Mercury Systems Inc · NASDAQ:MRCY

Mercury Systems — Jefferies Virtual Industrials Conference 2021

40 slides from Mercury Systems's conference presentation, Aug 4, 2021

  1. Slide 1: Jefferies Virtual Industrials Conference

    © Mercury Systems, Inc. JEFFERIES VIRTUAL INDUSTRIALS CONFERENCE Mark Aslett President & CEO Mike Ruppert Executive Vice President & CFO August 4, 2021

  2. Slide 2: Forward-looking safe harbor statement

    © Mercury 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 the acquisitions described herein and to fiscal 2021 business perf

  3. Slide 3: Mercury Systems at-a-glance

    © Mercury Systems, Inc. Mercury Systems at-a-glance Innovation That Matters. By and For People Who Matter. 3 Transformational business model at the intersection of high tech and defense Deployed on 300+ programs – serving defense Primes and critical infrastructure providers Making commercial technol

  4. Slide 4: Mercury Systems by the numbers

    © Mercury Systems, Inc. Mercury Systems by the numbers 4 ~2,400 Number of team members globally, ~30% hold DoD security clearances $202M FY21 Adj. EBITDA, 22% margin 29% CAGR FY16-FY21 4-5x Research & development relative investment compared to our industry 35+ Years of tech leadership in the A&D in

  5. Slide 5: Mercury solutions deployed on 300+ programs with 25+ primes

    © Mercury Systems, Inc. Mercury solutions deployed on 300+ programs with 25+ primes 5 C4 I Se ns or & E ffe ct or M is si on S ys te m s JLTV BLACKHAWK A330 MRTTWIN-T C-130 MALD-J SM2/3/6PavewayStormbreaker PGK Triton AegisLTAMDSF-16 Reaper/Gorgon Stare Global Hawk SEWIPBadger/BuzzardF-35 Aegis Aero

  6. Slide 6: We have executed on a disciplined and focused M&A strategy

    © Mercury Systems, Inc. We have executed on a disciplined and focused M&A strategy Notes: *Tier 2 includes embedded computing and subsystems with RF content. Includes US Government and Global Defense & Commercial Aerospace Markets Sources: RSAdvisors research & analysis, November 2019. Numbers are r

  7. Slide 7: Notes

    © Mercury Systems, Inc. Notes: • Fiscal year figures for Mercury are based on the trailing four fiscal quarters using information reported in Mercury’s Form 10- Ks, Form 10-Qs and/or most recent earnings release. All other data per FactSet as of July 15, 2021. 5-year CAGR for market participants cal

  8. Slide 8: Investment highlights

    © Mercury Systems, Inc. Investment highlights Innovative growth company at intersection of high tech and defense Focused on large, growing, well-funded addressable markets Proven transformational business model investing 4-5x defense industry average in R&D Benefiting from outsourcing, supply chain

  9. Slide 9: Mercury strategy: A plan to meet market needs at speed

    © Mercury Systems, Inc. 1/ Invest to grow organically 2/ Expand capabilities, market access and penetration through M&A 4/ Continuously improve operational capability and scalability 3/ Invest in trusted, secure Innovation That Matters® 5/ Attract and retain the right talent Mercury strategy: A plan

  10. Slide 10: Six major trends shaping the defense industry

    © Mercury Systems, Inc. Six major trends shaping the defense industry 1/ Defense spending pressures Political uncertainty, COVID-19 stimulus, interest payments, healthcare and social spending remain long-term headwinds; Pressures require prioritization within DoD 2/ Challenging global security envir

  11. Slide 11: FY22 DoD request adds $10B over FY21 appropriated amount

    © Mercury Systems, Inc. FY22 DoD request adds $10B over FY21 appropriated amount, with a similar 5-year topline outlook as the FY21 request $522 $524 $598 $617 $633 $636 $715 $581 $606 $671 $685 $723 $705 $722 $737 $753 $768 $731 $747 $764 $781 $450 $500 $550 $600 $650 $700 $750 $800 2016 2017 2018

  12. Slide 12: Aerospace & Defense Platform and Systems Electronics Content

    © Mercury Systems, Inc. Aerospace & Defense Platform and Systems Electronics Content C4I ($22.4B)* Sensor & Effector Mission Systems ($16.4B)* MARKET SEGMENT Platform & Mission Mgmt C2I Comms EW Radar EO/IR Acoustics Weapons 7 Avionics/ Vetronics Command & Control/Battle Management Dedicated Communi

  13. Slide 13: Six highly differentiated capabilities

    © Mercury Systems, Inc. Silicon: We are a leader in adapting commercially developed silicon technology to be purpose-built specifically for aerospace and defense. Safety: Design safety-certifiable processing systems up to the highest design assurance levels. Security: Investment in industry-leading

