Mercury Systems (MRCY) risk factors, FY2025 10-K

Risks Related to Business Operations and Our Industry

1. 01We depend heavily on defense electronics programs that incorporate our products and services, which may be only partially funded and are subject to potential termination and reductions and delays in government spending
2. 02Economic, capital market and political conditions could adversely affect our business, results of operations, and financial condition
3. 03Price inflation for labor and materials could adversely affect our business, results of operations and financial condition
4. 04The loss of one or more of our largest customers or programs could adversely affect our results of operations
5. 05Failure to respond to competition or evolving technology could lead to customer loss and missed business opportunities. The emergence of commodity-type substitutes may cause customers to delay purchases or seek alternatives
6. 06Competition from existing or new companies could cause us to experience downward pressure on prices, fewer customer orders, reduced margins, the inability to take advantage of new business opportunities and the loss of market share
7. 07We may be unable to obtain critical components from suppliers, which could disrupt or delay our ability to deliver products to our customers
8. 08Trade policies could increase the cost of our manufacturing operations, potentially reducing our gross margins and demand for our products
9. 09We may not be able to effectively manage our relationships with contract manufacturers
10. 10We are exposed to risks associated with international operations and markets
11. 11There can be no assurance that one or more of these factors will not have a material adverse effect on our future international activities and, consequently, on our business and results of operations
12. 12fluctuations in the value of the Plan’s assets. As of June 27, 2025, we had a liability of $5.3 million in Other non-current liabilities representing the net under-funded status of the Plan
13. 13Our need for continued or increased investment in R&D may increase expenses and reduce our profitability
14. 14Our results of operations are subject to fluctuation from period to period and may not be an accurate indication of future performance
15. 15We rely on the significant experience and specialized expertise of our senior management, engineering and operational staff and must retain and attract qualified and highly skilled personnel to grow our business successfully
16. 16If we experience a disaster or other business continuity problem, we may not be able to recover successfully, which could cause material financial loss, loss of human capital, regulatory actions, reputational harm, or legal liability
17. 17Our insurance coverage, customer indemnifications or other liability protections may be inadequate to cover our significant business risks, which could have a material adverse effect on our financial position

Risks Related to M&A and Acquisition Integration

1. 18Implementation of our growth strategy may not be successful, which could affect our ability to increase revenues and profits
2. 19Acquisitions may adversely affect our financial condition
3. 20We may incur substantial indebtedness
4. 21We have a significant amount of goodwill and intangible assets on our consolidated financial statements that are subject to impairment based upon future adverse changes in our business or prospects

Risks Related to Legal, Regulatory and Compliance Matters

1. 22We face risks and uncertainties associated with defense-related contracts
2. 23If we are unable to continue to obtain U.S. government authorization regarding the export of our products, or if current or future export laws limit or otherwise restrict our business, we could be prohibited from shipping our products to certain countries, which would harm our ability to generate revenue
3. 24Our products are complex, and undetected defects may increase our costs, harm our reputation with customers or lead to costly litigation

Risks Related to Information Technology and Intellectual Property

1. 25We may need to invest in new information technology systems and infrastructure to scale our operations
2. 26If we suffer ransomware breaches, data breaches, or phishing diversions involving the designs, schematics, or source code for our products or other sensitive information, our business and financial results could be adversely affected
3. 27We may be unsuccessful in protecting our intellectual property rights which could result in the loss of a competitive advantage. If we become subject to intellectual property infringement claims, we could incur significant expenses and could be prevented from selling specific products

Risks Related to Our Common Stock

1. 28The trading price of our common stock may continue to be volatile, which may adversely affect our business, and investors in our common stock may experience substantial losses
2. 29We have never paid cash dividends on our common stock and we do not anticipate paying any dividends in the foreseeable future
3. 30We may need additional capital and may not be able to raise funds on acceptable terms, if at all. In addition, any funding through the sale of additional common stock or other equity securities could result in additional dilution to our stockholders and any funding through indebtedness could restrict our operations
4. 31Provisions in our organizational documents and Massachusetts law and other actions we have taken could make it more difficult for a third party to acquire us
5. 32Shareholder activism could cause us to incur significant expense, disrupt our business, result in a proxy contest or litigation and impact our stock price