Mercury Systems Inc · NASDAQ:MRCY
Mercury Systems — Mercury Computer Systems — Kaufman Brothers 12th Annual Investor Conference (September 2009)
33 slides from Mercury Systems's conference presentation, Sep 9, 2009
Slide 1: Kaufman Brothers 12th Annual Investor Conference
Kaufman Brothers 12th Annual Investor Conference Mark Aslett – President & CEO Bob Hult – SVP, CFO September 9, 2009 Mercury Computer Systems, Inc. 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 2009 business performance and beyond. You can identify these statements
Slide 3: Introduction
Introduction • Founded in 1981 • HQ in Massachusetts; R&D in MA, VA, AL • 550+ employees • Leading provider of high- performance embedded computer systems • Focused on robust defense ISR market • FY2009 revenues of $189M • NASDAQ: MRCY Note: Excludes $2M interco eliminations
Slide 4: Completed the turnaround phase
Completed the turnaround phase • Refocused the business back to the economic core • Completed the divestiture of all non-core assets • Improved the underlying operations of the business • Returned the company to profitability • Developed a strong position in the Defense ISR space • Growing services
Slide 5: Key business growth drivers
5 key business growth drivers Product Portfolio Refresh Application Expansion Platform Penetration Customer Expansion Expand Total Addressable Market to $3.5B Increased System Content Platform Penetration Application Expansion Expand Total Addressable Market to $30B Defense Electronics Market Focus
Slide 6: ACS 5-year design win value increased 22% overall in FY09
ACS 5-year design win value increased 22% overall in FY09 with 51% growth in Defense Defense Highlights • Aegis – Naval BMD, C4I • Missile Defense – Ground Radar • Argon – Naval SIGINT • Predator – Airborne Radar • JCREW – Ground SIGINT • Rivet Joint – Airborne SIGINT • Gorgon Stare – Airborne ISR •
Slide 7: Services and Systems Integration drove significant revenue growth
rd Services and Systems Integration drove significant revenue growth in its first full year of operation • Expand ACS total addressable market • From startup in FY08, FY09 bookings growth +106%, revenue growth +157% • FY09 proved the business model and potential • Enables substitute and 3 party tech
Slide 8: 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 Initial Deal: • $18M booking • 1/3 hardware / software • 1/3 engineering services • 1/3 systems integration Advanced processing technology: • OpenVPX™ embedded comp
Slide 9: Mercury Federal Systems delivered significant first year bookings and revenue
• Strong revenue ($5.7M) and bookings ($11.9M) in FY09 • Concurrently, generating new opportunities for ACS • 9 active engagements; 3 direct prime contracts • Recognized by the DoD as advanced processing architects for next-gen airborne ISR systems Mercury Federal Systems (MFS) delivered significant
Slide 10: 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 (Gorgon Stare) Initial Deal: • $7M bookings • 1/2 hardware / software • 1/2 engineering services Advanced processing technology: • Embedded GPUs w/IO Total O
Slide 11: Strength in ACS defense markets
• 25% bookings and 13% FY07-FY09 revenue CAGR • Strong revenue growth in Radar, Electronic Warfare (EW) • Persistent ISR EO market growing opportunity Strength in ACS defense markets “C4ISR”
Slide 12: Growing and evolving our defense core
Growing and evolving our defense core • Commercial item and Open System Architectures • Highly penetrated across many programs and platforms – presents good upgrade opportunities and lower risk • Design win-led – refresh product portfolio • Tactically penetrate more programs on new and existing plat
Slide 13: Key defense platforms and programs driving growth
Global Hawk Predator/Reaper Rivet Joint Gorgon Stare F-16 F-35 JSF BAMS MESA P8-MMA MP-RTIP Guardrail JCREW Software Defined Jammer RDP - Ground Missile Defense Radar THAAD LRR SVDF DASR Soothsayer Aegis SSEE(F) Sampson CADF Deepwater Artisan Key defense platforms and programs driving growth Represe
Slide 14: 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, virtualized sensors • Next-gen onboard processing, exploitation and dissemination architecture
