Mercury Systems Inc · NASDAQ:MRCY
Mercury Systems — Q2 FY2020 Earnings Presentation
21 slides from Mercury Systems's earnings presentation, Jan 28, 2020
Slide 1: Second Quarter Fiscal Year 2020 Financial Results
Second Quarter Fiscal Year 2020 Financial Results Mark Aslett President and CEO Conference call: Dial (877) 303-6977 in the USA and Canada, Michael Ruppert (760) 298-5079 in all other countries Executive Vice President and CFO Webcast login at www.mrcy.com/investor January 28, 2020, 5:00 pm ET Webca
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 acquisitions described herein and to fiscal 2020 business performance and beyond and t
Slide 3: Introduction
Introduction • Record revenue, backlog and profitability • Positive industry environment; defense appropriations bill approved • Business model performing extremely well • Investing to support organic growth while delivering record results • Raising total FY20 revenue, adjusted EBITDA and adjusted E
Slide 4: Financial highlights
Financial highlights Q2 FY20 vs. Q2 FY19 LTM Q2 FY20 vs. LTM Q2 FY19 • Bookings up 21% • Record bookings up 27% • Record backlog up 39% • Record backlog up 39% • Record revenue up 22% • Record revenue up 26% • Organic revenue(1) up 12% • Organic revenue(1) up 16% • GAAP net income up 27% • Record GA
Slide 5: Pioneered next-generation defense electronics company
Pioneered next-generation defense electronics company • Making commercial technologies profoundly more accessible to A&D • Transformational business model at intersection of high tech and A&D – Fueled by internal R&D 4-5x industry average* – Highly innovative trusted, secure mission-critical technol
Slide 6: Favorable growth environment driving improved results
Favorable growth environment driving improved results • Sensor and effector mission systems (SEMS) revenue up 24% YoY, C4I up 22% • Substantial growth in estimated lifetime value of top 30 programs and pursuits • Growth driven by content expansion and market penetration • Benefiting from significant
Slide 7: Growth strategy update
Growth strategy update • Created low-risk content expansion in capabilities and addressable markets • Acquired capabilities drove Tier 2 subsystems provider transformation • Expanding in core sensor and effector mission systems market • C4I market expansion: C3I and platform/mission management • Uni
Slide 8: Strategy delivering above-average growth and profitability
Strategy delivering above-average growth and profitability • Continuing to invest across the business to support organic growth • Using M&A to expand capabilities, access and penetrate adjacent markets • Cost and revenue synergies contributing to strong financial performance • Investing in trusted,
Slide 9: Business outlook and summary
Business outlook and summary Plan to continue generating shareholder value: 1. Drive 10% average organic revenue growth supplemented by strategic M&A 2. Invest in people, new technologies, facilities, manufacturing assets, business systems 3. Enhance margin, quality, on-time delivery and working cap
Slide 10: Q2 FY20 vs. Q2 FY19
Q2 FY20 vs. Q2 FY19 In $ millions, except percentage and per share data Q2 FY19 Q2 FY20(3) Change Bookings $173.2 $209.6 21% Book-to-Bill 1.09 1.08 Backlog $522.0 $727.5 39% 12-Month Backlog 389.1 521.8 Revenue $159.1 $193.9 22% (1) Organic Revenue Growth 11% 12% Gross Margin 44.6% 45.6% 1.0 pts Ope
Slide 11: Balance sheet
