What changed in this filing

/stocks — the workspaceLOADING

Item 1. Business

2020-08-18 compared with 2019-08-15 · 175 added, 218 removed, 247 unchanged (61% of the section changed)

Mercury Systems, Inc.

is a leading commercial provider of secure sensor and safety-critical mission processing subsystems.

Headquartered in Andover, Massachusetts, we deliver solutions that power a broad range of critical aerospace, commercial aviation, defense and intelligence programs, configured and optimized for mission success in some of the most challenging and demanding environments.

Our innovative next-generation defense electronics business model is designed to meet the industry’s current and emerging technology and business needs by delivering affordable state-of-the-art solutions, rapid time-to-value and service and support to our defense prime contractor and our commercial aerospace customers.

Our products and solutions are successfully deployed in more than 300 programs with over 25 different defense prime contractors and commercial aviation customers, a testament to our deep domain expertise and culture of innovation.

Our unique capabilities, technology and research and development (“R&D”) investment strategy combine to differentiate Mercury in our industry.

Our technologies and capabilities include secure embedded processing modules and subsystems, mission computers, secure and rugged rack-mount servers, safety-critical avionics, radio frequency (“RF”) components, multi-function assemblies and subsystems.

We maintain our technological edge by investing in critical capabilities and intellectual property (“IP” or “building blocks”) in processing and RF, leveraging open standards and open architectures to quickly adapt those building blocks into solutions for highly data-intensive applications for the sensor processing chain, all the way from the sensor to the network.

This can encompass multiple sensor and mission processing functions - including emerging needs in artificial intelligence (“AI”).

We leverage the Company’s building blocks to design, build and manufacture integrated sensor processing subsystems - often including classified application-specific software and IP - for the command, control, communications, computers, intelligence, surveillance and reconnaissance ("C4ISR") and electronic warfare (“EW”) markets.

These subsystems are deployed by our customers - defense and commercial aerospace companies, defense prime contractors and the U.S.

Department of Defense (“DoD”) - in a variety of mission-critical applications.

An important component of adapting these technologies and IP for these applications is our investment in specialized packaging, ruggedization and cooling to address size, weight and power (“SWaP”) challenges.

These investments, coupled with our domestic design, development, and manufacturing capabilities in mission computing, safety-critical avionics and platform management solutions, and RF, microwave and millimeter wave components and subsystems, brings significant domain expertise to our customers.

is a leading technology company serving the aerospace and defense industry, positioned at the intersection of high-tech and defense.

Headquartered in Andover, Massachusetts, we deliver solutions that power a broad range of aerospace and defense programs, optimized for mission success in some of the most challenging and demanding environments.

We envision, create and deliver innovative technology solutions purpose-built to meet our customers’ most-pressing high-tech needs, including those specific to the defense community.

As a leading manufacturer of essential components, modules and subsystems, we sell to defense prime contractors, the U.S.

government and original equipment manufacturers (“OEM”) commercial aerospace companies.

Mercury has built a trusted, contemporary portfolio of proven product solutions purpose-built for aerospace and defense that it believes meets and exceeds the performance needs of our defense and commercial customers.

Customers add their own applications and algorithms to our specialized, secure and innovative pre-integrated solutions.

This allows them to complete their full system by integrating with their platform, the sensor technology and, in some cases, the processing from Mercury, with their platform.

Our products and solutions are deployed in more than 300 programs with over 25 different defense prime contractors and commercial aviation customers.

Mercury’s transformational business model accelerates the process of making new technology profoundly more accessible to our customers by bridging the gap between commercial technology and aerospace and defense applications.

Our long-standing deep relationships with leading high-tech companies, coupled with our high level of research and development (“R&D”) investments and industry-leading trusted and secure design and manufacturing capabilities, are the foundational tenets of this highly successful model.

Our capabilities, technology and R&D investment strategy combine to differentiate Mercury in our industry.

We maintain our technological edge by investing in critical capabilities and intellectual property (“IP” or “building blocks”) in processing and RF, leveraging open standards and open architectures to adapt quickly those building blocks into solutions for highly data-intensive applications, including emerging needs in areas such as artificial intelligence (“AI”).

Our mission critical solutions are deployed by our customers for a variety of applications including command, control, communications, computers, intelligence, surveillance and reconnaissance (“C4ISR”), electronic intelligence, avionics, electro-optical/infrared (“EO/IR”), electronic warfare, weapons and missile defense, hypersonics and radar.

Our consolidated revenues, acquired revenues, net income, diluted earnings per share (“EPS”), adjusted earnings per share (“adjusted EPS”) and adjusted EBITDA for fiscal 2020 were $796.6 million, $64.0 million, $85.7 million, $1.56, $2.30 and $176.2 million, respectively.

Our consolidated revenues, acquired revenues, net income, earnings per share, adjusted EPS and adjusted EBITDA for fiscal 2018 were $493.2 million , $59.7 million , $40.9 million , $0.86 , $1.42 and $114.6 million , respectively.

Our consolidated revenues, acquired revenues, net income, EPS, adjusted EPS and adjusted EBITDA for fiscal 2019 were $654.7 million, $13.5 million, $46.8 million, $0.96, $1.84 and $145.3 million, respectively.

See the Non-GAAP Financial Measures section of this annual report for a reconciliation of our acquired revenues, adjusted EPS and adjusted EBITDA to the most directly comparable GAAP measures.

Our Business Strategy

Our strategy is built around our key strengths as a leading commercial provider of secure sensor and safety-critical mission processing subsystems.

Our strategy includes innovation and investment in scaling existing capabilities, as well as augmenting our capabilities through an acquisition strategy designed to focus on adjacent technologies.

Mercury’s business strategy is based on a differentiated market position:

we make trusted, secure, mission critical technologies profoundly more accessible to the aerospace and defense industry.

We leverage cutting edge commercial technology innovations to develop complex, secure and reliable product solutions and subsystems, purpose built for aerospace and defense.

We create leading-edge technologies customized for aerospace and defense applications, through above average industry investment on a percentage basis in R&D.

Our strategy is built to meet the aerospace and defense market’s need for speed.

Our strategies for growth are as follows:

Invest to grow organically :

Mercury invests in our people, processes, systems and trusted manufacturing assets to support continued organic growth.

Expand capabilities, market access and penetration through mergers & acquisitions (“M&A”) :

We supplement our organic growth by expanding capabilities, market access and penetration through a disciplined M&A process and full acquisition integration to drive cost and revenue synergies.

Invest in trusted, secure Innovation that Matters®:

Mercury develops leading edge technologies, customized for aerospace and defense applications, through above-average industry investment on a percentage basis in R&D.

Recently our investments have been centered on trusted, secure Innovation that Matters®.

Continuously improve operational capability and scalability :

We deploy our Mercury operating system to drive transformational and sustainable business improvement and value creation across the enterprise.

Attract and retain the right talent :

We strive to continuously improve operational capability and scalability by attracting, retaining and engaging the right talent and supporting and promoting our culture and values.

Our strategies are built around our key strengths as a leading technology company serving the aerospace and defense industry.

Our strategies include innovation and investment in scaling existing capabilities, as well as augmenting our capabilities through an acquisition strategy designed to focus on adjacent technologies.

We believe our investment in R&D is more than double that of our competitors on a percentage basis.

Our consistent strategy allows us to assist our customers, mostly defense prime contractors, to reduce program cost, minimize technical risk, stay on schedule and on budget, and ensure trust and security in the supply chain.

In addition, we have earned a reputation for relentless execution on behalf of our customers.