Slide 15: To the 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 rele
Slide 16: Airborne ISR R&D costs
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 17: 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 Video Radar SIGINT Signal Processing Image Processing Signal Processing Data Exploitation Information Dissemination SAN Global Information Grid Become the government’s trusted par
Slide 18: Government/DoD frustration leads to Defense procurement reform
Government/DoD frustration leads to Defense procurement reform Today’s Model • Government frustrated with current prime model • Platform-centric approach • Proprietary closed system architectures • Significant cost overruns • Significant schedule slips Emerging Model • Commercial items built on open
Slide 19: ACS Defense and MFS – a hybrid business model
ACS Defense and MFS – a hybrid business model ACS Defense • Total addressable market – commercial item defense electronics ($3B annually) • Commercial item products with increased services • Board-level design wins • Develop everything on our own nickel • Long payback period – high risk with Mercury
Slide 20: Become the government's trusted partner for next-generation ISR
Become the government’s trusted partner for next-generation ISR signal processing and computing solutions Turnaround phase complete – focus on growth • Focus on robust Defense ISR market segment • Grow ACS defense business by targeting upgrades, new platforms and expanding application segments • Gro
Slide 21: = MERCURY
= MERCURY COMPUTE rs Ko ee
Slide 22: FY07–FY09: Restored profitability
FY07 – FY09: Restored profitability Notes: 1)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 growth in bookings and backlog
Strong growth in bookings and backlog FY07-FY09: • Total Company – 11% Bookings CAGR – 18% Backlog CAGR • Defense – 28% Bookings CAGR – 28% Backlog CAGR Note: Historical figures adjusted for discontinued operations Bookings Total Company $M Ending Backlog FY07 FY08 FY09 Defense $107 Defense $145 Def
Slide 24: 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 $7.4M in FY09 • Customer satisfaction - DSO slightly above model - End-of-quarter shipment
Slide 25: Repaid debt and improved cash balance
Repaid debt and improved cash balance Note: Convertible Debt $125 ARS settlement at par ($50M) with UBS 6/30/10
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Slide 27: Robust target business model
Notes: Target Business Model assumes organic growth. ACS /MFS approx 90%/10% revenue split Adj EBITDA adjusts for Depreciation 2-3% Stock Based Comp, not included in Non-GAAP target model, is approximately 2-3% of revenue Target Business Model Robust target business model
Slide 28: Last quarter's revenues and EPS exceeded or met the top end of guidance
Last 8 quarter’s revenues and EPS exceeded or met the top end of guidance (Non-GAAP) Q1 Q2 Q3 Q4 Reported Guidance Reported Guidance Reported Guidance Reported Guidance Revenue ($M) 49.2 48.0 52.6 51.0 56.5 53.0-55.0 55.2 53.0-56.0 EPS ($) 0.09 (0.08) 0.04 (0.05) 0.04 (0.04)- 0.00 0.01 (0.05)- 0.01
Slide 29: Q1'10 Guidance
Q1’10 Guidance Quarter Ending September 30, 2009 Low High Revenue $43 $45 GAAP EPS $0.01 $0.05 Adj EBITDA $3.6 $5.1 Note – Adj EBITDA adjustments: Stock Compensation 1.0 1.0 Interest Expense 0.1 0.1 Interest Income (0.2) (0.2) Taxes 0.2 0.7 Amortization 0.4 0.4 Depreciation 1.3 1.3
Slide 30: Financial Summary
Financial Summary • Returned to profitability • 11% bookings and 18% backlog growth (CAGR) • Improved working capital efficiencies • Healthy cash flows from operations • Strong and unencumbered balance sheet • Robust target business model 17-18% Adj. EBITDA • $100M shelf registration effective
Slide 31: = MERCURY
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Slide 32: => MER RY
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Slide 33: GAAP to Non-GAAP Reconciliation
GAAP to Non-GAAP Reconciliation Notes: 1) All historical income statement figures are as reported in the Company’s earnings press release at the end of the applicable fiscal period Year Year Year Ended Ended Ended June 30, 2007 June 30, 2008 June 30, 2009 GAAP net income (loss) from continuing opera
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