Mercury Systems Inc · NASDAQ:MRCY
Mercury Systems — Mercury Computer Systems — Investor Day (November 2005)
75 slides from Mercury Systems's investor day presentation, Nov 17, 2005
Slide 1: Sixth Annual Investor Conference
Sixth Annual Investor Conference November 17, 2005 Exhibit 99.1 © 2005 Mercury Computer Systems, Inc.
Slide 2: Forward-Looking Safe Harbor Statement
© 2005 Mercury Computer Systems, Inc. 2 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 2006 business performance and b
Slide 3: Agenda
© 2005 Mercury Computer Systems, Inc. 3 Agenda Q&A 12:10-12:20 Bob Hult, SVP, Finance & Operations, CFO 11:40-12:10 Barry Isenstein, VP, GM, Defense Business 11:10-11:40 Break 11:00-11:10 Mark Skalabrin, VP, GM, Advanced Solutions Business 10:30-11:00 Marcelo Lima, VP, GM, Commercial Imaging & Visua
Slide 4: Corporate Overview
Corporate Overview © 2005 Mercury Computer Systems, Inc. Jay Bertelli, President, CEO & Chairman
Slide 5: Mercury Growth Story
© 2005 Mercury Computer Systems, Inc. 5 Mercury Growth Story Strong competitive position in attractive and growing markets Leverage technology investments across multiple applications in diverse markets Defense and Commercial Straightforward operating model and financial structure Strong balance she
Slide 6: Mercury's Mission
© 2005 Mercury Computer Systems, Inc. 6 Mercury’s Mission To help our customers solve difficult computing challenges that make a difference Improving international security Advancing healthcare Increasing the world’s oil supply …And more To use these challenges to drive innovation Spending approxima
Slide 7: Solving Challenging Problems…
© 2005 Mercury Computer Systems, Inc. 7 Solving Challenging Problems… Deep Algorithm Expertise System Architecture Expertise Acceleration Expertise GPU Cell Broadband Engine FPGA Applications Expertise …by combining extensive technical expertise with deep knowledge of the science behind our customer
Slide 8: Key Elements of Mercury's Strategy
© 2005 Mercury Computer Systems, Inc. 8 Key Elements of Mercury’s Strategy Committed to driving innovation Average R&D y/y is approximately 20% of revenues Focused on continually enhancing our expertise to maintain our leading edge Internal development Cross-pollinating commercial technologies/exper
Slide 9: Mercury, IBM & Cell: A Landmark Agreement
© 2005 Mercury Computer Systems, Inc. 9 Mercury, IBM & Cell: A Landmark Agreement The Cell Broadband Engine processor is 5-100x faster than conventional microprocessors Mercury is the 1 st non-gaming company to integrate the Cell Broadband Engine into its products High-volume gaming market is transf
Slide 10: Leveraging our Core Competencies
© 2005 Mercury Computer Systems, Inc. 10 Leveraging our Core Competencies Image and Signal Processing J-STARS Aircraft Sensor Data-Scanned Wafers Mobile C-Arm (Digital X-Ray) Radar Image Display Wafer Inspection 3D Image Reconstruction Mercury Technology in Action Visualization Data Acquisition
Slide 11: Enabling a Growing Number of Applications
© 2005 Mercury Computer Systems, Inc. 11 Enabling a Growing Number of Applications J-STARS Aircraft RADAR Mobile C-Arm (Digital X-Ray) Wafer Inspection Image Processing Special-Purpose Computing & I/O Visualization & Rendering Signal Processing Wireless Communications Base Stations Image Storage & R
Slide 12: Entering New Markets
© 2005 Mercury Computer Systems, Inc. 12 Entering New Markets Telecommunications Seismic exploration and reservoir modeling Biotechnology Navigation In the future… Gaming Digital media Others
Slide 13: Goal
© 2005 Mercury Computer Systems, Inc. 13 Goal Sustain a 25% or better long-term revenue growth rate
