Mercury Systems Inc · NASDAQ:MRCY
Mercury Systems — Mercury Computer Systems — Noble Financial Seventh Annual Equity Conference (May 2011)
32 slides from Mercury Systems's conference presentation, May 17, 2011
Slide 1: Noble Financial Seventh Annual Equity Conference
© 2011 Mercury Computer Systems, Inc. Noble Financial Seventh Annual Equity Conference May 17, 2011 Bob Hult SVP & CFO Didier Thibaud SVP & GM Exhibit 99.1
Slide 2: Forward-Looking Safe Harbor Statement
© 2011 Mercury Computer Systems, Inc. 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 fiscal 2011 business performance and beyond and the
Slide 3: Introducing Mercury Computer Systems
• MRCY on NASDAQ • Real-time digital image, signal and sensor processing solutions • Focused on DoD high priorities: C4ISR; Electronic Warfare; Missile Defense • Deployed on ~300 programs with 25+ Primes • $231M LTM revenues; 19% Adj. EBITDA margin; 612 employees • Defense revenue ~80% and 42% growt
Slide 4: Management team has transformed the business
Current Management team has successfully transformed the business and poised Mercury for growth © 2011 Mercury Computer Systems, Inc.
Slide 5: Mercury investment highlights
Pure-play C4ISR and defense electronics company entrenched on a diverse mix of programs aligned with DoD priorities Best-of-breed provider of specialized computing subsystems targeting the well funded and growing C4ISR market Increased demand for ISR and a rapidly evolving threat environment driving
Slide 6: Procurement reform increasing opportunity for Mercury
Procurement reform increasing opportunity for Mercury © 2011 Mercury Computer Systems, Inc. • DoD spending projection is $708 billion for • Defense procurement reform well underway • Our market opportunity is defined by the growing demand for specialized embedded defense computing solutions • C4ISR
Slide 7: Defense procurement reform: Shifting DoD priorities
• Provide the war fighting capability we need with the dollars we have • Restore affordability to Defense goods and services procurement • Shorten procurement cycles; focus on upgrades to address urgent needs • Obtain greater efficiency, affordability and productivity in Defense spending • Avoid pro
Slide 8: • Some C4ISR focus among broader capabilities set • Unwanted exposure to vulnerable portions
• Some C4ISR focus among broader capabilities set • Unwanted exposure to vulnerable portions of the DoD budget • Risk associated with government insourcing of services functions • Strong C4ISR focus. Limited exposure to broader DoD budget risk • Public asset with scale that provides clear C4ISR inve
Slide 9: We've been making customers successful for 30 years
Deployed on approximately 300 programs with 25+ Primes Global Hawk BAMS F-35 SEWIP Guardrail Sampson Patriot Predator Reaper WAAS Ocean Eye P8 THAAD F-16 JCREW 3.3 SSEE (E) SSEE (F) © 2011 Mercury Computer Systems, Inc. AEGIS AEGIS Ashore We’ve been making customers successful for 30 years Global Ha
Slide 10: Best-of-breed solutions spanning the entire signal processing chain
© 2011 Mercury Computer Systems, Inc. © 2011 Mercury Computer Systems, Inc. Boards Systems Services Software We solve problems that can’t be solved with commercial computing • State-of-the-art, mixed silicon, real-time embedded signal processing and multi- computing solutions • Advanced size, weight
Slide 11: Increased demand for ISR and rapidly evolving threats
© 2011 Mercury Computer Systems, Inc. C4I EW Radar EO/IR • More and better sensors lead to overwhelming data • EW: new and rapidly evolving threats • Radar: smaller, faster targets. New technologies • EO/IR: leap in imaging detail, onboard exploitation and real-time tactical access • C4: Net-centric
Slide 12: Aegis ballistic missile defense: SPY-1 BMD Radar
© 2011 Mercury Computer Systems, Inc. 12 • Countering rogue nations’ ballistic missile threats • First systems installed on Aegis ships • $35M booked in FY10 • 43 ship upgrade scheduled over 5 years • Upside opportunities: – New data recorder design win in FY10 – Lockheed Martin awarded Aegis Ashore
Slide 13: SEWIP Block 2: Countering new emerging peer threats
© 2011 Mercury Computer Systems, Inc. • Naval surface fleet EW upgrade to counter emerging peer threats • Lockheed Martin displaced incumbent • Met compressed schedule for field trials • Leveraged Mercury application expertise • Delivered best-of-breed application-ready subsystem • EW performance-op
Slide 14: JCREW 3.3: Joint services CIED program of record
© 2011 Mercury Computer Systems, Inc. © 2011 Mercury Computer Systems, Inc. 14 • Software defined jammer to defeat roadside bombs – Signal Processing & RF Tuners • Previous generations high volume ground mobile – JCREW 2.1 25,000 systems – JCREW 3.2 5,000 systems • JCREW 3.3 Presolicitation: – Curre
Slide 15: Mercury is a best-of-breed outsourcing partner to the Primes
Mercury is a best-of-breed outsourcing partner to the Primes Advanced Computing Solutions (ACS) Primes Primes Primes Traditional Model and Competition Mercury Federal Systems (MFS) Application-Ready Subsystem Mercury Classified IP We anticipated shifting DoD priorities and uniquely positioned our bu
Slide 16: Patriot missile defense: Next generation ground radar