As a result we have successfully penetrated strategic government and commercial programs including Aegis, Patriot, Surface Electronic Warfare Improvement Program (“SEWIP”), Gorgon Stare, Predator, F-35, Reaper, F-16 SABR, E2-D Hawkeye, Paveway, Filthy

Buzzard, PGK, ProVision, P-8, Advanced Integrated Defensive Electronic Warfare Suite (“AIDEWS”), Common Display System (“CDS”) and WIN-T.

Our consistent strategies allow us to assist our customers, mostly defense prime contractors, to reduce program cost, minimize technical risk, stay on schedule and on budget, and ensure trust and security in the supply chain.

As a result we have successfully penetrated strategic programs including Aegis, Patriot, Surface Electronic Warfare Improvement Program (“SEWIP”), Gorgon Stare, Predator, F-35, Reaper, F-16 SABR, E2-D Hawkeye, Paveway, Filthy Buzzard, PGK, P-8, Advanced Integrated Defensive Electronic Warfare Suite (“AIDEWS”), Common Display System (“CDS”) and WIN-T.

We are committed to continued investment and innovation in advanced new products and solutions development to maintain our competitive advantage, including in the fields of RF, analog-to-digital and digital-to-analog conversion, advanced multi- and many-core sensor processing systems including graphics processing units (“GPUs”), safety-critical design and engineering, processing for AI, embedded security, digital storage, and digital radio frequency memory (“DRFM”) solutions, software defined communications capabilities, and advanced security technologies and capabilities.

2 unchanged sentences

to enable rapid, cost-effective deployment of our microelectronics and secure processing solutions to our customers.

Our unique commercial business model positions us to be compensated for non-recurring engineering which supplements our own internal R&D spend.

We team concurrently with multiple defense prime contractors as they pursue new business with unique solutions they develop and market to the government, and engage with our customers early in the design cycle, and well ahead of our competition.

Our engagement model can lead to long-term production revenue that will continue after the initial services are delivered.

Our commercial business model positions us to be compensated for non-recurring engineering which supplements our own internal R&D investment.

We typically team concurrently with multiple defense prime contractors as they pursue new business with solutions they develop and market to the government, and engage with our customers early in the design cycle.

Our engagement model can lead to long-term production revenue that continues after the initial services are delivered.

We intend to add capabilities, through both M&A and investment in organic growth, both horizontally – in adjacent markets – and vertically – adding more content.

• First, transition to pre-integrated subsystems:

Mercury has expanded capabilities, particularly in integrated subsystems related to defense threats and increased system complexity, which in turn has driven greater outsourcing to us from our prime defense contractor and OEM customers.

• Second, expansion into new submarkets:

Within the major markets Mercury serves we have moved, for example, into electronic warfare, weapons systems, acoustics submarkets and C4I.

• Third, vertical expansion:

As we continue to add content, we seek to apply technology to all computers on aerospace and defense platforms that require trusted, safe and secure processing.

• Fourth, microelectronics:

Our investment domestically in next-generation chiplet technology, from chip-scale to system scale.

Since July 2015, we have added substantial capabilities to our technology portfolio including:

embedded security, with the acquisitions of Lewis Innovative Technologies (“LIT”), custom microelectronics, RF and microwave solutions, and embedded security operations, with the carve-out acquisition from the Microsemi Corporation (the “Carve-Out Business”), The Athena Group, Inc.

embedded security, with the acquisitions of Lewis Innovative Technologies Inc.

(“LIT”), custom microelectronics, RF and microwave solutions, and embedded security, with the carve-out acquisition from Microsemi Corporation (the “Carve-Out Business”), The Athena Group, Inc.

(“Athena”), Delta Microwave, LLC (“Delta”), and Syntonic Microwave LLC (“Syntonic”);

mission computing, safety-critical avionics and platform management with the CES Creative Electronic Systems, S.A.

mission computing, safety-critical avionics and platform management, and large area display technology with the CES Creative Electronic Systems, S.A.

(“CES”), Richland Technologies, L.L.C.

(“RTL”), and GECO Avionics, LLC (“GECO”) acquisitions;

(“RTL”), GECO Avionics, LLC (“GECO”), and American Panel Corporation (“APC”) acquisitions;

and rugged servers, computers and storage systems with the acquisitions of Themis Computer (“Themis”) and Germane Systems, LC (“Germane”).

We believe we are the only high-tech commercial company with the technology breadth and depth and the domain expertise to build secure sensor and safety-critical processing mission subsystems.

We utilize a framework that we call the six Ss (Silicon, Speed, SWaP, Software, Security, and Safety) to invest in technologies that differentiate our solutions at the subsystem level:

We believe we are a leading conduit for commercial silicon innovation into the aerospace and defense market.

We work directly with silicon level technology providers as they target their products toward the defense market.

We believe we have the highest performing processing capability in the defense electronics industry.

We also have some of the highest performing broadband RF capability targeting EW applications.

We believe we have built the most trusted, proven, contemporary portfolio of solutions and sub-systems that are purpose-built to meet or exceed our customers’ most pressing high-tech needs.

We are investing in six highly differentiated capabilities embedded into our pre-integrated subsystem solutions and products.

We adapt commercial Silicon Valley technology specifically for the aerospace and defense industry bringing cutting-edge commercial silicon technology to the Department of Defense (“DoD”) and our commercial customers, across platforms and programs, fast and affordably, from chip-scale to systems.

We believe we have the highest performance and densest processing solutions available onboard military platforms.

We also have some of the highest performing broadband RF capability targeting electronic warfare applications.

We have some of the best size, weight, power and cooling capabilities that ensure that our technology is able to run at the highest performance as well as the advanced ruggedization that is required to ensure that these technologies are able to operate consistently and effectively in the harsh environments in which they are required to operate.

We have some of the industry’s most advanced open middleware that allows our customers a very low risk integration approach to port their applications on top of our hardware platforms.

Our investment in multiple generations of technology provides significant protection for our customers and their applications as we can move from one generation of processing technology to the next without our customers needing to rewrite their applications.

We have some of the industry’s most advanced embedded security capabilities.

This is an important set of technologies and capabilities to differentiate us from our competitors.

We have the capability to build avionics subsystem solutions up to the highest safety design assurance levels (“DAL-A”), which is critical for both commercial and military aircraft operating in civilian airspace.

We have some of the most advanced open middleware and software that allows customers to port their applications on top of open mission systems architecture.

We have industry-leading embedded security capabilities.

We design, market and sell products intended to protect electronic systems that are critical to national security.

We design safety-certifiable processing systems up to the highest design assurance levels.

Our products are certifiable to the highest levels of software critically recognized by the Federal Aviation Administration (“FAA”), European Union Aviation Safety Agency (“EASA”), Transport Canada and Joint Aviation Authorities (“JAA”).

Our Solutions and Products

Hardware Products

We deliver technology at the intersection of the high-tech and defense industries.

The Mercury difference is driven by three key factors we promise to deliver to all of our customers:

Trusted, Secure and Performance.

A trusted partner to aerospace and defense, delivering the most advanced and secure solutions to address accelerating global security challenges.

Advanced embedded security capabilities – built-in, not bolted on – delivering uncompromised solutions in the face of growing cyber threats, and manufactured in Mercury facilities with superior ratings in industrial security.

• High Performance :

Solutions that are among the highest performing available and optimized to meet the most rigorous demands of defense and commercial customers.

We offer a broad family of products designed to meet the full range of requirements in compute-intensive, signal processing, image processing and command and control applications.

1 unchanged sentence

Examples of hardware products include small, custom microelectronics, embedded sensor processing subsystems, RF and microwave components, modules, and subsystems, rugged servers, and avionics mission computers.

Our hardware products are typically compute-intensive and require extremely high bandwidth and high throughput.

Our products are typically compute-intensive and require extremely high bandwidth and high throughput.

