What changed in this filing

/stocks — the workspaceLOADING

Item 1. Business

2021-08-17 compared with 2020-08-18 · 124 added, 51 removed, 371 unchanged (32% of the section changed)

1 unchanged sentence

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.

Headquartered in Andover, Massachusetts, we deliver products and solutions that enable 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 that are open, purpose-built and uncompromised to meet our customers’ most-pressing high-tech needs, including those specific to the defense community.

As a leading manufacturer of essential components, products, 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.

Customers add their own applications and algorithms to our specialized, secure and innovative products and 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.

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

1 unchanged sentence

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.

We are leading the development and adaptation of commercial technology for aerospace and defense solutions.

From chip-scale to system scale and from radio frequency (“RF”) to digital, we make mission-critical technologies safe, secure, affordable and relevant for our customers.

Our capabilities, technology and 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, subsystems and custom microelectronics.

Our technologies and capabilities include secure embedded processing modules and subsystems, mission computers, secure and rugged rack-mount servers, safety-critical avionics, components, multi-function assemblies, subsystems and custom microelectronics.

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”).

3 unchanged sentences

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.

On August 3, 2021, Mercury announced a companywide effort, called 1MPACT, to lay the foundation for the next phase of the Company’s value creation at scale.

The goal of 1MPACT is to achieve Mercury’s full growth, margin expansion and adjusted EBITDA potential over the next five years.

Since fiscal year 2014, Mercury has completed 13 acquisitions, deploying $1.2 billion of capital and, as a result, dramatically scaled and transformed the business.

Over this time, the Company has extracted substantial revenue and cost synergies from each of these individual acquisitions.

Now, as Mercury approaches the milestone of $1 billion of revenue, management believes there is significant opportunity to realize further scale through consolidating and streamlining the Company’s organizational structure which will improve visibility, speed of decision making and accountability.

1MPACT will be led by a new Chief Transformation Officer, and will focus on six major areas:

organization efficiency and scalability;

procurement and supply chain;

facilities optimization;

R&D investment;

capital and asset efficiency;

and scalable common processes and systems.

Our Business Strategy

13 unchanged sentences

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.

We drive transformational and sustainable business improvement and value creation across the enterprise.

Attract and retain the right talent :

4 unchanged sentences

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.

As a result we have successfully penetrated strategic programs including Aegis, Patriot, Lower Tier Air & Missile Defense Sensor ("LTAMDS"), 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.

3 unchanged sentences

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.

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.

11 unchanged sentences

(“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”);

(“Athena”), Delta Microwave, LLC (“Delta”), Syntonic Microwave LLC (“Syntonic”), and Pentek Technologies, LLC and Pentek Systems, Inc.

(collectively, "Pentek");

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

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

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

19 unchanged sentences

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.

To maintain a competitive advantage, we seek to leverage technology investments across multiple product lines and product solutions.

To maintain a competitive advantage, we seek to leverage

technology investments across multiple product lines and product solutions.

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.

7 unchanged sentences

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 .

10 unchanged sentences

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

We believe this is a better business and technology model to operate within, as it continues to provide value and benefits to us over time.

We believe this is a better business and technology model to operate within, as it continues to provide value and benefits to us and our customers over time.

To address the current challenges facing the warfighter, our government and defense prime contractors, we have developed a new product architecture that supports a more dynamic, iterative, spiral development process by leveraging open architecture standards and leading-edge commercial technologies and products.

3 unchanged sentences

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.

We use the latest Intel® server-class processing products, Xilinx Field Programmable Gate Arrays (“FPGA”), as well as NVIDIA 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.

10 unchanged sentences

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.

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.

4 unchanged sentences

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

Commitment to Deliver Uncompromised

For Mercury, this means ensuring our products and solutions have not been and cannot be tampered with, and that what we deliver to our customers is not compromised at any point during the development lifecycle, from procurement to manufacturing.

Our holistic approach to deliver uncompromised includes:

• vigorously mitigating potential insider threats;

• proactively protecting our IT infrastructure with strong cybersecurity defenses;

• effectively managing and assessing our suppliers’ controls;

• judiciously controlling design information through the entire development process.

We are investing in digital transformation, insider trust, cybersecurity, supply chain management and trusted microelectronics, all integral to our commitment to being a leader in delivering uncompromised solutions to our customers.

Recent Acquisitions

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.

Since 2011 we have successfully acquired 16 businesses, successfully completing integration of the earlier acquired businesses with the integration of the more recent acquisitions progressing well.

The 13 acquisitions completed since July 1, 2015 are shown below.

14 unchanged sentences

American Panel Corporation September 23, 2019

Physical Optics Corporation December 30, 2020

Pentek May 27, 2021

Our Market Opportunity

3 unchanged sentences

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, 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 acquisitions of the Carve-Out Business, Delta, Syntonic and Pentek 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, GECO, APC, and POC 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 2021 and beyond.

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.