© 2011 Mercury Computer Systems, Inc. © 2011 Mercury Computer Systems, Inc. © 2011 Mercury Computer Systems, Inc. Application-ready subsystem and Prime outsourcing success story • First award $18M – Development – UAE – Entering production • Second award received – Taiwan • Potential future awards: –
Slide 17: MFS major program: Wide Area Airborne Surveillance
© 2011 Mercury Computer Systems, Inc. Platform-ready ISR subsystem and Prime outsourcing success story © 2011 Mercury Computer Systems, Inc. • Quick reaction capability MFS providing image processing payload • Partnered with Prime and other leading companies • Rapid prototyping and demonstration of
Slide 18: Acquisition Case Study: LNX
© 2011 Mercury Computer Systems, Inc. Acquisition Case Study: LNX • World - class supplier of next generation RF receivers for signals intelligence, communications intelligence and electronic warfare applications • Increased content on JCREW 3.3 by over 40% • Acquired on January 12, 2011 for $31 mil
Slide 19: Continuing to build a pure-play, best-of-breed ISR company
© 2011 Mercury Computer Systems, Inc. Continuing to build a pure-play, best-of-breed ISR subsystems and technology-enabled software and services company Positioned for growth in a changing industry • Focused on the right Defense market segments: ISR, Electronic Warfare and Missile Defense • Position
Slide 20: Financial Overview
© 2011 Mercury Computer Systems, Inc. Financial Overview
Slide 21: Financial highlights
© 2011 Mercury Computer Systems, Inc. • Profitability improving • Revenue growth accelerating • Generating healthy cash flows from operations • Efficient working capital platform • Strong balance sheet • Closing on robust target business model 17-18% adj. EBITDA margin Financial highlights
Slide 22: FY07-FY10: Restored profitability and growth
© 2011 Mercury Computer Systems, Inc. FY07 – FY10: Restored profitability and growth Defense 42% growth (12% CAGR) since FY07. LTM Adjusted EBITDA 19% Adj. EBITDA $M Notes: • FY07 – FY10 figures are as reported in the Company’s fiscal 2010 Form 10K. • FY10 Earnings per Share were positively influenc
Slide 23: Y-T-D FY11 year over year comparison
© 2011 Mercury Computer Systems, Inc. Y-T-D FY11 year over year comparison Revenue $M Commercial Defense
Slide 24: Efficient working capital platform to support growth
• Engineering and supply chain transformation – Engineering methods – Investments in DFM – Operational efficiencies – Reduced lead times – Improved cost of quality – Outsourced manufacturing • Customer satisfaction – Blue chip customers – Terms net 30 © 2011 Mercury Computer Systems, Inc. Efficient
Slide 25: Approaching target business model
• Organic growth only • ACS : MFS revenue split 90% : 10% respectively • High mix, low volume • R&D delivering significant added value and returns • Increased engineering services and systems integration • Services-led design wins lead to long-term production subsystem annuity revenues GAAP FY08 FY0
Slide 26: Generating positive free cash flow from operations; zero debt
Generating positive free cash flow from operations; zero debt Mercury’s balance sheet poised for investment Acquisition financing available ($M) Q2’11 Cash and marketable securities Net Proceeds from Stock Offering LNX Acquisition (net of cash acquired) (30) Free cash flow Q3’11 Cash and marketable
Slide 27: Q4 FY11 guidance
Consensus Q4 FY10 Actual Quarter Ending June 30, 2011 Low High $57 $59 $0.11 $0.13 $9.0 $10.0 3.4 4.0 0.0 0.0 1.7 2.0 1.8 1.8 0.7 0.7 (0.1) (0.1) 1.4 1.4 9.0 10.0 Q4 FY11 guidance Revenue $59 $64 GAAP EPS (Continuing) $0.13 $0.77 Adj EBITDA $10.0 $12.4 Note - Adj EBITDA Adjustments: Net income (Cont
Slide 28: Last 15 quarters' revenues and EPS exceeded or met top end of guidance
2008 Q1 Q2 Q3 Q4 Revenue ($M) EPS ($) 2009 Q1 Q2 Q3 Q4 Revenue ($M) EPS ($) 2010 Q1 Q2 Q3 Q4 Revenue ($M) EPS ($) 2011 Q1 Q2 Q3 Q4 Revenue ($M) EPS ($) Non-GAAP GAAP Last 15 quarter’s revenues and EPS exceeded or met the top end of guidance Reported Guidance Reported Guidance Reported Guidance Repor
Slide 29: Mercury investment highlights
© 2011 Mercury Computer Systems, Inc. Pure-play C4ISR and defense electronics company entrenched on a diverse mix of programs aligned with DoD priorities Best-of-breed provider of specialized computing subsystems targeting the well funded and growing C4ISR market Increased demand for ISR and a rapid
Slide 30: Appendix
Appendix
Slide 31: Adjusted EBITDA reconciliation
Adjusted EBITDA reconciliation © 2011 Mercury Computer Systems, Inc. Twelve Months Ended Nine Months Ended March 31, March 31, Years Ended June 30, (000'S) Income (loss) from continuing operations 32,273 14,243 10,039 28,069 7,909 (4,437) Interest expense (income), net (120) (151) (3,129) Income tax
Slide 32: Adjusted working capital reconciliation
Adjusted working capital reconciliation © 2011 Mercury Computer Systems, Inc. As of June 30, March 31, (000's) Accounts receivable, net of allowance for doubtful accounts 36,726 43,604 Inventory 17,622 19,279 Accounts payable (10,533) (7,030) Accrued expenses (5,025) (6,782) Adjusted working capital
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