Company: MRCY
Filing Date: 2025-11-04
Form Type: 10-Q
Source: 0001049521-25-000062
Chunk: 115

Company: MERCURY SYSTEMS INC
Filing Date: 2025-11-04
Form: 10-Q
Item: Item 2
Chunk 115
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 million recorded in the quarter, an incremental improvement of approximately $4.2 million, or 200 basis points, when compared to the prior period. We may experience increases in our manufacturing costs related to the imposition of tariffs on the import of components from other countries. We have not seen material increases to these costs in the first quarter of fiscal 2026, but they could impact our gross margins in the future.

We had the following aggregate effects of favorable and unfavorable margin impacts as a result of changes in estimates across our portfolio for the period presented:

First Quarters Ended(in thousands)September 26, 2025September 27, 2024Gross favorable$8,455 $7,774 Gross unfavorable(12,505)(16,067)Net impact of changes in estimates$(4,050)$(8,293)

The changes in estimates are assessed based on historical results and cumulative adjustments are recorded to recognize revenue to date based on changes in estimated margin on programs, including impact of contract amendments factored for potential risks and opportunities. We utilize the latest and best information available when revising our estimates and apply consistent judgment across the full portfolio of programs. 

SELLING, GENERAL AND ADMINISTRATIVE

Selling, general and administrative expenses increased $12.7 million, or 38.4%, to $45.9 million during the first quarter ended September 26, 2025, as compared to $33.2 million in the first quarter ended September 27, 2024. The increase was primarily driven by higher compensation and litigation and settlement expense of $7.3 million and $6.0 million, respectively. These increases were partially offset by lower consulting and depreciation expense of $0.6 million and $0.5 million, respectively. The litigation and settlement expense incurred during the first quarter ended September 26, 2025 was comprised of $5.2 million related to the dispute with our former CEO and $1.0 million related to contract matters.

RESEARCH AND DEVELOPMENT

Research and development expenses decreased $5.2 million, or 28.3%, to $13.2 million during the first quarter ended September 26, 2025, as compared to $18.4 million during the first quarter ended September 27, 2024. The decrease was primarily driven by the savings from headcount reductions of approximately 230 employees, initiated in fiscal 2025, resulting in lower expense of $6.7 million. We also saw decreased spending on