According to Renaissance Strategic Advisors (“RSA”), as of August 2021, the global aerospace and defense electronics market is estimated to be $129 billion in 2021, growing to $148 billion by 2025.

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

7 unchanged sentences

Within the global Tier 2 sensor and effector mission systems market in which we participate, RSA estimates the market for 2021 to be $5.7 billion for electronic warfare, $5.8 billion for radar, $2.0 billion for EO/IR, $1.2 billion for acoustics, and $3.4 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.

RSA estimates the 2021-2025

CAGR for these markets to be 3.1% for electronic warfare, 2.9% for radar, 4.0% for EO/IR, 4.4% for acoustics, and 3.3% for weapons systems.

Within the context of the overall U.S.

12 unchanged sentences

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, LTAMDS, 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, F-16, V-22 and F/A-18.

• 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 2020 is estimated by

RSA to be $41 billion.

On a global basis the Tier 2 embedded computing and RF market in 2021 is estimated by RSA to be $42 billion.

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

6 unchanged sentences

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

The government is focused on ensuring that the U.S.

government is focused on ensuring that the U.S.

military protects its defense electronic systems and the information held within them from nefarious activities such as tampering, reverse engineering and other forms of advanced attacks, including cyber.

The requirement to add security comes at a time when the commercial technology world continues to offshore more of the design, development, manufacturing, and support of such capabilities, making it more difficult to protect against embedded vulnerabilities, tampering, reverse engineering and other undesired activities.

The requirement to add security comes at a time when the commercial technology world continues to offshore more of the design, development, manufacturing

and support of such capabilities, making it more difficult to protect against embedded vulnerabilities, tampering, reverse engineering and other undesired activities.

The DoD has a mandate to ensure both the provenance and integrity of the technology and its associated supply chain.

18 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, 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.

8 unchanged sentences

Our strengths in this area include our position as an early and leading advocate for OSA in defense, offering Intel® server class processing form factors across 3/6U OpenVPX, ATCA and rack-mount architectures, and high density, secure solutions across multiple hardware architectures to seamlessly scale to meet our customers’ SWaP requirements.

In addition, we have a 30-year legacy of system management and system integration expertise that allows us to reduce technical risk, while improving affordability and interoperability.

In addition, we have a 30-year legacy of system management and system integration expertise that allows us to reduce technical risk, while

improving affordability and interoperability.

Our system integration expertise is a cornerstone in helping us support our customers in deploying pre-integrated, OSA subsystems.

22 unchanged sentences

• Security and program protection are now critical considerations for both program modernizations as well as for new program deployment.

We are now in our third generation of building secure embedded processing solutions.

We are now in our fourth generation of building secure embedded processing solutions.

We have a next generation business model built to meet the emerging needs of the DoD.

1 unchanged sentence

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 Corporation, Northrop Grumman, and Raytheon Technologies.

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

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

11 unchanged sentences

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.

15 unchanged sentences

Research and Product Development

Our R&D efforts are focused on developing new products and systems as well as enhancing existing hardware and software products in mission, signal and image processing.

Our R&D efforts are focused on developing new products and subsystems as well as enhancing existing hardware and software products in mission, signal and image processing.

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.

4 unchanged sentences

The majority of our sales are produced in AS9100 quality system-certified facilities.

The current scope of delivered hardware products includes commercial and industrial class printed circuit board assemblies (modules), complex chassis subsystems, and RF and microwave components and subsystems.

The current scope of delivered hardware products includes commercial and industrial class printed circuit board assemblies (modules), complex chassis subsystems, rugged display system and servers and RF and microwave components and subsystems.

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

3 unchanged sentences

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 Chantilly, Virginia facility is an IPC1791 and 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 Hudson, New Hampshire facility is also IPC1791 certified.

Our Geneva, Switzerland facility, the headquarters of Mercury's European operations, provides electronic design and manufacturing, maintenance and support services and is AS9001 and EASA Part 145 quality systems-certified.

1 unchanged sentence

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.

8 unchanged sentences

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.

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.

3 unchanged sentences

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.

We leverage best practices in design, development, manufacturing and materials handling at these production and subsystems 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.

Our Alpharetta, Georgia facility offers active matrix liquid crystal display systems which enhances the highly sophisticated man/machine interface.

Our recent acquisition of POC in Torrance, CA is an AS9100 facility that offers Avionics Safety-Certifiable subsystems.

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.

With the exception of certain components that have gone “end of life”, we strive to maintain minimal supply commitments from our vendors and generally purchase components on a purchase order basis as opposed to entering into long-term procurement agreements with vendors.

Prior to the global COVID-19 pandemic, we launched efforts to increase our spend under long-term procurement agreements.

This has proven very beneficial during the severe supply constraints we have faced, which have driven significant price increases across the industry.

We have generally been able to obtain adequate supplies of components in a timely manner from current vendors or, when necessary to meet production needs, from alternate vendors.

15 unchanged sentences

As of July 2, 2021, we had a backlog of orders aggregating approximately $909.6 million, of which $530.0 million is expected to be delivered within the next twelve months.

