Mercury Systems Inc · NASDAQ:MRCY
Mercury Systems — Mercury Computer Systems — Cowen 30th Annual Aerospace/Defense Conference (February 2009)
31 slides from Mercury Systems's conference presentation, Feb 5, 2009
Slide 1: Cowen 30th Annual Aerospace/Defence Conference
Cowen 30 th Annual Aerospace/Defence Conference February 5, 2009 Mark Aslett – President & CEO Bob Hult – SVP, CFO Exhibit 99.1
Slide 2: Forward-Looking Safe Harbor Statement
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 anticipated fiscal 2009 business performance and beyond. You can identify these statements
Slide 3: Introduction
Introduction • New strategy and management team well established • Improved FY08 financial performance • Strong core defense business – stabilizing commercial • Defense provides long-term profitable growth potential • Need to evolve COTS board business – Converged Sensor Network™ architecture • Merc
Slide 4: Significant company dynamics (GAAP FY08)
Significant company dynamics (# ’ s GAAP FY08) • Revenue and profitability strength in ACS business • Non-core businesses eroding operating profits Notes: 1) FY08 Operating Profit Total excludes stock-based compensation expense Includes $7.3M amortization expense, $5.2M restructuring, $18M goodwill
Slide 5: Defense: Major ACS business dynamics
Defense Major ACS business dynamics • Focus on strengthening and growing the defense business FY07 FY08 Commercial
Slide 6: ACS commercial segment dynamics
ACS commercial segment dynamics • Commercial bookings slower rate of decline in FY08 • Current market conditions challenging • Significant volatility has added unpredictability to ACS • Focused on commercial and defense leverage
Slide 7: Refocusing ACS commercial opportunities
Refocusing ACS commercial opportunities • Focus on existing customer accounts and industry segments • Selective tactical new pursuits leveraging existing products or planned roadmap • Maximize R&D synergies across product lines and defense • Converged Sensor Network™ architecture applicable to comme
Slide 8: Strength in ACS defense markets
Strength in ACS defense markets • 17% revenue growth and 33% bookings growth in FY08 • Strong revenue growth in Radar, C4I and EW • Focused on the C4ISR market going forward “C4ISR”
Slide 9: Growing and evolving our COTS defense core
Growing and evolving our COTS defense core • Highly penetrated across many programs and platforms presents good upgrade opportunities and lower risk • Design win-led – refresh product portfolio • Tactically penetrate more programs on new and existing platforms on land, air, and sea • Expand presence
Slide 10: Converged Sensor Network vision
Converged Sensor Network™ vision • Target real need – money flows • Next-generation platform- independent ISR architecture • Beyond COTS – expand addressable market 10x • Leverages technology strengths, installed base, and recent acquisitions • Provides catalyst for growth Become the government’s tr
Slide 11: Military electronics is a market sweet spot
Military electronics is a market sweet spot • Retrofit and upgrades remain strong for legacy programs • Increased need for EW – Intelligence, Surveillance, Reconnaissance assets • Networked nodal platforms, virtualized sensors • Next-gen onboard processing, exploitation and dissemination architectur
Slide 12: Commentary on the election and DoD budget
Commentary on the election and DoD budget • History shows defense budget is more related to what is happening, not who is in charge – Democrats presided over two largest increases in defense spending • Military leadership citing budget and funding deemed to be at a bare minimum – Military needs to r
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Slide 14: ACS Defense and MFS – a hybrid business model
ACS Defense and MFS – a hybrid business model ACS COTS Defense • Total addressable market COTS defense electronics ($3B annually) • Be told what board to develop by a prime • Board-level design wins • Develop everything on our own nickel • Long payback period – high risk with Mercury Federal • Total
Slide 15: Summary
Summary • Rationalize portfolio of non-core businesses by end FY09 • Strengthen ACS defense business – stabilize commercial • Grow ACS defense business by targeting upgrades, new platforms and applications • Evolve beyond COTS board business due to industry size constraints and dynamics – Converged
Slide 16: Mercury Computer Systems
— MERCURY “a COMPUTER SYSTEMS
Slide 17: FY07 vs FY08: Improved Performance
FY07 vs FY08: Improved Performance Notes: 1) All historical income statement figures adjusted for the discontinued operation of Embedded Systems & Professional Services and SolMap. 2) All numbers are non-GAAP.
Slide 18: Revenue growth: Driven by Defense
Revenue growth: Driven by Defense Notes: 1)Represents total Company revenues; VI, VSG and Emerging businesses’ revenue treated as Commercial 2)All historical figures adjusted for the discontinued operation of Embedded Systems & Professional Services and SolMap June Fiscal Year End ~ 10% CAGR FY98 –
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Slide 23: Strategic Direction – Sell, fix or grow
Strategic Direction – Sell, fix or grow Government Defense Commercial Mercury Federal Sell or Shutdown Fix Grow VSG AUSG - Sold VI ES/PS - Sold Biotech – Sold VI - Sold
Slide 24: FY09 Mercury Cash Balance Analysis
FY09 Mercury Cash Balance Analysis FY09 Cash Changes Summary (4) (125) Q1FY09 ARS Write- down UBS Loan Q2 FCF/Other Q2FY09 Repay Convert Cash & Sec Bal ARS: 42 Cash: 31
Slide 25: Focus on Working Capital
Focus on Working Capital • Supply chain transformation Operational efficiencies Manufacturing lead times Cost of quality Competitive advantage for Mercury and customers Inventory reduced $7.3M • Customer satisfaction DSO’s below model End-of-quarter shipment skew Inventory Turns 4.9 6.9 5.4 4.6 4.1
Slide 26: Gap to Target Business Model (non-GAAP)
Gap to Target Business Model (# ’ s non - GAAP) Target Business Model Notes: 1) All historical income statement figures adjusted for the discontinued operation of Embedded Systems & Professional Services and SolMap.
Slide 27: Guidance Summary (Non-GAAP)
Q108 Q208 Q308 Q408 Q109 Q209 Guidance Summary (Non-GAAP) Reported Guidance Reported Guidance Reported Guidance Reported Guidance Reported Guidance Reported Guidance Revenue ($M) 49.2 48.0 52.6 51.0 56.5 53.0- 55.0 55.2 53.0- 56.0 49.1 47.0- 49.0 50.7 47.0- 49.0 EPS ($) 0.09 (0.08) 0.04 (0.05) 0.04
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Slide 29: Mercury Computer Systems
— MERCURY “a COMPUTER SYSTEMS
Slide 30: GAAP to Non-GAAP Reconciliation
GAAP to Non-GAAP Reconciliation Q309 Guidance Reconciliation* * Per Company guidance range, January 27, 2009 earnings conference call RANGE Income (Loss) Per Share - Diluted Income (Loss) Per Share - Diluted GAAP expectation (0.02) $ 0.03 $ Adjustment to exclude stock-based compensation 0.07 0.07 Ad
Slide 31: GAAP to Non-GAAP Reconciliation
GAAP to Non-GAAP Reconciliation GAAP net loss from continuing operations (35.6) $ (33.2) $ Adjustment to exclude stock-based compensation 10.6 10.2 Adjustment to exclude inventory write-down - 0.8 Adjustment to exclude amortization of acquired intangible assets 7.2 7.3 Adjustment to exclude impairme
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