  14. Slide 14: Expanding content footprint vertically and market access horizontally

    © Mercury Systems, Inc. We are simultaneously expanding our content footprint vertically while horizontally expanding our market access Up to another 2x higher-margin content increase per system as new trusted microelectronic capabilities enable new applications and performance Trusted and Secure Co

  15. Slide 15: Our strategy is to provide all types of trusted, secure processing subsystems

    © Mercury Systems, Inc. C3I Software Integration Security Displays Mission Computer Storage Network Management Comms/Datalink Rugged Servers C2/Comms M Our overarching strategy is to provide all types of processing subsystems requiring trusted, secure computing Certification Security Displays Missio

  16. Slide 16: Game-changing capability enabling new applications at a rapid pace

    © Mercury Systems, Inc. This game-changing capability will enable new applications at a rapid pace Trusted and Secure Solutions Chip-Scale Application-Specific Customization Processors FPGAs GPUs CPUs I/O RF/Digitization Memory Other Chiplets Best-of-breed Ecosystem from Multiple Vendors Communicati

  17. Slide 17: Acquisitions and investments driving significant opportunity growth

    © Mercury Systems, Inc. Acquisitions and investments driving significant opportunity growth, which in turn is driving strong results  Total potential value grew >2.9x to $11B in 6 years  Significant Radar, EW, C4I, weapons and EO/IR opportunity pipeline  Acquisitions bring new programs and capabi

  18. Slide 18: Mercury M&A philosophy and value creation blueprint

    © Mercury Systems, Inc. Mercury M&A philosophy and value creation blueprint Culture & Values Full Integration Unify Brand Combine Like Entities Consolidate Manufacturing Deploy Common Processes & Systems Invest R&D Leverage G&A Accelerate Organic Growth Continuously Improve Deliver Results Assess cu

  19. Slide 19: Since FY14, we have achieved significant growth and scale

    © Mercury Systems, Inc.19 Since FY14, we have achieved significant growth and scale FINANCIAL METRIC Total Acquisitions 13 Total Headcount 3.5x Facilities 2.7x Subsystem Revenue 7.8x OPERATIONAL METRIC Total Revenue 4.4x IR&D Spend 3.2x Adjusted EBITDA 9.2x Operating Cash Flow 6.9x Note: Metric is F

  20. Slide 20: 1MPACT: a 3-year effort to achieve our full growth and EBITDA potential

    © Mercury Systems, Inc.20 Approved for public release. //Public// : a 3-year effort to achieve our full growth and EBITDA potential  Engaged tier 1 consulting firm to do full company assessment  Transforming organizational structure and how we do business to scale  Anticipate $22M benefit in FY22

  21. Slide 21: Glassdoor employee ratings validate Mercury as destination employer

    © Mercury Systems, Inc. Glassdoor current employee ratings validate Mercury’s status as a destination employer and acquirer of choice Mercury Systems Glassdoor Average Proxy Peer Group(1) Tier 2 Defense Company Index(2) Overall Rating 4.5 3.5 3.7 3.8 Culture & Values 4.6 3.4 3.6 3.6 Diversity & Incl

  22. Slide 22: Clear path to maintaining differentiated financial profile

    © Mercury Systems, Inc. Clear path to maintaining differentiated and attractive financial profile 22 100% 2% 8% 33% Increase Adj. EBITDA margins Grow organically at high-single / low-double digit Supplement w/strategic M&A  Operating expense leverage  Program production mix  VCP / 1MPACT  Full a

  23. Slide 23: Financial Overview

    FINANCIAL OVERVIEW MICHAEL RUPPERT EXECUTIVE VICE PRESIDENT & CFO

  24. Slide 24: The evolution of Mercury Systems

    © Mercury Systems, Inc. The evolution of Mercury Systems 7xMarket Capitalization(1,2) $504 $3,722 4xRevenue(2) $235 $924 5x +330 bps Adj. EBITDA(2) % Margin $44 19% $202 22% 3xAdj. EPS(2) $0.80 $2.42 Va lu at io n O pe ra tio na l In millions, except percentage and per share data. Notes (1) Valuatio

  25. Slide 25: Mercury continues to deliver strong financial results

    © Mercury Systems, Inc. Mercury continues to deliver strong financial results Notes: CAGR figures for the period FY16-FY21. YoY figures for the period FY20 vs. FY21. Numbers are rounded. Per share data is presented on a fully diluted basis. As of Q1 FY19, the Company has revised its definition of ad

  26. Slide 26: Revenue and growth by product type

    © Mercury Systems, Inc. Modules & Subassemblies 127 47% Components 31 12% Integrated Subsystems 112 41% FY16 REVENUE ($M, %) $270M 479 270 924 30 145 0 100 200 300 400 500 600 700 800 900 1,000 FY16 Increase By Product Type FY21 REVENUE AND GROWTH BY PRODUCT TYPE ($M) Integrated Subsystems Modules &

