Company: MRCY
Filing Date: 2025-08-11
Form Type: 10-K
Source: 0001049521-25-000024
Chunk: 24

Company: MERCURY SYSTEMS INC
Filing Date: 2025-08-11
Form: 10-K
Item: Item 1A
Chunk 24
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Defense customers require frequent technological advancements for military superiority. Historically, many design projects receive funding without actual deployment, and deployed systems favor subcontractors involved in the design phase. To secure future business, we must consistently provide superior technology in a timely and cost-effective manner. 

The design-in process is lengthy and costly, with no assurance that we will continue meeting customer specifications. Failing to anticipate technological shifts, customer needs or demand fluctuations could negatively impact financial results, including inventory obsolescence. Building inventory ahead of contractual commitments or purchasing end-of-life materials before confirmed customer demand increases this risk.

Product complexity occasionally leads to manufacturing delays. For example, in fiscal year 2024, we halted production for months on multiple secure computing programs due to a root cause analysis, materially affecting financial results and customer confidence. These challenges could recur in the future on other programs.

Competition 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.

We compete in highly competitive industries, and our customers generally extend the competitive pressures they face throughout their respective supply chains. Additionally, our markets are facing increasing industry consolidation, resulting in larger competitors who have more market share putting more downward pressure on prices and offering a more robust portfolio of products and services. We are subject to competition based upon product design, performance, pricing, quality, on time delivery and support services. Our product performance, engineering expertise, and product quality have been important factors in our growth. While we try to maintain competitive pricing on those products that are directly comparable to products manufactured by others, in many instances our products will conform to more exacting specifications and carry a higher price than analogous products. Many of our customers and potential customers have the capacity to design and internally manufacture products that are similar to our products. We face competition from research and product development groups and the manufacturing operations of current and potential customers, who continually evaluate the benefits of internal research, product development and manufacturing versus outsourcing. Our defense prime contractor customers could decide to pursue one or more of our product development areas as a core competency and insource that technology development and production rather than purchase that capability from us as a supplier. This competition could result in fewer customer orders and a loss of market share.

We may be unable to obtain critical components from suppliers, which could disrupt or delay our ability to deliver products to our customers.

Several components used in our products are currently obtained from sole-source suppliers. We are dependent on a limited number