the sixnine months ended DecemberMarch 26,27, 2025,2026, we had an inflow of $53.8$60.2 million in cash from operating activities compared to a $70.8$100.8 million inflow during the sixnine months ended DecemberMarch 27,28, 2024.2025. The reduced inflow during the sixnine months ended DecemberMarch 26,27, 20252026 was primarily due to aan $59.4outflow of $6.5 million lower inflow from deferred revenues and customer advances, as compared to an inflow of $67.9 million in the prior period, an outflow of $29.8$20.5 million due to prepaid expenses and other current assets, as compared to an inflow of $2.2$4.0 million in the prior period, and a $23.4$18.2 million lower inflow from accounts receivable, unbilled receivables, and costs in excess of billings. This activity was partially offset by an increaseinflow of $67.0$47.4 million from accounts payable, accrued expenses, accrued compensation, and due to factoring, as compared to aan decreaseoutflow in the prior period of $19.8$5.3 million. Under the terms of the RPSA for some customers, we will collect customer payments related to factored receivables, which are then remitted to the counterparty after receipt. As of DecemberMarch 26,27, 2025,2026, we had collected $32.3$14.1 million on behalf of the RPSA. These collected balances are reflected as Cash and cash equivalents and the related obligation to remit the cash to the counterparty is recorded in Due to factoring facility on our Consolidated Balance Sheet. The lower inflow of cash from operating activities was alsopartially offset by a lower net loss of $7.5 million, and higher stock-based compensation expense of $6.1$23.8 million. The settlement in principle of the federal securities class action lawsuit, which is expected to be covered by our insurance, reached during the sixnine months ended September 26, 2025, increased the cash provided by accrued expenses and was offset by a $32.5 million outflow in other current assets, respectively.

During the sixnine months ended DecemberMarch 26,27, 2025,2026, we hadinvested $22.1 million, an increase of $11.0 million, as compared to $11.1 million during the nine months ended March 28, 2025 primarily due to higher purchases of property and equipment of $12.5$5.0 million,million anand increase$1.4 million of $2.7cash million,paid as compared to $9.8 million duringin the sixasset acquisition of a provider of specialized manufacturing processes. The nine months ended DecemberMarch 27,28, 2024. The six months ended December 27, 20242025 also included an inflow of $1.9$4.6 million due to other investing activities.

During the sixnine months ended DecemberMarch 26,27, 2025,2026, we had $15.0 million of cash paidoutflow related to the purchase and retirement of common stockstock, as well as $3.2 million of cash paid in financing costs in conjunction with the amendment to our Revolver during the second quarter of fiscal 2026, partially offset by $2.7 million proceeds from employee stock plans. The sixnine months ended DecemberMarch 27,28, 2024,2025, included $2.2 million of cash paid in financing costs in conjunction with the amendment to our Revolver during the first quarter of fiscal 2025, partially offset by $1.5 million proceeds from employee stock plans.

The following is a schedule of our commitments and contractual obligations outstanding at DecemberMarch 26,27, 20252026:

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 approximately $203.7$224.2 million at DecemberMarch 26,27, 2025.2026.

We have a liability at DecemberMarch 26,27, 20252026 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 on these uncertain tax positions and as such, do not know the ultimate timing of payments or amount, if any, related to this liability. Accordingly, these amounts are not included in the above table.