These systems often must also meet significant SWaP constraints for use in aircraft, unmanned aerial vehicles (“UAVs”), ships and other platforms and be ruggedized for use in harsh environments.

They can be used in both commercial aerospace applications, such as transportation, communications, ground radar air traffic control, as well as advanced defense and intelligence applications, including

space-time adaptive processing, synthetic aperture radar, airborne early warning, command, control, communication and information systems, mission planning, image intelligence and signal intelligence systems.

They are primarily used in both commercial aerospace applications, such as communications and ground radar air traffic control, as well as advanced defense and intelligence applications, including space-time adaptive processing, synthetic aperture radar, airborne early warning, command, control, communication and information systems, mission planning, image intelligence and signal intelligence systems.

Our products transform the massive streams of digital data created in these applications into usable information in real time.

The systems can scale from a few processors to thousands of processors.

We group our hardware products into the following categories:

We group our products into the following categories:

• Components .

Components include technology elements typically performing a single, discrete technological function, which when physically combined with other components may be used to create a module or subassembly.

Examples include but are not limited to power amplifiers and limiters, switches, oscillators, filters, equalizers, digital and analog converters, chips, MMICs (monolithic microwave integrated circuits), and memory and storage devices.

Examples include but

are not limited to power amplifiers and limiters, switches, oscillators, filters, equalizers, digital and analog converters, chips, MMICs (monolithic microwave integrated circuits), and memory and storage devices.

• Modules and Subassemblies .

1 unchanged sentence

Modules and subassemblies may in turn be combined to form an integrated subsystem.

Examples of modules and subassemblies include but are not limited to embedded processing modules, embedded processing boards, switch fabric boards, high speed input/output boards, digital receiver boards, graphics and video processing and Ethernet and input-output (“I/O”) boards, multi-chip modules, integrated radio frequency and microwave multi-function assemblies, tuners, and transceivers.

Examples of modules and subassemblies include but are not limited to embedded processing modules, embedded processing boards, switch fabric boards, digital receiver boards, graphics and video processing and Ethernet and input/output boards, multi-chip modules, integrated radio frequency and microwave multi-function assemblies, tuners, and transceivers.

• Integrated Subsystems .

3 unchanged sentences

By providing pre-integrated subsystems to our customers, we enable them to rapidly and cost-effectively port and adapt their applications to changing threats.

This approach also saves our customers valuable time and expense, as their costs to integrate modules and components typically minimize the costs of the individual product procurement.

This benefit continues over time because we are continually investing research and development into our products.

This approach also saves our customers valuable time and expense, as their initial costs to integrate modules and components typically far exceed the costs of the individual product procurement.

This benefit continues over time because we are continually investing R&D into our products.

This allows us to provide our customers the latest technologies in our pre-integrated subsystems faster than they can typically do it themselves.

2 unchanged sentences

Our open architecture is carried throughout our entire embedded computing product line from the very small form-factor subsystems to the high-end, where ultimate processing power and reliability is of paramount importance to the mission.

Our commercially-developed hardware and software product capabilities cover the entire Intelligence, Surveillance and Reconnaissance (“ISR”) spectrum from acquisition and digitization of the signal, to processing of the signal, through the exploitation and dissemination of the information.

Our commercially-developed product capabilities cover the entire intelligence, surveillance and reconnaissance (“ISR”) spectrum from acquisition and digitization of the signal, to processing of the signal, through the exploitation and dissemination of the information.

We work continuously to improve our hardware technology with an eye toward optimization of SWaP demands.

We use the latest Intel® server-class processing products as well as GPU products in our embedded high-performance processing technologies.

Mercury partners with global tech leaders to align technology roadmaps and deliver cutting-edge computing in scalable, field-deployable form factors that are fully configurable to each unique workload.

We use the latest Intel® server-class processing products, Field Programmable Gate Arrays (“FPGA”), as well as GPU products in our embedded high-performance processing technologies.

While this multi-computing and embedded processing technology is one of our core skills, the SWaP constraints that are encountered in connection with the high-performance embedded processing applications create unique challenges.

1 unchanged sentence

In rugged environments where air is limited, such as high-altitude operations, our Liquid-Flow-By™ technology has been successfully customer tested allowing maximum server-class processor performance.

These innovative cooling techniques allow full performance server-class processing in rugged environments enabling new and advanced modes of operation that enhance the multi-intelligence, situational awareness and EW capabilities in military platforms.

Embedded systems security has become a requirement for new and emerging military programs, and our security solutions are a critical differentiator from our traditional competition.

Our security solutions, combined with our next-generation secure Intel® server-class product line, together with increasingly frequent mandates from the government to secure electronic systems for domestic and foreign military sales, position us well to capitalize on DoD program protection security requirements.

Finally, our built-in security framework creates higher product differentiation, drives greater program velocity, while lowering risk.

Finally, our built-in security framework creates higher product differentiation, and drives greater program velocity, while lowering risk.

Open Standards Support

Mercury has a long history of driving modular open systems architectures and has remained committed to creating, advancing, and adopting open standards for all our products, from our smallest components and connectors to our largest, high-performance,

integrated multi-computer systems.

With thirty-five years of technology leadership within the high-performance embedded computing industry, we have pioneered or contributed to the development of many of the defense industry’s current and emerging open standards, including standards such as RACEway, RapidIO, VXS, VPX, REDI and notably OpenVPX.

These open standards allow system integrators to benefit from the interoperability of modules produced by multiple vendors.

We also continue to be influential in the industry-standard organizations associated with our market segments.

As a member of the VMEbus International Trade Association (“VITA”), the Sensor Open Systems Architecture (“SOSA”) initiative, the Future Airborne Capability Environment (“FACE”) consortium, and the Vehicular Integration for C4ISR/EW Interoperability (“VICTORY”) consortium, among other standards bodies, Mercury is helping to guide the defense industry toward greater openness and vendor interoperability, consistent with the DoD’s focus on using modular open systems architectures (“MOSA”) in major programs.

Software Products

We design, market and sell complete software and middleware environments to accelerate development and execution of complex signal and image processing applications on a broad range of heterogeneous, multi-computing platforms that typically operate in mission-critical settings.

Our software suite is based on open standards and includes heterogeneous processor support with extensive highly-optimized math libraries, multi-computing switch fabric support, net-centric and system management enabling services, extended operating system services, board support packages and development tools.

We also continue to be influential in the industry-standards organizations associated with our market segments.

As a member of the VMEbus International Trade Association (“VITA”), the Sensor Open Systems Architecture (“SOSA”) initiative, the Future

Airborne Capability Environment (“FACE”) consortium, and the Vehicular Integration for C4ISR/EW Interoperability (“VICTORY”) consortium, among other standards bodies, Mercury is helping to guide the aerospace and defense industry toward greater openness and vendor interoperability, consistent with the DoD’s focus on using modular open systems architectures (“MOSA”) in major programs.

Our software is based on open standards and includes heterogeneous processor support with extensive highly-optimized math libraries, multi-computing switch fabric support, net-centric and system management enabling services, extended operating system services, board support packages and development tools.

This software platform delivers on the performance required for highly tuned real-time operation with the flexibility of open standards that are an essential ingredient of technology insertion and software life-cycle support.

In order to efficiently develop, test and integrate software ahead of hardware availability, we use a model that allows for concurrent engineering internally and with customers to accelerate time to deployment, improve quality and reduce development costs.

In most cases, our software products are bundled together with broader solutions including hardware and/or services, while in other cases they are licensed separately.

Our software framework enables our customers to easily port their applications to the latest hardware without having to rewrite them, preserving their investment.

Our multi-computer software packages are a key differentiator for our subsystems business.

We generally charge a user-based development license fee and bundle software run-time licenses with our hardware.