Balance sheet As of (In $ millions)(1) 12/31/18 3/31/19 6/30/19 9/27/19 12/27/19 ASSETS Cash & cash equivalents $93.9 $112.5 $257.9 $161.3 $182.0 Accounts receivable, net 168.3 170.7 176.2 177.5 193.4 Inventory, net 126.4 131.7 137.1 148.5 153.6 PP&E, net 53.1 55.9 60.0 65.9 72.7 Goodwill and intang
Slide 12: Cash flow summary
Cash flow summary For the Fiscal Quarters Ended (In $ millions)(1) 12/31/18 3/31/19 6/30/19 9/27/19 12/27/19 Net Income $12.4 $14.1 $12.8 $19.2 $15.7 Depreciation and amortization 11.7 11.6 11.6 11.4 12.5 Termination of interest rate swap - - 5.4 - - Other non-cash items, net 4.6 6.3 5.1 6.4 7.6 Cha
Slide 13: Committed to maintaining differentiated and attractive financial profile
Committed to maintaining differentiated and attractive financial profile • Operating expense leverage Increase Adj. EBITDA • Program production mix margins • Operational improvements • Full acquisition integration • Alignment with DoD priorities Grow organically at • Increased customer outsourcing h
Slide 14: Q3 FY20 guidance
Q3 FY20 guidance In $ millions, except percentage and per share data Q3 FY19(1) Q3 FY20(2) Change Revenue $174.6 $190.0 - $200.0 9% - 15% GAAP Net Income $14.1 $15.9 - $17.4 13% - 23% (3) Effective tax rate 27.5% 26.0% GAAP EPS $0.29 $0.29 - $0.32 0% - 10% Weighted-average diluted shares outstanding
Slide 15: FY20 annual guidance
FY20 annual guidance In $ millions, except percentage and per share data FY19(1) FY20(2)(5) Change Revenue $654.7 $780.0 - $795.0 19% - 21% GAAP Net Income $46.8 $71.7 - $74.5 53% - 59% Effective tax rate(3) 21.4% 19.0% GAAP EPS $0.96 $1.30 - $1.35 35% - 41% Weighted-average diluted shares outstandi
Slide 16: Summary
Summary • Strong Q2 and first half financial performance • Revenue increased 22% YoY with 12% organic growth • Bookings exceeded $200M for the third consecutive quarter with 1.08 book-to-bill yielding record backlog • Record operating cash flow & solid free cash flow generation • Continuing to inves
Slide 17: Appendix
Appendix © 2020 Mercury Systems, Inc.
Slide 18: Adjusted EPS reconciliation
Adjusted EPS reconciliation Q3 FY20(2)(4) FY20(2)(4) (In thousands, except per share data) Q2 FY19 Q2 FY20 LTM Q2 FY19 LTM Q2 FY20 Low High Low High (1) Earnings per share $ 0.26 $ 0.29 $ 0.71 $ 1.18 $ 0.29 $ 0.32 $ 1.30 $ 1.35 Net Income $ 12,383 $ 15,676 $ 33,659 $ 61,836 $ 15,900 $ 17,400 $ 71,70
Slide 19: Adjusted EBITDA reconciliation
Adjusted EBITDA reconciliation Q3 FY20(2)(3) FY20(2)(3) (In thousands) Q2 FY19 Q2 FY20 LTM Q2 FY19 LTM Q2 FY20 Low High Low High Net Income $ 12,383 $ 15,676 $ 33,659 $ 61,836 $ 15,900 $ 17,400 $ 71,700 $ 74,500 Other non-operating adjustments, net (1) (18) (549) (344) (231) - - (200) (200) Interest
Slide 20: Free cash flow reconciliation
Free cash flow reconciliation (In thousands) Q2 FY19 Q2 FY20 LTM Q2 FY19 LTM Q2 FY20 Cash provided by operating activities $ 25,301 $ 32,066 $ 71,844 $ 108,563 Purchases of property and equipment (7,075) (11,324) (18,316) (36,808) Free cash flow $ 18,226 $ 20,742 $ 53,528 $ 71,755 © 2020 Mercury Sys
Slide 21: Organic revenue reconciliation
Organic revenue reconciliation (In thousands) Q2 FY19 Q2 FY20 LTM Q2 FY19 LTM Q2 FY20 (1) Organic revenue $ 159,089 $ 177,583 $ 563,354 $ 653,636 Acquired revenue - 16,330 8,994 69,180 Net revenues $ 159,089 $ 193,913 $ 572,348 $ 722,816 Notes: (1) Organic revenue represents total company revenue ex