Mercury : Q3 2021 Earnings Presentation

THIRD QUARTER FISCAL YEAR 2021 FINANCIAL RESULTS

Mark Aslett

President and CEO

Michael Ruppert

Executive Vice President and CFO

May 4, 2021, 5:00 pm ET

Webcast login at www.mrcy.com/investor

Webcast replay available by 7:00 p.m. ET May 4, 2021

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Forward-looking safe harbor statement

This presentation contains certain forward-looking statements, as that term is defined in the Private Securities Litigation Reform Act of 1995, including those relating to the acquisitions described herein and to fiscal 2021 business performance and beyond and the Company's plans for growth and improvement in profitability and cash flow. You can identify these statements by the use of the words "may," "will," "could," "should," "would," "plans," "expects," "anticipates," "continue," "estimate," "project," "intend," "likely," "forecast," "probable," "potential," and similar expressions. These forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those projected or anticipated. Such risks and uncertainties include, but are not limited to, continued funding of defense programs, the timing and amounts of such funding, general economic and business conditions, including unforeseen weakness in the Company's markets, effects of epidemics and pandemics such as COVID, effects of any U.S. federal government shutdown or extended continuing resolution, effects of continued geopolitical unrest and regional conflicts, competition, changes in technology and methods of marketing, delays in completing engineering and manufacturing programs, changes in customer order patterns, changes in product mix, continued success in technological advances and delivering technological innovations, changes in, or in the U.S. Government's interpretation of, federal export control or procurement rules and regulations, market acceptance of the Company's products, shortages in components, production delays or unanticipated expenses due to performance quality issues with outsourced components, inability to fully realize the expected benefits from acquisitions and restructurings, or delays in realizing such benefits, challenges in integrating acquired businesses and achieving anticipated synergies, increases in interest rates, changes to industrial security and cyber-security regulations and requirements, changes in tax rates or tax regulations, changes to interest rate swaps or other cash flow hedging arrangements, changes to generally accepted accounting principles, difficulties in retaining key employees and customers, unanticipated costs under fixed-price service and system integration engagements, and various other factors beyond our control. These risks and uncertainties also include such additional risk factors as are discussed in the Company's filings with the U.S. Securities and Exchange Commission, including its Annual Report on Form 10-K for the fiscal year ended July 3, 2020. The Company cautions readers not to place undue reliance upon any such forward-looking statements, which speak only as of the date made. The Company undertakes no obligation to update any forward-looking statement to reflect events or circumstances after the date on which such statement is made.

Use of Non-GAAP (Generally Accepted Accounting Principles) Financial Measures

In addition to reporting financial results in accordance with generally accepted accounting principles, or GAAP, the Company provides adjusted EBITDA, adjusted income, adjusted EPS, free cash flow, organic revenue and acquired revenue, which are non-GAAP financial measures. Adjusted EBITDA, adjusted income, and adjusted EPS exclude certain non-cash and other specified charges. The Company believes these non-GAAP financial measures are useful to help investors better understand its past financial performance and prospects for the future. However, these non-GAAP measures should not be considered in isolation or as a substitute for financial information provided in accordance with GAAP. Management believes these non-GAAP measures assist in providing a more complete understanding of the Company's underlying operational results and trends, and management uses these measures along with the corresponding GAAP financial measures to manage the Company's business, to evaluate its performance compared to prior periods and the marketplace, and to establish operational goals. A reconciliation of GAAP to non-GAAP financial results discussed in this presentation is contained in the Appendix hereto.

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Delivered strong fiscal 2021 third quarter

• Delivered record revenues exceeding guidance
• Strong quarter for new design wins
• Anticipate increased bookings and positive book-to-bill for Q4 FY21
• Expect approximately 6% organic and 14-15% total revenue growth for FY21
• Fiscal 2022 revenue growth in the mid-teens; organic revenue growth mid to high single-digit

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Strategy and technologies aligned with major industry drivers and trends

• Expect flat to low single-digit CAGR in defense spending; well-aligned with Nat'l Defense Strategy
• Targeting and participating in large, and faster growing market segments
• Targeting sensor and effector mission systems and C4I modernization
• Successfully diversified our program revenue base
• Grew top 30 programs estimated LTV from $~5B to $10B since 2015, 10x greater than backlog
• Expect design win program production transitions to drive increases in bookings and backlog
• Long term high single to low double-digit organic revenue growth expectation unchanged

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Q3 and LTM FY21 results

Q3 FY21 VS. Q3 FY20

• Bookings decreased 16%
• Backlog increased 16%
• Revenue up 23%
• Organic revenue(1) up 5%
• GAAP net income down 34%
• Adjusted EBITDA up 16%
• Op cash of $23.2M
• FCF of $13.2M; 24% of adj. EBITDA

LTM FY21 VS. LTM FY20

• Bookings decreased 2%
• Backlog up 16%
• Revenue up 18%
• Organic revenue (1) up 10%
• GAAP net income flat
• Adjusted EBITDA up 17%
• Op cash of $98.8M
• FCF of $52.6M; 27% of adj. EBITDA

Notes

1. Organic revenue represents total company revenue excluding net revenue from acquisitions for the first four full quarters since the entities' acquisition date (which excludes any intercompany transactions). After the completion of four fiscal quarters, acquired businesses are treated as organic for current and comparable historical periods.

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