We offer a standards-based software value proposition to our customers and provide this offer through several integrated software packages and service offerings.

For our avionics and safety product offering our BuiltSAFE™ Graphics Suite (“GS”) enables application developers to create content-rich embedded graphics applications and user interfaces for mission and safety-critical systems deployed in aerospace, defense, automotive and industrial environments.

Our graphics drivers are certifiable to the highest levels of software criticality recognized by the FAA, EASA, Transport Canada and JAA.

We also design, market and sell software and firmware specifically designed to protect electronic systems that are critical to national security.

These capabilities include cryptographic techniques to implement capabilities such as Differential Power Analysis (“DPA”) countermeasures and Physical Unclonable Functions (“PUF”).

These products are designed to meet DoD program protection requirements.

As multiple technologies are integrated into a secure platform it is essential that common Application Programming Interfaces (“APIs”) and software code have a known and controlled source and can provide clear and known user authentication, information assurance, tamper monitoring and resistance, and secure run-time operation.

As part of our strategy, we are focused on being a commercial outsourcing partner to the large defense prime contractors as they seek the more rapid design, development and delivery of affordable, commercially developed, specialized processing solutions within the markets we serve.

We deliver subsystem level engineering expertise as well as ongoing systems integration services addressing our strategy to capitalize on the multi-billion-dollar subsystem market within the defense embedded electronics market segment.

government mandates more outsourcing and open standards, a major shift is occurring within the defense prime contractor community towards procurement of integrated subsystems that enable quick application level porting through standards-based methodologies.

2 unchanged sentences

This results in less risk for the defense prime contractors, shortened development cycles, quicker solution deployment and reduced life-cycle costs.

We also offer unique safety-critical engineering service tailored to help our customers achieve their engineering, development, and certification goals for avionics applications.

We define service revenues as revenue from activities that are not associated with the design, development, production, or delivery of tangible assets, software or specific capabilities sold by us.

Examples of our service revenues include:

analyst services and systems engineering support, consulting, maintenance and other support, testing and installation.

We combine our product and service revenues into a single class as services revenues are less than 10 percent of total revenues.

Recent Acquisitions

Since 2011 we have successfully acquired thirteen businesses, successfully completing integration of the earlier acquired business with the integration of the more recent acquisitions progressing well.

The ten acquisitions completed since July 1, 2015 are described below.

Acquisition of Lewis Innovative Technologies, Inc.

In December 2015, we acquired LIT.

Embedded systems security has become a requirement for new and emerging military programs, and LIT’s security solutions significantly extend our capabilities and leadership in secure embedded computing, a critical differentiator from our traditional competition.

LIT’s solutions, combined with our next-generation secure Intel® server-class product line, together with increasingly frequent mandates from the government to secure electronic systems for domestic and foreign military sales, position us well to capitalize on DoD program protection security requirements.

Acquisition of the Microsemi Carve-Out Business

In May 2016, we acquired the Carve-Out Business from Microsemi Corporation.

The Carve-Out Business is a leader in the design, development, and production of sophisticated electronic subsystems and components for use in high technology products for aerospace and defense markets.

The Carve-Out Business’ defense electronics solutions include high-density rugged memory modules, secure solid-state drives, secure GPS receiver modules, high-power RF amplifiers, millimeter-wave modules and subsystems, and specialized software and firmware for embedded security applications.

The Carve-Out Business’ customers, which include many significant defense prime contractors, outsource many of their electronic design and manufacturing requirements to the Carve-Out Business as a result of its specialized capabilities in packaging electronics for SWaP constrained environments, its focus on security and the unique requirements of defense applications, and its expertise in RF and microwave technologies.

The Carve-Out Business’ products and technologies are used in a variety of defense applications, including missiles and precision-guided munitions, fighter and surveillance aircraft, airport security portals, and advanced electronic systems for radar and EW.

Acquisition of CES Creative Electronic Systems S.A.

In November 2016, we acquired CES.

Based in Geneva, Switzerland, CES is a leading provider of embedded solutions for military and aerospace mission critical computing applications.

CES specializes in the design, development and manufacture of safety-certifiable product and subsystems solutions including:

primary flight control units, flight test computers, mission computers, command and control processors, graphics and video processing and avionics-certified Ethernet and IO.

CES has decades of experience designing subsystems deployed in applications certified up to the highest levels of design assurance.

CES products and solutions are used on platforms such as aerial refueling tankers and multi-mission aircraft, as well as several types of unmanned platforms.

The addition of CES added important and complementary capabilities in mission computing, safety-critical avionics and platform management that are in demand from our customers.

The new capabilities also substantially expanded our addressable market into commercial aerospace, defense platform management, C4I and mission computing markets that are aligned to our existing market focus.

CES also expanded our international presence and gives us better access to non-U.S.

Like Mercury, CES has exceptional technology, solid engineering talent and strong leadership, so we believe there is an excellent fit strategically, culturally and operationally between the CES business and Mercury.

Acquisition of Delta Microwave, LLC

In April 2017, we acquired Delta.

Based in Oxnard, California, Delta is a leading designer and manufacturer of high-value RF, microwave and millimeter wave sub-assemblies and components for the military, aerospace, and space markets.

The acquisition of Delta is an excellent fit for our market and content expansion strategy.

Delta’s strengths in high-power, high-frequency active and passive microwave components and sub-assemblies - particularly in GaN solid-state power amplifiers.

These new capabilities added scale and breadth to our existing RF, microwave and millimeter wave portfolio, expanded our addressable market into satellite communications, datalinks and space launch - markets that are well-aligned with our existing market focus - and deepened our penetration into our core radar, EW, and precision-guided munitions markets.

Additionally, Delta has a strong position on a number of franchise U.S.

and international defense programs such as F-35, Paveway, MALD, and Rivet Joint that complement our presence.

Delta has strong relationships with space Original Equipment Manufacturers (“OEM”), supplying future manned spaceflight missions as well as military and commercial satellite programs, representing a new growth area for Mercury.

Acquisition of Richland Technologies L.L.C.

In July 2017, we acquired RTL.

Based in Duluth, Georgia, RTL specializes in safety-critical and high integrity systems, software, and hardware development as well as safety-certification services for mission-critical applications.

In addition, RTL is a leader in safety-certifiable embedded graphics software for commercial and military aerospace applications.

The acquisition

complements our acquisition of CES in November 2016 by providing additional capabilities in safety-critical markets as well as the opportunity to leverage RTL’s U.S.

presence and expertise.

Together, the RTL and CES acquisitions position us uniquely as a leading provider of secure and safety-critical processing subsystems for aerospace and defense customers.

We gained a European footprint in safety-critical avionics with the acquisition of CES.

The combination of RTL with CES strengthens our U.S.

presence in the safety-critical avionics market, adding significant systems engineering, safety-critical software and hardware development and certification expertise to our existing mission computing portfolio.

These new capabilities enhance our market penetration in commercial aerospace, defense platform management, C4I and mission computing - markets that are very closely aligned with our existing market focus.

Acquisition of Themis Computer

In February 2018, we acquired Themis.

Based in Fremont, California, Themis is a leading designer, manufacturer and integrator of commercial, SWaP-optimized rugged servers, computers and storage systems for U.S.

and international markets.

The Themis acquisition represented our first acquisition in the rugged server domain.

Themis allowed us to expand our presence in the command, control and intelligence (“C2I”) market on existing platforms such as Aegis through the Common Processing System (“CPS”) and CDS programs.

Themis also added new ground platforms to our program portfolio, such as WIN-T.

The acquisition of Themis represented an important platform acquisition for us in the rugged server domain and lead to the subsequent acquisition of Germane in July 2018.

Acquisition of Germane Systems, LC

In July 2018, we acquired Germane.

