Company: MRCY
Filing Date: 2025-08-11
Form Type: 10-K
Source: 0001049521-25-000024
Chunk: 26

Company: MERCURY SYSTEMS INC
Filing Date: 2025-08-11
Form: 10-K
Item: Item 1A
Chunk 26
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 including if such increases are ultimately implemented, the timing of implementation, contractual terms and the amount, scope and nature of the tariffs. 

Tariffs and other restrictive trade measures may require us to take various actions, including changing suppliers and altering business relationships. Changing our operations in accordance with new or evolving trade restrictions can be expensive, time-consuming, disruptive to our operations and distracting to management. Tariffs and trade restrictions can be announced with little or no advanced notice, and we may not be able to effectively mitigate all adverse impacts from such measures.

We may not be able to effectively manage our relationships with contract manufacturers.

We may not be able to effectively manage our relationship with contract manufacturers, and the contract manufacturers may not meet future requirements for timely delivery. We rely on contract manufacturers to build hardware sub-assemblies for certain of our products in accordance with our specifications. During the normal course of business, we may provide demand forecasts to contract manufacturers several months prior to scheduled delivery of our products to customers. If we overestimate requirements, the contract manufacturers may assess cancellation penalties or we may be left with excess inventory, which may negatively impact our earnings. If we underestimate requirements, the contract manufacturers may have inadequate inventory, which could interrupt manufacturing of our products and result in delays in shipment to customers and revenue recognition. Contract manufacturers also build products for other companies, and they may not have sufficient quantities of inventory available or sufficient internal resources to fill our orders on a timely basis or at all. These risks may be enhanced for our International operations as we outsourced our former Swiss manufacturing operations to Cicor Group during fiscal 2025.

We are exposed to risks associated with international operations and markets.

We market and sell products in international markets and have sales offices and manufacturing and/or engineering facilities and subsidiaries in Switzerland, Spain and the United Kingdom. Revenues from international operations accounted for 5% of our total net revenues in each fiscal 2025, 2024, and 2023. We also ship directly from our U.S. operations to international customers. There are inherent risks in transacting business internationally, including:

•changes in applicable laws and regulatory requirements;

•export and import restrictions, including export controls relating to technology and sanctioned parties;

•tariffs and other trade barriers;

•less favorable intellectual property laws;

•difficulties in staffing and managing foreign operations;

•longer payment cycles;

•problems in collecting accounts receivable;

•adverse economic conditions in foreign markets;

•political instability;

•fluctuations in currency exchange rates, which may lead to lower