Company: MRCY
Filing Date: 2025-02-04
Form Type: 10-Q
Source: 0001049521-25-000009
Chunk: 67

Company: MERCURY SYSTEMS INC
Filing Date: 2025-02-04
Form: 10-Q
Item: Item 1
Chunk 67
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 AARGM programs when compared to the prior period. There were no programs comprising 10% or more of our revenues for the six months ended December 27, 2024 or December 29, 2023.

GROSS MARGIN

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

29

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:

Six Months Ended(in thousands)December 27, 2024December 29, 2023Gross favorable$14,814 $11,790 Gross unfavorable(27,515)(59,704)Net impact of changes in estimates$(12,701)$(47,914)

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.

SELLING, GENERAL AND ADMINISTRATIVE

Selling, general and administrative expenses decreased $6.6 million, or 8.2%, to $73.7 million during the six months ended December 27, 2024, as compared to $80.3 million during the six months ended December 29, 2023. The decrease was primarily driven by the reduction in force initiated in fiscal 2024, resulting in lower costs of $8.6 million, lower bad debt expense of $4.8 million, lower software licensing fees of $2.2 million, lower directors fees of $0.6 million, and lower facilities expense of $0.5 million. These decreases were partially offset by higher stock-based compensation of $3.5 million, higher bonus expense of $3.1 million, as well as higher legal and consulting costs of $3