Based in Chantilly, Virginia, Germane is a leading provider of rugged servers for C2I applications, which we combined with our February 2018 acquisition of Themis.

The acquisition of Germane provided an east coast presence for our rugged server platform and added important new subsurface programs, such as Acoustic Rapid Commercial-off-the-Shelf Insertion (“ARCI”) and Submarine Warfare Federated Tactical Systems (“SWFTS”), and airborne programs, such as KC-46 and P-8.

Themis and Germane have a highly complementary market focus and a strategic program portfolio with programs spanning from airborne to ground to undersea.

We intend to drive incremental growth combining the Themis and Germane channels, particularly where the government has authority over compute architecture.

With our existing processing and embedded security capabilities, we can increase value-add and content expansion opportunities by adding security, storage and other technologies and capabilities to the Themis and Germane solution sets, providing the end-customer with a variety of offerings to suit the customer’s processing, security and budget requirements.

These two acquisitions further provide us with opportunities to rationalize product portfolio and costs in order to optimize operations, improve competitiveness and achieve cost synergies.

Acquisition of GECO Avionics, LLC

In January 2019, we acquired GECO.

Based in Mesa, Arizona, GECO has over twenty years of experience designing and manufacturing affordable safety-critical avionics and mission computing solutions.

GECO’s DO-254-certified hardware solutions include mission processors, airborne displays, video processing and aviation networking.

GECO also specializes in DO-178 avionics software design up to DAL-A.

GECO’s technologies are deployed on numerous military platforms such as the AH-64 Apache attack helicopter and the KC-46A Pegasus widebody multirole tanker, among others.

The GECO acquisition complements our acquisitions of CES in November 2016 and RTL in July 2017 by providing additional capabilities in safety-critical markets as well as the opportunity to leverage RTL’s and GECO’s U.S.

presence and expertise.

Together, the RTL, CES and GECO acquisitions position us uniquely as a leading provider of secure and safety-critical processing subsystems for aerospace and defense customers.

These new capabilities enhance our market penetration in commercial aerospace, defense platform management, C4I and mission computing—markets that are very closely aligned with our existing market focus.

Acquisition of The Athena Group, Inc.

In April 2019, we acquired Athena.

Based in Gainesville, Florida, Athena is a leading provider of cryptographic and countermeasure IP vital to securing defense computing systems.

A world leader in DPA countermeasure technology, Athena offers a complete portfolio of provable DPA-resistant solutions.

Athena’s sophisticated patented technologies meet mandated DoD requirements and mitigate reverse engineering attempts on mission-critical systems.

Embedded in millions of ASIC and next-generation FPGA devices, Athena’s solutions are designed to solve today’s toughest security obstacles, enabling key applications such as artificial intelligence, mobile communications and cloud computing.

Athena’s security solutions significantly extended our capabilities and leadership in secure computing.

Athena’s solutions, combined with our next-generation secure Intel® server-class product line, rugged server product line, and custom microelectronics capabilities, together with increasingly frequent mandates from the government to secure electronic systems for domestic and foreign military sales, position us well to capitalize on DoD program protection security requirements.

Acquisition of Syntonic Microwave LLC

In April 2019, we acquired Syntonic.

Based in Campbell, California, Syntonic is a leading provider of advanced synthesizers, wideband phase coherent tuners and microwave converters optimized for signals intelligence and electronic intelligence applications demanding frequency coverage up to 40 GHz with 2 GHz instantaneous bandwidth.

To address the rapidly evolving needs across the defense industry, the entire Syntonic product portfolio was designed for modularity, configurability and rapid prototyping in order to deliver unparalleled performance for next-generation EW applications.

Syntonic’s capabilities are highly complementary with our existing portfolio of analog-to-digital, digital-to-analog conversion products and other embedded sensor processing products and strengthen our ability to meet current and emerging technical challenges in EW and Signals Intelligence (“SIGINT”) domains.

Pending Acquisition of American Panel Corporation

On July 30, 2019, we announced the execution of a purchase agreement to acquire American Panel Corporation (“APC”).

The acquisition is expected to close in the first quarter of fiscal 2020.

Based in Alpharetta, Georgia, APC is a leading innovator in flat panel display technology deployed on a wide range of defense and commercial aviation platforms.

The APC acquisition will be our first in the rugged displays domain.

Our previous acquisitions of CES, RTL and GECO focused on providing highly specialized, safety-certifiable avionics processing capabilities.

APC complements these capabilities by providing very advanced, ruggedized displays for the military aerospace, ground vehicle and commercial aerospace markets.

Since 2011 we have successfully acquired 14 businesses, successfully completing integration of the earlier acquired business with the integration of the more recent acquisitions progressing well.

The 11 acquisitions completed since July 1, 2015 are shown below.

Name of Acquired Entities Date of Acquisition

Lewis Innovative Technologies, Inc.

December 16, 2015

Microsemi Carve-Out Business May 2, 2016

CES Creative Electronic Systems S.A.

November 3, 2016

Delta Microwave, LLC April 3, 2017

Richland Technologies L.L.C.

Themis Computer February 1, 2018

Germane Systems, LC July 31, 2018

GECO Avionics, LLC January 29, 2019

The Athena Group, Inc.

April 18, 2019

Syntonic Microwave LLC April 18, 2019

American Panel Corporation September 23, 2019

Our Market Opportunity

Our market opportunity is defined by the growing demand for domestically designed and manufactured secure sensor and safety-critical mission processing capabilities for critical aerospace, defense and intelligence applications.

Historically, our primary market has been centered on bringing commercially available technologies to the defense sector, specifically C4I systems, sensor processing and EW systems;

Our primary market positioning is centered on making commercially available technologies profoundly more accessible to the aerospace and defense sector, specifically C4I systems, sensor processing and electronic warfare systems;

and commercial markets, which include commercial aerospace communications and other commercial computing applications.

We believe we are well-positioned in growing sustainable market segments of the defense sector that rely on advanced technologies to improve warfighter capability and provide enhanced force protection capabilities.

We believe we are well-positioned in growing sustainable market segments of the aerospace and defense sector that rely on advanced technologies to improve warfighter capability and provide enhanced force protection capabilities.

The acquisitions of the Carve-Out Business, Delta and Syntonic further improved our ability to compete successfully in these market segments by allowing us to offer an even more comprehensive set of closely related capabilities.

The CES, RTL, and GECO acquisitions provided us new capabilities that substantially expanded our addressable market into commercial aerospace, defense platform management and mission computing markets that are aligned to our existing market focus.

The CES, RTL, GECO and APC acquisitions provided us new capabilities that substantially expanded our addressable market into defense platform management, mission computing and commercial aerospace markets that are aligned to our existing market focus.

The additions of Themis and Germane provided us with new capabilities and positioned us with a significant footprint within the C2I rugged server business.

2 unchanged sentences

We believe there are a number of evolving trends that are reshaping our target markets and accordingly provide us with attractive growth opportunities.

We expect these to endure despite the COVID-19 pandemic.

These trends include:

• The aerospace and defense electronics market is expected to grow in 2020 and beyond.

According to Renaissance Strategic Advisors (“RSA”), the global aerospace and defense electronics market is estimated to be $125 billion in 2019, growing to $151 billion by 2023.

According to Renaissance Strategic Advisors (“RSA”), as of November 2019, the global aerospace and defense electronics market is estimated to be $130 billion in 2020, growing to $146 billion by 2024.

Within this global market, RSA estimates that the U.S.

3 unchanged sentences

C4I encompasses platform and mission management, which include avionics and vetronics, C2I, which includes command and control and intelligence, and dedicated communications processing.