Slide 14: VIDEO: Harnessing the Power of the Cell Broadband Engine Processor
© 2005 Mercury Computer Systems, Inc. 14 VIDEO Harnessing the Power of the Cell Broadband Engine Processor Medical Imaging ( webcast audio only )
Slide 15: Commercial Imaging and Visualization (CIV)
Commercial Imaging and Visualization (CIV) © 2005 Mercury Computer Systems, Inc. Marcelo Lima, Vice President & General Manager
Slide 16: CIV Overview
© 2005 Mercury Computer Systems, Inc. 16 CIV Overview 20% of FY05 revenues 50% growth over FY04 Delivering Imaging & Computing Solutions to: Life Sciences (Medical Imaging & Biotech) Geosciences (Oil and gas exploration) Navigation Competitive Differentiation & Leadership Scalable systems High-perfo
Slide 17: CIV Growth Strategy & Competencies
© 2005 Mercury Computer Systems, Inc. 17 CIV Growth Strategy & Competencies Strategy Extend and lead in end-to-end OEM solutions Data acquisition, reconstruction, computation, visualization, distribution Innovate Scalable systems, large data set computing, 3D visualization, servers Leverage & integr
Slide 18: CIV Growth Driver – Data Explosion
© 2005 Mercury Computer Systems, Inc. 18 CIV Growth Driver – Data Explosion Improving Sensors More and better images Large data sets Growing need for intensive computing in processing and visualization Increased 3D demand MRCY performance opportunity Multi-slice CT (32/64) 4Gbytes typical OIV/Volume
Slide 19: Continuous R&D Investments – Innovation
© 2005 Mercury Computer Systems, Inc. 19 Continuous R&D Investments – Innovation Real-Time Image and Signal Processing Image reconstruction algorithms General-Purpose GPU (GPGPU) programming Cell Broadband Engine technology computing platforms Advanced Visualization High-performance volume data proc
Slide 20: CIV Customers & Targets
© 2005 Mercury Computer Systems, Inc. 20 CIV Customers & Targets (not all inclusive) Oil & Gas
Slide 21: OEM Customer Needs
© 2005 Mercury Computer Systems, Inc. 21 OEM Customer Needs Our Products and Solutions are Designed to Optimize Image quality Throughput and workflow Time to market Ease of integration and use Scalability Reliability Our customers’ brand Value
Slide 22: Life Sciences Value Delivery
© 2005 Mercury Computer Systems, Inc. 22 Life Sciences Value Delivery Acquire Visualize Archive Distribute Large data set volume rendering Workstation Clinical packages Reconstruct Reconstruction algorithms GPU acceleration Cell Broadband Engine technology acceleration SoHard Gantry Controllers Echo
Slide 23: Life Sciences Modality Customer Example
© 2005 Mercury Computer Systems, Inc. 23 Life Sciences Modality Customer Example X-ray projections Ziehm C-Arm reconstruction and visualization C-arm scanner Acquisition
Slide 24: Life Sciences PACS Example
© 2005 Mercury Computer Systems, Inc. 24 Life Sciences PACS Example Example Installation: Newcastle upon Thyne 1,000 WW sites for our WebPACS through indirect sales
Slide 25: Life Sciences Biotech Microscopy Example
© 2005 Mercury Computer Systems, Inc. 25 Life Sciences Biotech Microscopy Example The FEI Company EB Microscope Drug discovery & nanotechnology Mercury recon and visualization Minutes vs. hours From acquisition to images on the researcher’s desktop
Slide 26: Oil & Gas Value Delivery
© 2005 Mercury Computer Systems, Inc. 26 Oil & Gas Value Delivery Competitive advantages in computing and visualization Power/watt/cubic Inch Extremely large data sets Computing platforms – seismic acquisition and processing Visualization Seismic QC and interpretation Horizons, faults, well bores...