  27. Slide 27: Revenue and growth by market

    © Mercury Systems, Inc. 72 305 270 924 149 67 61 0 100 200 300 400 500 600 700 800 900 1,000 FY16 Increase FY21 REVENUE AND GROWTH BY MARKET ($M) Other C4I Radar EW Weapons 654 Expanding into new markets  Continued growth in core markets  Expansion into adjacent markets and leveraging current capa

  28. Slide 28: We have outspent our industry in R&D, Capex and M&A

    © Mercury Systems, Inc. Since FY14, we have outspent our industry in R&D, Capex and M&A to make trusted, secure commercial technology profoundly more accessible 28 ~$502M ~$184M ~$1.2B ~$1.9B 4-5X peers 2-3X peers 13 acquisitions R&D Capex M&A Total Investment Notes: All figures are approximate and

  29. Slide 29: FY21 vs. FY20

    © Mercury Systems, Inc. FY21 vs. FY20 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,

  30. Slide 30: Mercury recent acquisition history

    © Mercury Systems, Inc. Total Capital Deployed: $1,179M Mercury recent acquisition history Company Expansion Primary Theme Closing Date Purchase Price ($M) Ending Debt Balance Funding LIT Security Dec-2015 $ 10 $ 0 Cash on Hand Microsemi(1) Weapons, EW, Security May-2016 $ 300 - Term Loan Cash on Ha

  31. Slide 31: Strategy and business model delivering financial performance above industry average

    © Mercury Systems, Inc. Strategy and business model delivering financial performance well above industry average  Track record of strong organic growth, profitability and strategic M&A  Significant investment over last 5 years is competitive differentiator  Poised for continued organic growth and

  32. Slide 32: Thank you

    THANK YOU. mercury eee. ain} Ze Q: @ 2 : mrcy.com

  33. Slide 33: Appendix

    APPENDIX

  34. Slide 34: Balance sheet

    © Mercury Systems, Inc. Balance sheet As of (In $ millions)(1) 7/3/20 10/2/20 1/1/21 4/2/21 7/2/21 ASSETS Cash & cash equivalents $226.8 $239.1 $109.1 $121.9 $113.8 Restricted cash - - 61.6 - - Accounts receivable, net 210.7 207.8 240.2 264.0 291.7 Inventory, net 178.1 206.0 218.4 226.8 221.6 PP&E,

  35. Slide 35: Cash flow summary

    © Mercury Systems, Inc. Cash flow summary FY20 For the Fiscal Quarters Ended FY21(In $ millions)(1) 10/2/20 1/1/21 4/2/21 7/2/21 Net Income $85.7 $15.8 $12.7 $15.6 $17.9 $62.1 Depreciation and amortization 49.3 13.0 13.3 20.0 20.8 67.0 (Gain)/Loss on investment (5.8) - 0.4 - - 0.4 Other non-cash ite

  36. Slide 36: Q4 FY21 vs. Q4 FY20

    © Mercury Systems, Inc. Q4 FY21 vs. Q4 FY20 In $ millions, except percentage and per share data Q4 FY20(3) Q4 FY21(3) CHANGE Bookings Book-to-Bill $278.6 1.28 $260.2 1.04 (7%) Backlog 12-Month Backlog $831.1 567.7 $909.6 530.0 9% Revenue Organic Revenue Growth(1) $217.4 17% $250.8 (3%) 15% Gross Mar

  37. Slide 37: Adjusted EPS reconciliation

    © Mercury Systems, Inc. Adjusted EPS reconciliation Notes (1) Per share information is presented on a fully diluted basis. (2) Rounded amounts used. (3) Effective as of the third quarter of fiscal 2020, the Company has added back incremental COVID related expenses. (4) Impact to income taxes is calc

  38. Slide 38: Adjusted EBITDA reconciliation

    © Mercury Systems, Inc. Adjusted EBITDA reconciliation Notes (1) Rounded amounts used. (2) Effective as of July 1, 2019, the Company’s fiscal year has changed to the 52-week or 53-week period ending on the Friday closest to the last day of June. All references in this presentation to the fourth quar

  39. Slide 39: Free cash flow and organic revenue reconciliation

    © Mercury Systems, Inc. Free cash flow reconciliation Organic revenue reconciliation 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)

  40. Slide 40: Glossary

    © Mercury Systems, Inc. Glossary API Application Programming Interface BCA Budget Control Act C4I Command, Control, Communications, Computers COTS Commercial off-the Shelf CPU Central Processing Unit EO/IR Electro-optical / Infrared EW Electronic Warfare FPGA Field Programmable Gate Array GPU Graphi

Mercury Systems — Jefferies Virtual Industrials Conference 2021 on 6ix