Sensor and effector mission systems are primarily different types of sensor modalities such as EW, radar, EO/IR, and acoustics as well as weapons systems such as missiles and munitions.

Within the tier 2 C4I market in which we participate, RSA estimates the market for 2019 to be $6.7 billion for platform and mission management, $8.1 billion for C2I, and $8.2 billion for dedicated communications.

Sensor and effector mission systems are primarily different types of sensor modalities such as electronic warfare, radar, EO/IR, and acoustics as well as weapons systems such as missiles and munitions.

Within the global Tier 2 C4I market in which we participate, RSA estimates the market for 2020 to be $7.8 billion for platform and mission management, $8.1 billion for C2I, and $8.2 billion for dedicated communications.

RSA estimates the compound annual growth rate (“CAGR”) from 2019-2024 for these markets to be 4.8% for platform and mission management, 3.7% for C2I, and 3.8% for dedicated communications.

Within the tier 2 sensor and effector mission systems market in which we participate, RSA estimates the market for 2019 to be $4.5 billion for EW, $5.1 billion for radar, $1.9 billion for EO/IR, $1.2 billion for acoustics, and $3.1 billion for weapons systems.

RSA estimates the 2018-2023 CAGR for these markets to be 5.2% for EW, 6.2% for radar, 6.5% for EO/IR, 6.5% for acoustics, and 8.1% for weapons systems.

Within the global Tier 2 sensor and effector mission systems market in which we participate, RSA estimates the market for 2020 to be $5.6 billion for electronic warfare, $5.5 billion for radar, $1.9 billion for EO/IR, $1.1 billion for acoustics, and $3.2 billion for weapons systems.

RSA estimates the 2019-2024 CAGR for these markets to be 4.3% for electronic warfare, 3.6% for radar, 4.8% for EO/IR, 6.0% for acoustics, and 4.4% for weapons systems.

Within the context of the overall U.S.

defense budget and spending for defense electronics specifically, we believe the C4ISR, EW, guided missiles and precision munitions, and ballistic missile defense market segments have a high priority for future DoD spending.

defense budget and spending for defense electronics specifically, we believe the C4ISR, electronic warfare, guided missiles and precision munitions, and ballistic missile defense market segments have a high priority for future DoD spending.

We continue to build on our strengths in the design and development of performance optimized electronic subsystems for these markets, and often team with multiple defense prime contractors as they bid for projects, thereby increasing our chance of a successful outcome.

6 unchanged sentences

Standard computing architectures and computing platforms currently do not offer the level of performance needed to optimize existing AI algorithms, creating an additional opportunity for advanced processing capabilities onboard the platform.

Rogue nations’ missile programs and threats from peer nations are causing greater investment in advanced new radar, EW and ballistic missile defense capabilities .

• Rogue nations’ missile programs and threats from peer nations are causing greater investment in advanced new radar, electronic warfare and ballistic missile defense capabilities .

There are a number of new and emerging threats, such as peer nations developing stealth technologies, including stealth aircraft, new anti-ship ballistic missiles and a variety of other advanced missile capabilities.

1 unchanged sentence

armed forces require enhanced signals intelligence and jamming capabilities.

In response to these emerging threats, we have participated in key DoD programs, including Aegis, Patriot, SEWIP, a large ground-based radar, F-22, Raptor, F-35 Joint Strike Fighter and upgrade programs for the F-15 and F-16.

In response to these emerging threats, we have participated in key DoD programs, including Aegis, Patriot, SEWIP, LTAMDS, F-22, Raptor, F-35 Joint Strike Fighter and upgrade programs for the F-15 and F-16.

• The long-term DoD budget pressure is pushing more dollars toward upgrades of the electronic subsystems on existing platforms, which may increase demand for our products .

8 unchanged sentences

defense prime contractors currently outsource only a small percentage of their work.

On a global basis the tier 2 embedded computing and RF market in 2019 is estimated by RSA to be $39 billion.

On a global basis the Tier 2 embedded computing and RF market in 2020 is estimated by

RSA to be $41 billion.

government is intensely focused on making systems more affordable and shortening their development time.

2 unchanged sentences

This trend, along with a scarcity of technical and engineering talent in the market, is causing defense prime contractors to outsource to companies like Mercury, which we believe is our largest secular growth opportunity.

As a company that provides commercial items to the defense industry, we believe our products and subsystem solutions are often more affordable than solutions with the same functionality developed by a defense prime contractor.

Several factors are providing incentives for defense prime contractors to outsource more work to subcontractors with significant expertise and cost-effective technology capabilities and solutions, and we have transformed our business model over the last several years to address these long-term outsourcing trends and other needs.

As a merchant supplier of commercial technologies to the defense industry, we believe our products and subsystem solutions are often more affordable than solutions with the same functionality developed by a defense prime contractor.

In addition, we believe our size, scale, and stability in addition to the investments we have made in our domestic manufacturing capabilities and infrastructure, make us a more reliable and attractive outsourcing partner for our customers relative to smaller sub-scale providers.

These factors are providing incentives for defense prime contractors to outsource more work to subcontractors with significant expertise and cost-effective technology capabilities and solutions, and we have transformed our business model over the last several years to address these long-term outsourcing trends and other needs.

• DoD security and program protection requirements are creating new opportunities for domestic sourcing and our advanced secure processing capabilities .

5 unchanged sentences

In addition, advanced systems sold to foreign military buyers also require protection so that the technologies, techniques and data associated with them do not become more widely available, which further enhances our market opportunity.

• Mercury is well-positioned to help address the need for DoD to access the latest commercial silicon, combined with the desire to ensure a trusted domestic supply of silicon technologies .

In June 2020, DoD elevated microelectronics to its number one technology priority.

This decision was based primarily on the proliferation and advances in commercial silicon but also the realization that DoD needs to be able to access these technologies in a trusted, secure, and domestic manner.

We believe Mercury is the leading provider of commercially-developed silicon purpose-built for the specific requirements of aerospace & defense.

This capability began with our 2016 acquisition of the Carve-Out Business, which included capabilities in trusted and secure microelectronics.

Since the acquisition, we have made additional investments in security and advanced packaging, most notably our announced $15 million capital investment in fiscal year 2020 to expand our trusted custom microelectronics business in Phoenix, Arizona, to bring cutting-edge commercial silicon to the DoD.

This initiative is specifically intended to bridge DoD technologies from monolithic ASIC designs, which are purpose-built for DoD but are deployed on legacy silicon designs, to heterogeneous “chiplet” architectures, which leverage best-of-breed silicon from commercial providers and packages the silicon for defense-specific applications, including the ability to embed security into the device itself.

Our Competitive Strengths

We believe the following competitive strengths will allow us to take advantage of the evolving trends in our industry and successfully pursue our business strategy:

Subsystem Solutions Provider for the C4ISR and EW Markets .

• Subsystem Solutions Provider for the C4ISR and Electronic Warfare Markets .

Through our commercially developed, specialized processing subsystem solutions, we address the challenges associated with the collection and processing of massive, continuous streams of data and dramatically shorten the time that it takes to give information to U.S.

5 unchanged sentences

Our products and solutions have been deployed on more than 300 different programs and over 25 different defense prime contractors.

We serve high priority markets for the DoD and foreign militaries, such as UAVs, ballistic missile defense, guided missiles and precision munitions, airborne reconnaissance, EW, and have secured positions on mission-critical programs including Aegis, Predator and Reaper UAVs, F-35 Joint Strike Fighter, Patriot missile, SEWIP, and Paveway.

We serve high priority markets for the DoD and foreign militaries, such as UAVs, ballistic missile defense, guided missiles and precision munitions, airborne reconnaissance, electronic warfare, and have secured positions on mission-critical programs including Aegis, Predator and Reaper UAVs, F-35 Joint Strike Fighter, LTAMDS, Patriot missile, SEWIP, and

In addition, we consistently leverage our technology and capabilities across multiple programs, providing significant operating leverage and cost savings.

