Mercury Systems Inc · NASDAQ:MRCY
Mercury Systems — Q3 2024 Earnings Presentation
17 slides from Mercury Systems's earnings presentation, May 7, 2024
Slide 1: Third Quarter Fiscal Year 2024 Financial Results
THIRD QUARTER FISCAL YEAR 2024 FINANCIAL RESULTS Bill Ballhaus Chairman and CEO David Farnsworth Executive Vice President and CFO May 7, 2024, 5:00 pm ET Webcast login at www.mrcy.com/investor Webcast replay available by 7:00 p.m. ET May 7, 2024 © Mercury Systems, Inc.
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 the Company's focus on enhanced execution of the Company's strategic plan under a refreshe
Slide 3: Today's call
Today’s call Opening remarks on business and results Update on our four focus areas Expectations for performance for FY24 and beyond Q&A 3 © Mercury Systems, Inc. Does not contain Technical Data. //Mercury Proprietary/No Tech Data//
Slide 4: Business and results
Business and results Optimistic about our strategic positioning, business model, and outlook. Q2 election to pause transition of Common Processing Architecture to full-rate production impacted results, as expected. Significant advancements resolving Common Processing Architecture technical pro
Slide 5: Enhancing execution to deliver predictable performance
Enhancing execution to deliver predictable performance Working to mitigate impact of select items on revenue and pre-tax earnings $39 $6 (4) $5 (3) $12 (2) Majority of select items isolated to ~20% of business, resulting in negative gross margin $16 (1) contribution and obscuring performance in the
Slide 6: Continued progress on risk drivers
Continued progress on risk drivers Significant progress resolving technical challenges associated with Common Processing Architecture Making progress on challenged programs(1) 2 complete / retired 2 complete / retired 4 19 complete / retired 17 15 3 complete / retired 4 Expected to 11 complete / ret
Slide 7: Building a thriving organic growth engine
Building a thriving organic growth engine Strong book-to-bill despite self-imposed pause in Common Processing Architecture transition. Record backlog of nearly $1.3bn, up 17% year-over-year, representing strong demand. ~80% of firm fixed price bookings production-related. Continuing to secur
Slide 8: Addressing our cost structure to expand margins
Addressing our cost structure to expand margins Margins impacted by what we believe to be transitory items and negative operating leverage. Focused development program execution and mix shift to production. Cost rationalization efforts of $44 million to date, of which $24-$26 million expected
Slide 9: Driving free cash flow release and improved conversion
Driving free cash flow release and improved conversion Continued reduction in net working capital balances. Inventory – 13% reduction in raw and 45% increase in WIP year-over-year reflecting progress toward cash. Unbilled receivables – record billings on over-time revenue contracts last two qu
Slide 10: Expectations for FY24 and beyond
Expectations for FY24 and beyond Continue to target above-average industry growth, mid-20 percent adjusted EBITDA margins. Maintaining focus on transitioning development programs to production, especially our common processing architecture, and releasing net working capital. Demand remains str
Slide 11: Q3 FY24 vs. Q3 FY23
Q3 FY24 vs. Q3 FY23 Notes In $ millions, except percentage and per share data Q3 FY24(2) Q3 FY23(2) CHANGE (1) Non-GAAP, see reconciliation table. (2) All references in this presentation to the third quarter Bookings $219.9 $245.0 of fiscal 2024 are to the quarter (10%) ended March 29, 2024 . All Bo
Slide 12: Balance sheet
Balance sheet Notes As of (1) Rounded amounts used. (In $ millions)(1) 3/31/23 6/30/23 9/29/23 12/29/23 3/29/24 ASSETS Cash & cash equivalents $64.4 $71.6 $89.4 $168.6 $142.6 Accounts receivable, net 502.3 507.3 480.0 433.7 417.2 Inventory, net 342.8 337.2 363.0 354.2 343.0 PP&E, net 119.5 119.6 117
Slide 13: Cash flow summary
Cash flow summary Notes For the Fiscal Quarters Ended (1) Rounded amounts used. (2) Non-GAAP, see (In $ millions)(1) 3/31/23 6/30/23 9/29/23 12/29/23 3/29/24 reconciliation table. Net (Loss) Income $5.2 ($8.2) ($36.7) ($45.6) ($44.6) Depreciation and amortization 23.9 22.5 22.7 22.2 21.8 Other non-c
Slide 14: Appendix
mercury APPENDIX 14
Slide 15: Adjusted EPS reconciliation
Adjusted EPS reconciliation Notes (1) Per share information is presented on a fully diluted basis. (2) Rounded amounts used. (3) Impact to income taxes is calculated by recasting income before income taxes to include the items involved in determining adjusted income and recalculating the income tax
Slide 16: Adjusted EBITDA reconciliation
Adjusted EBITDA reconciliation Notes (1) Rounded amounts used. (2) All references in this presentation to the third quarter of fiscal 2024 and LTM Q3 FY24 are to the quarter ended March 29, 2024, and the four- quarter period ended March 29, 2024. All references to the third quarter of fiscal 2023 an
Slide 17: Free cash flow and organic revenue reconciliation
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). After the completion o