Company: MRCY
Filing Date: 2025-05-06
Form Type: 10-Q
Source: 0001049521-25-000017
Chunk: 63

Company: MERCURY SYSTEMS INC
Filing Date: 2025-05-06
Form: 10-Q
Item: Item 1
Chunk 63
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 costs in fiscal 2025, but they could impact our gross margins in fiscal 2026.

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:

Third Quarters Ended(in thousands)March 28, 2025March 29, 2024Gross favorable$5,448 $9,667 Gross unfavorable(9,101)(25,644)Net impact of changes in estimates$(3,653)$(15,977)

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 judgement across the full portfolio of programs. 

SELLING, GENERAL AND ADMINISTRATIVE

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

RESEARCH AND DEVELOPMENT

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

AMORTIZATION OF INTANGIBLE ASSETS

Amortization of intangible assets decreased $1.3 million to $10.2 million during the