Our recent acquisitions allow us to participate in a broader array of programs, many with key strategic customers of ours.

We are a leading commercial provider of secure processing subsystems designed and made in the U.S.A.

• We are a leading technology company serving the aerospace and defense industry.

We have a portfolio of Open Standards Architecture (“OSA”) technology building blocks across the entire sensor processing chain.

8 unchanged sentences

As more commercial technology companies move the design, development, manufacturing, and support of their technologies offshore, the DoD is looking to domestic technology providers to develop a sustainable, U.S.-based trusted supply chain.

Over the several years we have been building out our capacity for domestic manufacturing through our Advanced Microelectronics Centers (“AMCs”).

Over several years we have been building out our capacity for domestic manufacturing through our Advanced Microelectronics Centers (“AMCs”).

These facilities provide significant scale and capacity for our defense prime customers, who have been increasingly willing to outsource to partners with the scale needed to meet large program production requirements.

10 unchanged sentences

The DoD and the defense industrial base is currently undergoing a major transformation.

Domestic political and budget uncertainty, geopolitical instability and evolving global threats have

become constants.

The defense budget, while stabilized in the short term, remains under pressure and R&D and technology spending are often in budgetary competition with the increasing costs of military personnel requirements, health care costs, and other important elements within the DoD and the federal budget generally.

Domestic political and budget uncertainty, geopolitical instability and evolving global threats have become constants.

The defense budget remains under pressure and R&D and technology spending are often in budgetary competition with the increasing costs of military personnel requirements, health care costs, and other important elements within the DoD and the Federal budget generally.

Finally, defense acquisition reform calls for the continued drive for innovation and competition within the defense industrial base, while also driving down acquisition costs.

9 unchanged sentences

Because of the DoD’s continuing shift toward a firm fixed price contract procurement model, an increasingly uncertain budgetary and procurement environment, and increased budget pressures from both the U.S.

and allied governments, defense prime contractors are accelerating their move toward outsourcing opportunities to help mitigate the increased program and financial risk.

and allied governments, defense prime contractors are

accelerating their move toward outsourcing opportunities to help mitigate the increased program and financial risk.

Our differentiated secure sensor and safety-critical processing solutions offer meaningful capabilities upgrades for our customers and enable the rapid, cost-effective deployment of systems to the end customer.

19 unchanged sentences

government and other key organizations in the defense industry over our 30 years in the defense electronics industry.

Our customers include Airbus, BAE Systems, Boeing, General Atomics, General Dynamics, L3Harris Technologies, Leonardo, Lockheed Martin, Northrop Grumman, and Raytheon.

Our customers include Airbus, BAE Systems, Boeing, General Atomics, General Dynamics, L3Harris Technologies, Leonardo, Lockheed Martin Corporation, Northrop Grumman, and Raytheon Technologies.

Over this period, we have become recognized for our ability to develop new technologies and meet stringent program requirements.

6 unchanged sentences

We have a strong track-record of identifying and executing strategic acquisitions.

Since July 1, 2015 we have acquired ten businesses, successfully completing integration of the earlier acquired businesses with the integration of the more recent acquisitions progressing well, which are strategically aligned with Mercury.

Since July 1, 2015 we have acquired 11 businesses, which are strategically aligned with Mercury, successfully completing integration of the earlier acquired businesses with the integration of the more recent acquisitions progressing well.

We have established an internal team that brings decades of experience across more than 100 transactions.

We have developed internal processes to identify and source strategic acquisitions on a proprietary basis.

A number of our acquisitions have been sourced on a proprietary basis and negotiated directly with owners.

We have developed internal processes to identify and source strategic acquisitions on a proprietary basis and negotiated directly with owners on a number of acquisitions.

In addition, we have developed relationships with a number of investment banks and other sell-side advisors, as well as a reputation as a preferred acquirer, which allow us access to targeted or widely-marketed M&A processes.

Our internal capabilities include financial, legal, and other transaction diligence, deal valuation, and deal negotiations.

Where appropriate, we leverage third party advisors to supplement our internal diligence.

Where appropriate, we leverage third party advisors

to supplement our internal diligence.

We have a proven ability to execute numerous transactions simultaneously effectively and efficiently.

8 unchanged sentences

Our competitive strengths include rapid, innovative engineering in both hardware and software products, subsystem design expertise, advanced packaging capability to deliver the most optimized SWaP solution possible, our ability to respond rapidly to varied customer requirements, and a track record of successfully supporting many high profile programs in the defense market.

There are a limited number of competitors across the market segments and application types in which we compete.

There are competitors in the different market segments and application types in which we participate.

Some of these competitors are larger and have greater resources than us.

6 unchanged sentences

Our R&D goal is to fully exploit and maintain our technological lead in the high-performance, real-time sensor processing industry and in mission computing, platform management and other safety-critical applications.

Expenditures for research and development amounted to $68.9 million , $58.8 million , and $54.1 million in fiscal 2019 , 2018 , and 2017 , respectively.

As of June 30, 2019 , we had 551 employees, including hardware and software architects and design engineers, primarily engaged in engineering and research and product development activities.

Expenditures for research and development amounted to $98.5 million, $68.9 million, and $58.8 million in fiscal years 2020, 2019, and 2018, respectively.

As of July 3, 2020, we had 643 employees, including hardware and software architects and design engineers, primarily engaged in engineering and research and product development activities.

These individuals, in conjunction with our sales team, also devote a portion of their time to assisting customers in utilizing our products, developing new uses for these products and anticipating customer requirements for new products.

3 unchanged sentences

Our Phoenix, Arizona AMC manufactures our custom microelectronics products in an AS9100 quality system-certified facility.

Our Phoenix, Arizona facility also contains our USMO, which is a DMEA-certified trusted manufacturing facility and is primarily focused on advanced secure system-on-chip design, assembly, packaging, and test.

Our Oxnard and Camarillo, California facilities manufacture radio frequency and microwave products in AS9100 quality system-certified facilities.

Our Cypress, California, West Lafayette, Indiana, and Huntsville, Alabama facilities are AS9100 quality systems-certified facilities as well.

Our Fremont, California facility is ISO 9001:2015 quality systems certified.

Our Chantilly, Virginia facility is AS9100 quality systems-certified.

Our Phoenix, Arizona facility also contains our USMO, which is an IPC1791 and DMEA-certified trusted manufacturing facility and is primarily focused on advanced secure system-on-chip design, assembly, packaging, and test.

Our Oxnard, California facility manufactures radio frequency and microwave products in an AS9100 quality system-certified facility.

Our Cypress, California, West Lafayette, Indiana, Huntsville, Alabama and Mesa, Arizona facilities are AS9100 quality systems-certified facilities as well.

Our Fremont, California and Alpharetta, Georgia facilities are ISO 9001:2015 quality systems-certified.

Our Chantilly, Virginia facility is an AS9100 quality systems-certified facility.

Our Andover, Massachusetts and Hudson, New Hampshire facilities design and assemble our processing products and are AS9100 quality systems-certified facilities.

Our Andover, Massachusetts facility is also a DMEA-certified trusted design facility and is primarily focused on advanced security features for the processing product line.

Our Geneva, Switzerland facility, the headquarters of Mercury Systems’ European operations, provides electronic design and manufacturing, maintenance and support services and is AS9011 quality systems certified.

Our Geneva, Switzerland facility, the headquarters of Mercury's European operations, provides electronic design and manufacturing, maintenance and support services and is AS9001and EASA Part 145 quality systems-certified.