Slide 27: Oil & Gas Customer Example - TOTAL
© 2005 Mercury Computer Systems, Inc. 27 Oil & Gas Customer Example - TOTAL VolumeViz LDM 125GB dataset
Slide 28: CIV Summary
© 2005 Mercury Computer Systems, Inc. 28 CIV Summary Dynamic, growing markets Aligned with strong economic trends Solving real problems Delivering product innovation 2D + 3D + systems = competitive advantage Focused on quality & time to market Extending customer base Growing business 35%
Slide 29: Advanced Solutions Business Unit (ASBU)
Advanced Solutions Business Unit (ASBU) © 2005 Mercury Computer Systems, Inc. Mark Skalabrin, Vice President & General Manager
Slide 30: ASBU Overview
© 2005 Mercury Computer Systems, Inc. 30 ASBU Overview 20% of FY05 revenues 81% growth over FY04 Market Focus Semiconductor Capital Equipment Wireless Communications Infrastructure Competitive Differentiation & Leadership Solutions that solve the hardest problems End-to-end integration of applicatio
Slide 31: ASBU Customers & Targets
© 2005 Mercury Computer Systems, Inc. 31 ASBU Customers & Targets (not all inclusive) Satellite Data Links and Software Radio Wireless Infrastructure Base Stations and Radio Network Controllers Silicon IP and Component Solutions Semiconductor Capital Equipment: Wafer Inspection, Reticle Inspection,
Slide 32: ASBU Growth Strategy & Competencies
© 2005 Mercury Computer Systems, Inc. 32 ASBU Growth Strategy & Competencies Strategy Targeting market segments where we add significant value Innovating to create highly differentiated value Leveraging alliances and partnerships to provide more of the solution Core Competencies Solution architectur
Slide 33: Semiconductor Equipment Value Proposition
© 2005 Mercury Computer Systems, Inc. 33 Semiconductor Equipment Value Proposition Acquire Detect Image Correction & Defect Detection Accelerating customers’ advanced algorithms to market Analyze Offline Classification & Analysis Sensor Data- Scanned Wafers or Reticles Classify Requires: Scalable im
Slide 34: Semiconductor Equipment Growth Drivers
© 2005 Mercury Computer Systems, Inc. 34 Semiconductor Equipment Growth Drivers Consumer demand for faster, lower power, lower-cost electronics Drives the need for higher-performance chip equipment Hard problems that are getting harder More complex algorithms, higher data rates New applications that
Slide 35: Mercury Has the Solutions
© 2005 Mercury Computer Systems, Inc. 35 Mercury Has the Solutions
Slide 36: Communications Market
© 2005 Mercury Computer Systems, Inc. 36 Communications Market Application Focus Wireless base stations Radio Network Controllers (RNCs) Video gateways Satellite data links Software Defined Radio (SDR) In the Labs of Tier 1 OEMs Today Supporting development of next- generation solutions Accelerating
Slide 37: Wireless Infrastructure Growth Drivers
© 2005 Mercury Computer Systems, Inc. 37 Wireless Infrastructure Growth Drivers Deployment of data and multimedia services will drive mobile service provider revenue growth
Slide 38: Wireless Infrastructure Growth Drivers
© 2005 Mercury Computer Systems, Inc. 38 Wireless Infrastructure Growth Drivers Data and multimedia applications through “wireless broadband everywhere” will demand new network infrastructure solutions 30X Bandwidth Increase
Slide 39: Wireless Infrastructure Growth Drivers
© 2005 Mercury Computer Systems, Inc. 39 Wireless Infrastructure Growth Drivers Total Merchant Market, ATCA and MicroTCA, 2004-2009 (US $ in Millions) Source: VDC, September 2005 New standard platforms replacing proprietary solutions
Slide 40: Wireless Infrastructure Growth Drivers
© 2005 Mercury Computer Systems, Inc. 40 Wireless Infrastructure Growth Drivers Equipment OEMs are looking outside for innovation OEMs emerging from a brutal downturn with a fraction of their development staff Strong time-to-market demands for new solutions Push for platform standardization to reduc
Slide 41: Mercury Investing to Meet the Challenges
© 2005 Mercury Computer Systems, Inc. 41 Mercury Investing to Meet the Challenges High-availability system management middleware Scalable / reliable system interconnect Improved quality of service Tightly integrated DSP and specialized compute nodes System architected to hundreds of processing nodes
Slide 42: ASBU Summary
