Mercury Systems Inc · NASDAQ:MRCY
Mercury Systems — Mercury Computer Systems — Jefferies Annual Global Industrial and A&D Conference 2010
34 slides from Mercury Systems's conference presentation, Aug 10, 2010
Slide 1: Jefferies Annual Global Industrial and A&D Conference
Jefferies Annual Global Industrial and A&D Conference Mark Aslett – President & CEO Bob Hult – SVP, CFO August 10, 2010 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 2010 business performance and beyond. You can identify these statements
Slide 3: Mercury is a best-of-breed provider of application ready ISR subsystem solutions
Mercury is a best-of-breed provider of application ready ISR subsystem solutions • Founded in 1981 • HQ in Massachusetts; R&D in MA, VA, AL • 523 employees • Leading provider of commercial high-performance signal, image and sensor processing • Focused on growing defense ISR market • FY2010 revenues
Slide 4: Phases of Mercury's transformation
Phases of Mercury's transformation 3 Overlapping Phases – Parallel Execution
Slide 5: Defense growth drivers
5 defense growth drivers – Prime Outsourcing – Application Ready ISR Subsystems – Missile Defense – UAV Radar – Fighter Radar – UAV EW – UAV EO/IR Airborne EW – UAV EO/IR QRC – UAV EO/IR Production – MFS Defense ISR Systems & Services – ACS Defense Product & Market Expansion – ACS Defense Services &
Slide 6: Success in semiconductor equipment – position controller for lithography
Success in semiconductor equipment – position controller for lithography Application Requirement: • Low-latency, deterministic processing for precision control in Stepper/Scanners Initial Deal: • $10M pre-production orders booked and partially shipped • Starting to receive production orders • Integr
Slide 7: ACS 5-year design win value CAGR 15% FY08-10
ACS 5-year design win value CAGR 15% FY08-10 Defense CAGR 38% Defense Highlights • Aegis – Naval BMD, C4I • Patriot – Missile Defense • BAMS – Airborne SIGINT, Radar • ASIP – Airborne SIGINT • JCREW – Ground SIGINT • SEWIP – Naval SIGINT • FAB-T – Satcomm • Cobra Ball – EO/IR • SSEE(F) – Naval SIGIN
Slide 8: AEGIS BMD radar processing opportunity
2011 2012 2013 2014 2015 Total Total 5 year opportunity: $100M AEGIS BMD radar processing • Selected for BMD Radar – Most powerful deployed embedded computer for digital beam-forming – Extend to Radar Control System • Addressable market 60 ships out of 92 – Plan of Record for ship upgrade: 6-8 6-8 3
Slide 9: Services and Systems Integration delivered 119% revenue CAGR
Services and Systems Integration delivered 119% revenue CAGR FY08-FY10 • 85% revenue growth FY10 - Beginning FY11 backlog $5.7M • Expands addressable market • Outsourcing partner to Defense Primes given acquisition reform • Best-of-breed application ready ISR subsystem solutions • Services led engag
Slide 10: Success in Services & System Integration – Radar Digital Processor
Success in Services & System Integration – Radar Digital Processor Project Requirement: • Phased Array Radar for Ground Missile Defense (FMS) Initial Deal: • $12M engineering services and system integration • $6M production order (1 country) Advanced processing technology: • OpenVPX™ embedded comput
Slide 11: Mercury Federal Systems delivered strong revenue growth since FY08 startup
• 95% revenue growth FY10 - Beginning FY11 backlog $2.7M • DCAA auditable Defense services • Can perform classified work • Next-generation persistent ISR program driving growth • Best-of-breed, ISR subsystem architect, developer & integrator (sensing thru exploitation) • Leverages application ready
Slide 12: MFS success story – Wide Area Airborne Surveillance
MFS success story – Wide Area Airborne Surveillance Project Requirement: • Concurrent near real-time situational awareness for MQ-9 Reaper UAV Initial Deal: • $10M bookings • 1/2 hardware / software • 1/2 engineering services Advanced processing technology: • Embedded GPUs w/IO Total Opportunity Pot
Slide 13: Strength in ACS defense markets
Strength in ACS defense markets • Radar (32% CAGR FY07-10) and EO (29% CAGR) driving growth +17% +8% +7%
Slide 14: Key defense platforms and programs driving growth
Key defense platforms and programs driving growth Representative Program List Global Hawk Predator/Reaper Rivet Joint Gorgon Stare F-16 F-35 JSF BAMS MESA P8-MMA MP-RTIP Aegis RDP - Ground Missile Defense Radar THAAD JCREW Software Defined Jammer Guardrail SSEE(F) CADF Deepwater
Slide 15: 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, time to information • Next-gen onboard processing, exploitation and dissemination architecture
Slide 16: Warfighter time to information is critical
To the warfighter, time to information is critical to address the growing gap between: What’s analyzed? What’s collected? 100GB per mission 100TB per mission Force Protection Mission Critical Real-time Forensics Last 18 hours Recent minutes For decision makers who need timely, actionable, and releva
Slide 17: Airborne ISR R&D costs and Mercury's opportunity
Airborne ISR R&D costs Signal Processing / Systems Integration Platform Sensor Datalink Ground Station 10% 40% 30% 5% 15% 45% 10% 15% 10% 10% 5% 5% Datalink Platform Sensor Ground Station Application Acceleration/ Systems Integration Warfighter Terminals Warfighter Terminals Broadcast Provision Broa
Slide 18: Mercury's new Converged Sensor Network vision for persistent ISR
Mercury's new Converged Sensor Network™ (CSN™) vision for persistent ISR A revolutionary open architecture that combines Radar Video SIGINT Become the government’s trusted partner for next-generation ISR platform signal processing and computing Signal Processing Signal Processing Image Processing In
Slide 19: Government/DoD frustration leads to defense procurement reform
Government/DoD frustration leads to defense procurement reform Today’s Model • Government frustrated with current model • Platform-centric approach • Proprietary closed system architectures • Significant cost overruns • Significant schedule slips Emerging Model • Best-of-breed model emerging • More
Slide 20: Positioned for growth
Positioned for growth • Focused on growing ISR market segment – strong position on important, well funded defense programs • Outsourcing partner to the primes – best-of-breed application ready ISR subsystem solutions provider • Unique capabilities in commercial high-performance embedded signal, imag
Slide 21: Financial Overview
Financial Overview
Slide 22: FY07–FY10: Restored profitability & growth
FY07 – FY10: Restored profitability & growth Note: All historical income statement figures are as reported in the Company’s earnings press release at the end of the applicable fiscal year and have not been restated for operations that have been discontinued subsequent to that time.
