Mercury Systems Inc · NASDAQ:MRCY
Mercury Systems — Q3 FY2019 Earnings Presentation
19 slides from Mercury Systems's earnings presentation, Apr 30, 2019
Slide 1: Third Quarter Fiscal Year 2019 Financial Results
Third Quarter Fiscal Year 2019 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 April 30, 2019, 5:00 pm ET Webcast
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 2019 business performance and beyond and t
Slide 3: Introduction
Introduction • Record Q3 fiscal 2019 financial results • Completed 3 acquisitions since January 2019: GECO, Athena, Syntonic • Deployed ~$700M for 10 acquisitions over last 3 ½ years • 24% revenue and 51% adj. EBITDA CAGR FY14-FY18 • Strategy for continued long-term shareholder value creation: – Adj
Slide 4: Financial highlights
Financial highlights Q3 FY19 vs. Q3 FY18 LTM Q3 FY19 vs. LTM Q3 FY18 • Record bookings up 26% • Record bookings up 36% • Record revenue up 50% • Record revenue up 38% • Organic revenue(1) up 31% • Organic revenue(1) up 16% • GAAP net income up 282% • GAAP net income up 11% • Record adjusted EBITDA u
Slide 5: Favorable growth environment driving improved results
Favorable growth environment driving improved results • Estimated LTV of top 30 programs/pursuits grew more than 4.5x in last 6 years • Favorable trends – delayering, flight to quality, outsourcing, taking share • Strongly positioned in well-funded DoD priorities and need for modernization • Signifi
Slide 6: Q3 FY19 strategic achievements and business outlook
Q3 FY19 strategic achievements and business outlook • Buildout of West Coast RF manufacturing facilities progressing • Themis and Germane integration on track, strong financial performance • Acquired GECO, integration under way, new growth opportunities identified • R&D strategy based on need for U.
Slide 7: Acquisitions of Athena and Syntonic
Acquisitions of Athena and Syntonic Combined $46M purchase price funded through existing revolver, expand security and RF capabilities The Athena Group Syntonic Microwave • Based in Gainesville, FL • Based in Campbell, CA • Premier provider of security, • Provider of advanced synthesizers, cryptogra
Slide 8: Summary
Summary • On track for continued strong performance in fiscal 2019 • Business growing faster than industry overall; expect 10-11% organic growth • Realizing manufacturing and M&A integration synergies • Continued double-digit revenue and adj. EBITDA growth, strong cash flow • Expect to achieve high-
Slide 9: Q3 FY19 vs. Q3 FY18
Q3 FY19 vs. Q3 FY18 In $ millions, except percentage and per share data Q3 FY18 Q3 FY19 Change Bookings $150.4 $189.7 26% Book-to-Bill 1.29 1.09 Backlog $429.3 $558.2 30% 12-Month Backlog 321.0 367.3 Revenue $116.3 $174.6 50% (1) Organic Revenue Growth (6%) 31% Gross Margin 45.4% 42.3% (3.1 pts) Ope
Slide 10: Balance Sheet