Our Silchester, England facility provides engineering, development and integration services and is AS9100 quality systems-certified.

We rely on both vertical integration and subcontracting to contract manufacturers to meet our manufacturing needs.

Our USMO and Geneva facilities have the manufacturing capabilities to complete the assembly and testing for certain of our embedded multi-computing products.

Our USMO and Geneva facilities have the manufacturing capabilities to complete the assembly and testing for certain of our

embedded multi-computing products.

We subcontract as needed a portion of the assembly and testing for our other embedded multi-computing products to contract manufacturers in the U.S.

7 unchanged sentences

Our AMC in Phoenix, Arizona is built around scalable, repeatable, secure, affordable, and predictable manufacturing.

The USMO is designed for efficient manufacturing, enabling our customers to access the best proven technology and high performing, secure processing solutions.

The high mix, low volume and high complexity/density nature of our products require speed and seamless interaction with all internal functions (as opposed to with an external contract manufacturer) which is a key value proposition of the USMO.

The USMO is also designed for efficient showcasing to customers who at any point wish to access the best proven technology and high performing, secure electronics and processing manufacturing solutions within a broader product company such as Mercury.

Proximity and interaction with our internal engineering organization is a significant benefit.

This allows for the most repeatable product performance, while optimizing affordability and production responsiveness.

1 unchanged sentence

We combine surface-mount, flip chip, die attach, wire bond and rugged 3D packaging on the same devices to provide a swap-optimized solution for our customers.

The Hudson, New Hampshire, West Caldwell, New Jersey, and Oxnard, California facilities are specifically aimed at providing scalable manufacturing within our critical RF and microwave businesses.

We leverage best practices in design, development, manufacturing and materials handling at these Advanced Microelectronics Centers.

The Hudson, New Hampshire, West Caldwell, New Jersey, and Oxnard, California facilities are specifically aimed at providing scalable manufacturing within our critical businesses.

We leverage best practices in design, development, manufacturing and materials handling at these production and sub-systems integration facilities.

These facilities include the design, build and test of both RF and microwave components and subsystems in support of a variety of key customer programs.

Our most recent acquisition of APC in Alpharetta, Georgia enables further integrated offerings to customers whereby products from other facilities are deployed to the end user by active matrix liquid crystal display systems which enhances the highly sophisticated man/machine interface.

Although we generally use standard parts and components for our products, certain components, including custom designed ASICs, static random access memory, FPGAs, microprocessors and other third-party chassis peripherals (single board computers, power supplies, blowers, etc.), are currently available only from a single source or from limited sources.

2 unchanged sentences

We believe that, in most cases, alternate vendors can be identified if current vendors are unable to fulfill needs.

We also design, develop, and manufacture DRFM units for a variety of modern EW applications, as well as radar environment simulation and test systems for defense and intelligence applications.

We develop high performance SIGINT payloads and EO/IR technologies for small UAV platforms as well as powerful onboard UAV processor systems for real-time Wide Area Motion Imagery.

We also design, develop, and manufacture DRFM units for a variety of modern electronic warfare applications, as well as radar environment simulation and test systems for defense and intelligence applications.

We develop high performance signals intelligence payloads and EO/IR technologies for small UAV platforms as well as powerful onboard UAV processor systems for real-time wide area motion imagery.

Intellectual Property and Proprietary Rights

As of June 30, 2019 , we held 85 patents of varying duration issued in the United States.

As of July 3, 2020, we held 88 patents of varying duration issued in the United States.

patent applications and, where appropriate, foreign patent applications.

8 unchanged sentences

All other trademarks and registered trademarks are the property of their respective holders, and are hereby acknowledged.

As of June 30, 2019 , we had a backlog of orders aggregating approximately $625.4 million , of which $451.2 million is expected to be delivered within the next twelve months.

As of July 3, 2020, we had a backlog of orders aggregating approximately $831.1 million, of which $567.7 million is expected to be delivered within the next twelve months.

As of June 30, 2019, backlog was approximately $625.4 million.

3 unchanged sentences

We cannot assure the timely replacement of canceled, delayed or reduced orders.

At June 30, 2019 , we employed a total of 1,661 people excluding contractors, including 551 in research and development, 136 in sales and marketing, 737 in manufacturing and customer support and 237 in general and administrative functions.

We have 115 employees located in Europe, eight located in Canada, and one located in Japan, and 1,537 located in the United States.

At July 3, 2020, we employed a total of 1,947 people excluding contractors, including 643 in research and development, 151 in sales and marketing, 867 in manufacturing and customer support and 286 in general and administrative functions.

We have 141 employees located in Europe, six located in Canada, and one located in Japan, and 1,799 located in the United States.

We do not have any employees represented by a labor organization, and we believe that our relations with our employees are good.

We also use contractors on an as-needed basis.

Our revenues are concentrated in two defense prime contractors including Lockheed Martin and Raytheon for the years ended June 30, 2019 , 2018 and 2017 .

These two defense prime contractors comprised an aggregate of 37% , 38% and 36% of our revenues in each of the years ended June 30, 2019 , 2018 and 2017 , respectively.

While sales to each of these customers typically compose 10% or more of our revenue, the sales to these customers are spread across multiple programs and platforms.

Our revenues are concentrated in two defense prime contractors including Lockheed Martin Corporation and Raytheon Technologies for the fiscal years ended 2020, 2019 and 2018.

These two defense prime contractors comprised an aggregate of 32%, 37% and 38% of our revenues in each of the fiscal years 2020, 2019 and 2018, respectively.

While sales to each of these customers that typically comprise 10% or more of our revenue, the sales to these customers are spread across multiple programs and platforms.

For the fiscal years ended 2020, 2019 and 2018, we had no single program that represented 10% or more of our revenues.

Corporate Headquarters and Incorporation

Our corporate headquarters is located in Andover, Massachusetts.

In 2017, we relocated our corporate headquarters into a more modern facility in Andover, Massachusetts, investing in communications, media and collaborative capabilities, engineering labs and security infrastructure.

In 2017, we relocated our corporate headquarters into a more modern facility, investing in communications, media and collaborative capabilities, engineering labs and security infrastructure.

Mercury Systems, Inc.

2 unchanged sentences

Information about revenue we receive within and outside the U.S.

can be found in Note P - Operating Segment, Geographic Information and Significant Customers - to the accompanying Consolidated Financial Statements included elsewhere in this Annual Report on Form 10-K.

can be found in Note Q - Operating Segment, Geographic Information and Significant Customers - to the accompanying Consolidated Financial Statements included elsewhere in this Annual Report on Form 10-K.

We maintain a website at www.mrcy.com .

We make available on our website, free of charge, our annual report on Form 10-K, quarterly reports on Form 10-Q, and current reports on Form 8-K, including exhibits and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as soon as reasonably practicable after such reports are electronically filed with, or furnished to, the Securities and Exchange Commission (“SEC”).

We make available on our website, free of charge, our annual report on Form 10-K, quarterly reports on Form 10-Q, and current reports on Form 8-K, including exhibits and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 as amended, as soon as reasonably practicable after such reports are electronically filed with, or furnished to, the Securities and Exchange Commission (“SEC”).

Our code of business conduct and ethics is also available on our website.

2 unchanged sentences

Our reports filed with, or furnished to, the SEC are also available on the SEC’s website at www.sec.gov .

Investors and others should note that we announce material financial information using our website ( www.mrcy.com ), SEC filings, press releases, public conference calls, webcasts, and social media, including Twitter ( twitter.com/mrcy and twitter.com/mrcy_CEO ) and LinkedIn ( www.linkedin.com/company/mercury-systems ).

Therefore, we encourage investors and others interested in Mercury to review the information we post on the social media and other communication channels listed on our website.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business