© 2005 Mercury Computer Systems, Inc. 42 ASBU Summary Delivering superior architected solutions to solve hard problems Systems optimized for scalability and reliability Accelerating customers’ application time to market Leveraging alliances with leading silicon and software suppliers Tight integrati
Slide 43: Defense Business Unit (DBU)
Defense Business Unit (DBU) © 2005 Mercury Computer Systems, Inc. Barry Isenstein, Vice President & General Manager
Slide 44: DBU Overview
© 2005 Mercury Computer Systems, Inc. 44 DBU Overview 60% of FY05 revenues 18% growth over FY04 Market focus Radar Signals Intelligence (SIGINT) Other defense technologies Technology leadership Strong COTS model Aboard demanding platforms in air, on land, under sea Full life-cycle support Growth Tra
Slide 45: Customer Success
© 2005 Mercury Computer Systems, Inc. 45 Customer Success Enabling our customers to win by providing commercial off-the-shelf technology for new applications
Slide 46: Growth Drivers
© 2005 Mercury Computer Systems, Inc. 46 Growth Drivers DoD transformation/ISR initiative Persistent ISR Expansion to lower echelons, smaller platforms Image & data exploitation Software radio/data links ISR becoming CISR Network-centric warfare Smart weapons COTS initiative Today 5 Years Available
Slide 47: DBU Strategy
© 2005 Mercury Computer Systems, Inc. 47 DBU Strategy Target High-growth CISR applications Offer COTS “more of the sensor-based computing system” Solutions: HW, SW and services Leadership in performance and functionality per volume Leverage Leadership in existing radar and SIGINT platforms Strong cu
Slide 48: Defense Value Proposition
© 2005 Mercury Computer Systems, Inc. 48 Defense Value Proposition Sensor Sensor streaming Scalable Real time Embedded Real estate, environmental, cooling constraints Real-time signal and image processing applications Acquire Process Transmit Mathematical transformations Visualize Image Display Comp
Slide 49: DBU Continues to Evolve
© 2005 Mercury Computer Systems, Inc. 49 DBU Continues to Evolve Traditional Strength High Density, High Performance Multiprocessors New Form Factors & Capabilities Conduction-Cooled Boards 3U Boards Single Board Computers Radio Frequency, A/D & D/A IBM Alliance Cell Broadband Engine-Based Products
Slide 50: Defense Budget Update
© 2005 Mercury Computer Systems, Inc. 50 Defense Budget Update FY 2006 Appropriations and Authorization Conference finalizing budget mid-November Final budget appropriation likely to be approximately $450 billion, including war spending FY 2007 President’s Budget being prepared, will be presented in
Slide 51: Defense Budget Update
© 2005 Mercury Computer Systems, Inc. 51 Defense Budget Update Government Electronics & Information Technology Association (GEIA) Quotes by John Keller, Aerospace and Military Electronics, 10/28/05 : “Spending for procurement and RDT&E combined, in constant 2006 dollars, is expected to decline from
Slide 52: DBU Elements of Stability
© 2005 Mercury Computer Systems, Inc. 52 DBU Elements of Stability The importance of CISR Old threats New threats The role of COTS Lower life-cycle costs Faster time to deployment Technology is driven by non-defense markets Servers/Desktops Graphics/Gamers Telecommunications/Networking DBU is extrem
Slide 53: Radar – Leading through Innovation
© 2005 Mercury Computer Systems, Inc. 53 Radar – Leading through Innovation Radar Processing Leadership Tactical fighters: JSF Airborne surveillance: MP-RTIP Global Hawk E10-A Shipboard missile defense: Aegis UAV SAR: Predator LYNX Expanding Radar Markets Upgrades to existing radars Land-based/mobil
Slide 54: Signals Intelligence (SIGINT)
© 2005 Mercury Computer Systems, Inc. 54 Signals Intelligence (SIGINT) Communications Intelligence (COMINT) and Electronic (ELINT) Intelligence Fastest growing DBU segment Proliferation of signals Cross-cueing for other sensors COTS adoption Comprehensive product offering RF receivers Analog-to-digi
Slide 55: Mercury in Smart Weapons
© 2005 Mercury Computer Systems, Inc. 55 Mercury in Smart Weapons Significant missile program wins driven by COTS benefits Joint Common Missile (JCM) Others Software costs outweigh hardware costs Mercury is cost-effective Frequent technology refreshes Ruggedized COTS modules IP available for licensi
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Slide 57: Mercury Applications for Modern Warfare
