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United States securities and exchange commission logo
February 1, 2024
David Farnsworth
Chief Financial Officer
Mercury Systems, Inc.
50 Minuteman Road
Andover, MA 01810
Re: Mercury Systems,
Inc.
Form 10-K for the
Year Ended June 30, 2023
File No. 001-41194
Dear David Farnsworth:
We have limited our review of your filing to the financial
statements and related
disclosures and have the following comments.
Please respond to this letter within ten business days by
providing the requested
information or advise us as soon as possible when you will respond. If
you do not believe a
comment applies to your facts and circumstances, please tell us why in
your response.
After reviewing your
response to this letter, we may have additional comments.
Form 10-K for the year ended June 30, 2023
Notes to Consolidated Financial Statements
Note B. Summary of Significant Accounting Policies
Revenue Recognition, page 55
1. We note that for over
time contracts, you typically leverage the input method, using a
cost-to-cost measure of
progress. Changes in estimates are applied retrospectively and
when adjustments in
estimated contract costs are identified, such revisions may result in
current period
adjustments to earnings applicable to performance in prior periods. Please
revise future filings
to disclose the change in contract estimates that impacted operating
profits for each year
presented pursuant to ASC 250-10-50-4. Also, please revise your
disclosure in MD&A to
provide the gross amount of favorable and unfavorable
adjustments to contract
estimates to complete for each period presented. To the extent
material, please revise
your disclosure to address such circumstances, accompanied by an
appropriate level of
analysis of the underlying reasons for the significant changes. We
believe such disclosure
will give investors more insight to the estimation process
associated with your
contracts, as discussed in Critical Accounting Estimates, and the
David Farnsworth
FirstName LastNameDavid Farnsworth
Mercury Systems, Inc.
Comapany1,NameMercury
February 2024 Systems, Inc.
February
Page 2 1, 2024 Page 2
FirstName LastName
separate potential impacts on your results. As part of your response,
please provide us
with a copy of your intended revised disclosure.
Contract Assets, page 57
2. We note your disclosure that the contract asset balance increased due
to growth in revenue
recognized under contracts, as well as the timing of program milestone
billings during the
fiscal year ended June 30, 2023. Please revise future filings to
quantify each of the
significant changes in the balance. Also, disclose the nature and
status of amounts
representing claims or other similar items subject to uncertainty
concerning their
determination or ultimate realization, and any amounts that are
expected to be
billed/collected after one year. See guidance in ASC 606-10-50-10 and
Rule 5-02(3)(c) of
Regulation S-X.
Note G. Goodwill, page 66
3. We note your disclosure that you performed the annual goodwill
impairment test in the
fourth quarter of fiscal 2023 with no impairment noted. Given the
significance of your
goodwill balance and overall decline in your market capitalization, as
well as deteriorating
operating results, please revise your notes to the financial
statements in future filings to
address the following:
Provide a discussion of how goodwill and other intangible assets
were tested in 2023,
including whether you performed a qualitative and/or quantitative
test;
Expand your disclosure to state whether or not the fair value of
your reporting units
"substantially exceeds" the carrying value. To the extent any
reporting unit fair values
are not substantially in excess of fair values, disclose the name
of those reporting
units and the amount or percentage by which the fair value
exceeds their carrying
value;
Explain how you consider market capitalization in determining the
estimated fair
values of the reporting units. Refer to ASC-350-20-35-3C;
Additionally, please revise your disclosure in the Critical Accounting
Policies section of
MD&A to provide a more detailed description of the key assumptions you
used to
estimate fair value of the reporting units during your impairment
analysis, including how
the key assumptions were determined, and to discuss the degree of
uncertainty associated
with the key assumptions, including material changes in the key
assumptions during the
periods presented. Please provide us with a copy of your intended
disclosure.
In closing, we remind you that the company and its management are
responsible for the
accuracy and adequacy of their disclosures, notwithstanding any review,
comments, action or
absence of action by the staff.
David Farnsworth
Mercury Systems, Inc.
February 1, 2024
Page 3
Please contact Claire Erlanger at 202-551-3301 or Kevin Woody at
202-551-3629 with
any questions.
FirstName LastNameDavid Farnsworth Sincerely,
Comapany NameMercury Systems, Inc.
Division of Corporation
Finance
February 1, 2024 Page 3 Office of Manufacturing
FirstName LastName