Balance Sheet As of (In $ millions)(1) 3/31/18 6/30/18 9/30/18 12/31/18 3/31/19 ASSETS Cash & cash equivalents $44.2 $66.5 $72.9 $93.9 $112.5 Accounts receivable, net 141.6 143.8 153.9 168.3 170.7 Inventory, net 117.1 108.6 121.2 126.4 131.7 PP&E, net 51.3 51.0 50.8 53.1 55.9 Goodwill and intangible
Slide 11: Cash flow summary
Cash flow summary For the Fiscal Quarters Ended (In $ millions)(1) 3/31/18 6/30/18 9/30/18 12/31/18 3/31/19 Net Income $3.7 $10.1 $7.5 $12.4 $14.1 Depreciation and amortization 11.4 12.0 11.5 11.7 11.6 Other non-cash items, net 3.3 5.1 5.5 4.6 6.3 Change in Working Capital Accounts receivable, unbil
Slide 12: FY19 annual guidance
FY19 annual guidance In $ millions, except percentage and per share data FY18(1) FY19(2) Change Revenue $493.2 $642.0 - $651.0 30% - 32% Gross Margin 45.8% 43.3% - 43.5% (2.5) - (2.3) pts Operating Expenses $178.9 $203.4 - $205.9 14% - 15% GAAP Net Income $40.9 $45.2 - $47.4 11% - 16% Effective tax
Slide 13: Q4 FY19 guidance
Q4 FY19 guidance In $ millions, except percentage and per share data Q4 FY18(1) Q4 FY19(2) Change Revenue $152.9 $164.2 - $173.2 7% - 13% Gross Margin 44.7% 43.6% - 44.5% (1.1) - (0.2) pts Operating Expenses $49.4 $52.9 - $55.4 7% - 12% GAAP Net Income $10.1 $11.3 - $13.4 12% - 33% Effective tax rat
Slide 14: Summary
Summary • Record bookings with 1.09 book-to-bill and record backlog • Record revenue increases 50% YoY; 31% organic revenue growth • GAAP net income and record adjusted EBITDA exceeded guidance • Significant YoY growth in operating and free cash flow • Completed acquisitions of GECO, Athena and Synt
Slide 15: Appendix
Appendix © 2019 Mercury Systems, Inc.
Slide 16: Adjusted EPS reconciliation
Adjusted EPS reconciliation Q4 FY19(2) FY19(2) (In thousands, except per share data) Q1 FY17 Q2 FY17 Q3 FY17 Q4 FY17 FY17 Q1 FY18 Q2 FY18 Q3 FY18 Q4 FY18 FY18 Q1 FY19 Q2 FY19 Q3 FY19 Low High Low High Earnings per share(1) $ 0.10 $ 0.13 $ 0.16 $ 0.19 $ 0.58 $ 0.38 $ 0.19 $ 0.08 $ 0.21 $ 0.86 $ 0.16
Slide 17: Adjusted EBITDA reconciliation
Adjusted EBITDA reconciliation Q4 FY19(2) FY19(2) (In thousands) Q1 FY17 Q2 FY17 Q3 FY17 Q4 FY17 FY17 Q1 FY18 Q2 FY18 Q3 FY18 Q4 FY18 FY18 Q1 FY19 Q2 FY19 Q3 FY19 Low High Low High Net income $ 3,819 $ 5,204 $ 7,048 $ 8,804 $ 24,875 $ 17,953 $ 9,133 $ 3,696 $ 10,101 $ 40,883 $ 7,479 $ 12,383 $ 14,10
Slide 18: Free cash flow reconciliation
Free cash flow reconciliation (In thousands) Q1 FY17 Q2 FY17 Q3 FY17 Q4 FY17 FY17 Q1 FY18 Q2 FY18 Q3 FY18 Q4 FY18 FY18 Q1 FY19 Q2 FY19 Q3 FY19 Cash flows from operations $ 10,283 $ 14,238 $ 24,889 $ 9,736 $ 59,146 $ 8,028 $ 8,779 $ 873 $ 25,641 $ 43,321 $ 20,029 $ 25,301 $ 26,218 Capital expenditure
Slide 19: Organic revenue reconciliation
Organic revenue reconciliation (In thousands) Q1 FY17 Q2 FY17 Q3 FY17 Q4 FY17 FY17 Q1 FY18 Q2 FY18 Q3 FY18 Q4 FY18 FY18 Q1 FY19 Q2 FY19 Q3 FY19 Organic revenue $ 63,339 $ 68,072 $ 75,080 $ 71,208 $ 277,699 $ 93,498 $ 104,957 $ 100,625 $ 134,358 $ 433,438 $ 112,801 $ 130,326 $ 139,812 Acquired revenu