Stock-Based Compensation

3 Months Ended

Oct. 02, 2026

Share-Based Payment Arrangement [Abstract]

STOCK INCENTIVE PLANS

The Company’s 2025 Long Term Incentive Plan (as amended from time to time, the “2025 Plan”) was adopted by the Company’s Board of Directors in July 2025 and approved by the Company’s shareholders on October 22, 2025. At October 2, 2026, the aggregate number of shares authorized for issuance under the 2025 Plan is 2,159 shares, including 1,900 shares approved by the Company’s shareholders on October 22, 2025 and 259 shares by virtue of awards forfeited from and after October 22, 2025 under a predecessor stock incentive plan, the Company’s Amended and Restated 2018 Stock Incentive Plan (the “2018 Plan”). The shares authorized for issuance under the 2025 Plan will continue to be increased to the extent that any award previously granted under the 2018 Plan is forfeited, terminates, expires, lapses without being exercised or is settled for cash in the future. The 2025 Plan provides for the grant to employees and non-employees of non-qualified and incentive stock options, stock appreciation rights, time-based and performance-based restricted stock awards or units, and deferred stock awards or units. Stock options and stock appreciation rights must be granted with an exercise price of not less than 100% of the fair value of the Company’s common stock on the date of grant and have a maximum exercisable term of ten years. Under the share counting rules applicable to the 2025 Plan, each share issued pursuant to a stock option or stock appreciation right counts as 0.5 shares against the available share reserve, and each share issued pursuant to any other award (a “full value” award) counts as one share against the available reserve. Accordingly, at October 2, 2026, a maximum of 3,578 shares underlying future awards of stock options and stock appreciation rights are issuable under the 2025 Plan, and a maximum of 1,789 shares underlying future full value awards are issuable under the 2025 Plan.

As part of the Company's ongoing annual equity grant program for employees, the Company grants performance-based restricted stock unit awards to certain executives and employees pursuant to the 2025 Plan (and prior to October 22, 2025, the 2018 Plan). Performance awards vest based on the requisite service period subject to the achievement of specific financial performance targets. Based on the performance targets, some of these awards require graded vesting which results in more rapid expense recognition compared to traditional time-based vesting over the same vesting period. The Company monitors the probability of achieving the performance targets on a quarterly basis and may adjust periodic stock compensation expense accordingly based on its determination of the likelihood for reaching targets. The performance targets generally include the achievement of financial performance goals. Payouts under performance-based restricted stock unit awards may also be subject to adjustment based on Mercury's total shareholder return.

EMPLOYEE STOCK PURCHASE PLAN

The Company adopted an employee stock purchase plan (the “2024 ESPP”) in April 2024. The Company's shareholders approved the plan at the Company’s 2024 annual meeting of shareholders, held on October 23, 2024. The number of shares authorized for issuance under the 2024 ESPP is 1,000 shares. Under the 2024 ESPP, rights are granted to purchase shares of common stock at 85% of the lesser of the market value of such shares at either the beginning or the end of each six-month offering period. The 2024 ESPP permits employees to purchase common stock through payroll deductions, which may not exceed 10% of an employee’s compensation as defined in the 2024 ESPP. There were no shares issued under the 2024 ESPP during the first quarters ended October 2, 2026 and September 26, 2025, respectively. Shares available for future purchase under the 2024 ESPP totaled 754 at October 2, 2026.

STOCK OPTION AND AWARD ACTIVITY

The following table summarizes activity with respect to Company-issued stock options since July 3, 2026:


	Options Outstanding
	Number of Shares	Weighted Average Grant Date Fair Value		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (Years)	Aggregate Intrinsic Value
Outstanding at July 3, 2026	934	$	12.71	$	45.00		—
Granted	—			—
Exercised	(467)	12.71		42.50
Canceled	—			—
Outstanding at October 2, 2026	467	12.71		47.50		1.92 years	$	17,452
Exercisable at October 2, 2026	—	$	—	$	—	—	—

There were 467 options vested and exercised with an aggregate intrinsic value of $21,934 during the first quarter ended October 2, 2026. Non-vested stock options are subject to the risk of forfeiture until the fulfillment of specified conditions. As of October 2, 2026, there was $1,456 of total unrecognized compensation cost related to non-vested options granted that is expected to be recognized over a weighted-average period of 0.92 years from October 2, 2026.

The following table summarizes the status of the Company’s non-vested restricted stock unit awards and deferred stock unit awards since July 3, 2026:


	Non-vested Restricted Stock Unit Awards
	Number of Shares	Weighted Average Grant Date Fair Value
Non-vested at July 3, 2026	1,672	$	45.50
Granted	220	115.52
Vested	(533)	44.27
Forfeited	(31)	51.48
Non-vested at October 2, 2026	1,328	$	70.24

STOCK-BASED COMPENSATION EXPENSE

The Company recognizes expense for its share-based payment plans in the Consolidated Statements of Operations and Comprehensive Income (Loss) in accordance with ASC 718, Compensation - Stock Compensation (“ASC 718”). Under the fair value recognition provisions of ASC 718, stock-based compensation cost is measured at the grant date based on the value of the award and is recognized as expense over the service period, net of estimated forfeitures.

The following table presents share-based compensation expenses included in the Company’s Consolidated Statements of Operations and Comprehensive Income (Loss):


	First Quarters Ended
	October 2, 2026		September 26, 2025
Cost of revenues	$	1,146	$	1,760
Selling, general and administrative	9,299		6,296
Research and development	1,726		1,517
Stock-based compensation expense before tax	12,171		9,573
Income taxes(1)	(3,286)		(2,585)
Stock-based compensation expense, net of income taxes	$	8,885	$	6,988
(1) Federal and state statutory rate of 27%