Slide 23: Strong defense revenue
Strong defense revenue Note: All historical figures adjusted for discontinued operations FY07 – FY10 12% Defense CAGR (22%) Commercial CAGR 0% Total CAGR Revenue ($M) Commercial Defense
Slide 24: Growth in bookings and backlog
Growth in bookings and backlog FY07-FY10: • Total Company – 7% Bookings CAGR – 14% Backlog CAGR – 18% 12-mo CAGR • Defense – 10% Bookings CAGR – 10% Backlog CAGR – 18% 12-mo CAGR Note: Historical figures adjusted for discontinued operations Def $107 Def $58 Def $145 Def $67 Def $174 Def $94 Def $142
Slide 25: Improved working capital efficiencies
Improved working capital efficiencies • Supply chain transformation - Operational efficiencies - Manufacturing lead times - Cost of quality - Competitive advantage for Mercury and customers - Inventory reduced $11M from Q3 FY08 to Q4 FY10 • Customer satisfaction - Blue chip customers - End-of-quarte
Slide 26: Much improved cash conversion cycle
Much improved cash conversion cycle Note: Cash conversion calculation = DSO’s + Inventory Days – A/P Days - Q108 Q208 Q308 Q408 Q109 Q209 Q309 Q409 Q110 Q210 Q310 Q410 Cash Conversion Trend (days)
Slide 27: Repaid debt, settled ARS resulting in improved cash balance
Repaid debt, settle ARS’s resulting in improved cash balance ($33) $92 $5 $11 $74 FY09 Ending Cash & Sec Bal ARS Debt Payment Put Option on ARS FCF/Other FY10 Ending Cash & Sec Bal $47M Net Usable Cash $M ARS $45 ARS Loan $33 Cash $14
Slide 28: Robust target business model
Robust target business model Notes: Target Business Model assumes organic growth. ACS /MFS approx 90%/10% revenue split Adj EBITDA adjusts for Depreciation 2-3% of revenue and Stock Based Comp 2-3% of revenue Target Business Model
Slide 29: Last 12 quarters' revenues and EPS exceeded or met top end of guidance
2008 Q1 Q2 Q3 Q4 Revenue ($M) EPS ($) 2009 Q1 Q2 Q3 Q4 Revenue ($M) EPS ($) 2010 Q1 Q2 Q3 Q4 Revenue ($M) EPS ($) Non-GAAP GAAP Last 12 quarter’s revenues and EPS exceeded or met the top end of guidance Reported Guidance Reported Guidance Reported Guidance Reported Guidance 49.2 48.0 52.6 51.0 56.5
Slide 30: Q1'11 Guidance
Q1’11 Guidance Quarter Ending September 30, 2010 Low High Revenues $48 $50 GAAP EPS $0.03 $0.06 Adj EBITDA $4.5 $5.8 Note - Adj EBITDA Adjustments: Net Income 0.6 1.5 Stock compensation 1.7 1.7 Taxes 0.4 0.9 Amortization 0.3 0.3 Depreciation 1.5 1.5 Adj EBITDA 4.5 5.8
Slide 31: Financial summary
Financial summary • Returned to profitability and top line growth • 7% bookings and 14% backlog growth (FY07 – FY10 CAGR) • Improved working capital efficiencies • Healthy cash flows from operations • Strong balance sheet with zero debt • Closing on robust target business model 17-18% Adj. EBITDA •
Slide 32: Mercury Computer Systems
= MERCURY COMPUTER SYSTEMS
Slide 33: Appendix
Appendix
Slide 34: GAAP to Non-GAAP Reconciliation ($M)
GAAP to Non-GAAP Reconciliation ($M) Notes: 1)FY07 – FY08 income statement figures are as reported in the Company’s earnings press release at the end of the applicable fiscal period 2)FY09 income statement figures are restated for discontinued operations as reported 3)GAAP related items: stock comp,
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