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

As of July 3, 2020, backlog was approximately $831.1 million.

We include in our backlog customer orders for products and services for which we have accepted signed purchase orders, as long as that order is scheduled to ship or invoice in whole, or in part, within the next 24 months.

6 unchanged sentences

We also use contractors on an as-needed basis.

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.

Human Capital

At Mercury, our people are at the center of everything we do in driving Innovation That Matters® for our customers.

We recognize that Mercury will succeed only if our employees are engaged, given an opportunity to develop and provided with a safe workplace that values diverse perspectives.

Our Board of Directors provides oversight of our people practices, including regularly reviewing workforce metrics, including the metrics described below.

Additional data related to these metrics can be found on our website at www.mrcy.com under the Company – Environmental, Social and Governance tab (our “Website”).

• Employee Overview:

As of July 2, 2021, we had 2,384 employees around the globe.

Our primary operations are in the U.S.

with 2,175 employees and we operate offices in 11 states.

Mercury also has operations in Europe, Asia and Canada.

No employees are covered by any collective bargaining or similar agreements.

• Culture and Employee Engagement:

We believe our workplace culture drives engagement that turns ideas into action, delivering trusted and secure solutions at the speed of innovation.

Our investment in our employees extends to our workplaces.

Over the last fiscal year, Mercury’s Phoenix, Arizona, facility, our largest manufacturing facility, was recognized as Medium Manufacturer of the Year by the Arizona Manufacturers Council for its accomplishments in championing innovation, excellence, sustainability and leadership in the manufacturing sector.

We also encourage employees to give back to our communities.

During the pandemic, Mercury and its employees contributed over $100,000 to a fund used to thank healthcare workers in our communities with gift cards.

The Boston Globe also ranked Mercury for 2020 one of the Top Places to Work in Massachusetts, where we are headquartered with over 300 employees as of July 2, 2021.

Mercury regularly seeks employee input through engagement surveys, the results of which drive meaningful and timely action, as appropriate, from our leadership team.

Participation in our most recent employee engagement survey in April 2021 remained strong at 85%.

• Training and Development:

Life-long learning is encouraged at Mercury through our offering of LinkedIn Learning, tuition reimbursement and other employee development opportunities.

We are deeply invested in building the next generation of engineers and scientists, with our internship and co-op programs, as well as through our new partnership with Udacity which fosters upskilling in the areas of AI, machine learning and data science.

Mercury also has formal leadership development programs for high-potential employees:

Leadership Edge (director and above);

Mercury Managers Matter (for manger-level employees);

and Managing at Mercury (supervisors, team leaders and new managers).

• Pay and Benefits:

The Company seeks competitiveness and fairness in total compensation with reference to peer comparisons and internal equity.

Mercury also offers a variety of well-being programs to support our employees and their families with healthy living.

These programs include paid time off, paid parental leave, health insurance coverage, company contributions to retirement savings and employee assistance and work-life programs.

In addition, Mercury offers employees less traditional benefits to support employee well-being such as access to fitness and meditation apps, as well as an online platform through which employees participate in health living challenges and earn financial rewards.

• Health and Safety:

On our Website, we disclose quality and safety information, including OSHA injury data.

Over the last fiscal year, Mercury expended $9.9 million for COVID testing, sick pay and other efforts to keep our employees and their families, as well as our facilities, safe during the global pandemic.

Mercury also established a $1 million relief fund, which was fully utilized, for employees to access during the pandemic for family needs (e.g., acquiring personal protective equipment) and hardships.

Our CEO was also recognized by Glassdoor as the top rated CEO in the U.S.

for his leadership during the pandemic.

• Diversity, Equity & Inclusion:

Our Website discloses detailed workplace data surrounding our gender diversity, racial/ethnic diversity and turnover data.

As of July 2, 2021, women and racially/ethnically diverse employees represented 30% and 42%, respectively, of Mercury’s workforce.

Development of a diverse talent pipeline is a

business imperative at Mercury and critical to our ability to drive innovation and improve long-term results.

We have established relationships with job networks and educational institutions to proactively attract a diverse pool of talent.

Our employees are afforded opportunities to cultivate diversity, equity and inclusion both within Mercury and our industry.

For example, Mercury sponsors, and our leaders participate in, the annual Simmons Women’s Leadership Conference which has the goal of preparing the next generation of female leaders and furthering equality in the workplace .

Mercury has also conducted gender pay equity assessments and made adjustments to women’s pay levels, as appropriate, as a result of such assessments.

Lockheed Martin Corporation and Raytheon Technologies comprised an aggregate of 34%, 32% and 37% of our revenues in each of the fiscal years 2021, 2020 and 2019, respectively.

The United States Navy comprised 12% of our revenues in fiscal year 2021.

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

For the fiscal years ended 2021, 2020 and 2019, we had no single program that represented 10% or more of our revenues.

1 unchanged sentence

Our corporate headquarters is located in Andover, Massachusetts.

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.

12 unchanged sentences

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