© 2005 Mercury Computer Systems, Inc. 57 Mercury Applications for Modern Warfare Sensor to Shooter: Providing real-time sensor-based intelligence to the shooter on the ground A i rborne R econnaissance I mage E xploitation S ystem
Slide 58: DBU Summary
© 2005 Mercury Computer Systems, Inc. 58 DBU Summary DoD investment priorities consistent with DBU strengths Transformation agenda driving increasing need for CISR and processing COTS will grow in importance DBU well-positioned Significant barriers to entry Strong investment strategy Defense and Com
Slide 59: Financial Overview
Financial Overview © 2005 Mercury Computer Systems, Inc. Bob Hult, SVP, Finance & Operations, CFO
Slide 60: Mercury: The Company
© 2005 Mercury Computer Systems, Inc. 60 Mercury: The Company Well-positioned in attractive and growing markets Open innovation strategy Commitment to investing in customer success Solid operating model
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Slide 64: Long-Term Sustainable Growth Rate
© 2005 Mercury Computer Systems, Inc. 62 Long-Term Sustainable Growth Rate Revenue ($M) $275-285* $186 $250 2004 2005 2006E Future Objective: 25% + CAGR *Per Company guidance, Oct. 20, 2005 earnings press release
Slide 65: CIV Growth Drivers
© 2005 Mercury Computer Systems, Inc. 63 CIV Growth Drivers Improving sensors More and better images Large data sets Growing need for intensive computing in processing and visualization $1.9 Billion Market Opportunity in 2010
Slide 66: ASBU Growth Drivers
© 2005 Mercury Computer Systems, Inc. 64 ASBU Growth Drivers Semiconductor Capital Equipment 12x processing needs outpace 4x mainstream computing Wireless Communications Infrastructure Industry emerging from downturn Strong time-to-market demands for new solutions Push for platform standardization $
Slide 67: DBU Growth Drivers
© 2005 Mercury Computer Systems, Inc. 65 DBU Growth Drivers DoD transformation/ISR initiative Expansion to lower echelons, smaller platforms Image & data exploitation Software radio/data links Smart weapons $3 Billion Market Opportunity in 2010
Slide 68: Fiscal Year 2006 Guidance
© 2005 Mercury Computer Systems, Inc. 66 Fiscal Year 2006 Guidance Fiscal Year Ending June 30, 2006 Revenues ($M) $275-285 Gross Margin 64-65% GAAP Non-GAAP Operating Income 6% 12% EPS $0.50-0.55 $1.00-1.05 Notes: 1) Figures in millions, except percent and per share data which includes adjustment fo
Slide 69: Q2 Fiscal 2006 Guidance
© 2005 Mercury Computer Systems, Inc. 67 Q2 Fiscal 2006 Guidance Quarter Ending December 31, 2005 Revenues ($M) $61-64 GAAP Non-GAAP Operating Income --- 4% EPS $(0.02)-0.00 $0.08-0.10 Impact of equity-based compensation costs related to FAS 123(R), amortization of purchased intangibles, and in- pro
Slide 70: Timeless Business Model
© 2005 Mercury Computer Systems, Inc. 68 Timeless Business Model FY04 FY05 Guidance FY06 Timeless Business Model Revenue 100% 100% 100% 100% Gross Margin 67% 66% 64-65% 66-67% SG&A 30% 29% 29-30% R&D 21% 20% 20-21% Income from Operations 17% 17% 12% 16-18% Notes : FY06 non-GAAP guidance per October
Slide 71: Focus on Working Capital
© 2005 Mercury Computer Systems, Inc. 69 Focus on Working Capital Inventory Turns 3.8 4.9 6.9 5.4 2002 2003 2004 2005 Model Supply chain investment Competitive advantage for Mercury and customers Customer satisfaction DSO target 45 days Days Sales Outstanding 2002 2003 2004 2005 Model
Slide 72: Cash Generation
© 2005 Mercury Computer Systems, Inc. 70 Cash Generation $M $15.9 $50.5 $25.9 $38.0 $26.6 $20.3 $10.2 $44.3 F2002 F2003 F2004 F2005 Operating Cash Flow Free Cash Flow
Slide 73: Strong Balance Sheet
© 2005 Mercury Computer Systems, Inc. 71 Strong Balance Sheet Historically strong balance sheet Supports open innovation growth agenda (Quarter ended September 30, 2005) Cash and Equivalents $171 Total Current Assets $182 Total Assets $393 Total Debt $136 Total Liabilities $190 Stockholders’ Equity
Slide 74: Solid Operating Model
© 2005 Mercury Computer Systems, Inc. 72 Solid Operating Model Healthy operating margins Focus on working capital Deliver consistent cash flow Leverage strong balance sheet
Slide 75: MRCY Summary
© 2005 Mercury Computer Systems, Inc. 73 MRCY Summary Sustain a 25% or better long-term revenue growth rate Strong competitive position in attractive and growing markets Leverage technology investments across multiple applications in diverse markets Defense and Commercial Straightforward operating m
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