Mercury Systems Inc · NASDAQ:MRCY
Mercury Systems — Mercury Computer Systems — William Blair & Company Emerging Growth Stock Conference (October 2009)
31 slides from Mercury Systems's conference presentation, Oct 6, 2009
Slide 1: William Blair Emerging Growth Stock Conference
William Blair & Company Emerging Growth Stock Conference Mark Aslett – President & CEO Bob Hult – SVP, CFO October 6, 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 2010 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 517 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 and systems
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 NASP – Airborne
Slide 7: Services and Systems Integration drove significant revenue growth
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 technologies e.
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 computing Note:
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 first y
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 Note: Potential b
Slide 11: 25% bookings and 13% FY07-FY09 revenue CAGR
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
Slide 12: 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 13: 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 critica
Slide 14: 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 15: 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 16: 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 SAN Signal Processing Signal Processing Image Processing Information Dissemination Data Exploitation Become the government’s trusted partner for next-generation
Slide 17: 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 platform-in
Slide 18: 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 Federal T
Slide 19: Turnaround phase complete – focus on growth
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 Grow beyond commercial item boards through complementary Services and Systems Integration – Converged Sensor Networ
Slide 20: Financial Overview
Financial Overview
Slide 21: 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 22: 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 Defense
Slide 23: 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 as reported Customer satisfaction DSO slightly above model End-of-quarter shipment skew
Slide 24: Repaid debt and improved cash balance
Repaid debt and improved cash balance Note: settlement at par ($50M) with UBS 6/30/10 ARS
Slide 25: Strong and unencumbered balance sheet
Strong and unencumbered balance sheet Divested all non-core businesses Repaid $125M convert debt in Q3/Q4 FY09 Zero cost ARS loan of $33M $50M ARS balance repaid at par 6/30/10 FY09 Cash and Marketable Securities Total Current Assets Total Assets Debt Total Liabilities Shareholders' Equity
Slide 26: Robust target business model
Robust target business model Notes: Target Business Model assumes organic growth. ACS /MFS approx 90%/10% revenue split Adj EBITDA adjusts for Depreciation 2-3% Stock Based Comp, not included in Non-GAAP target model, is approximately 2-3% of revenue Target Business Model
Slide 27: Last quarter's revenues and EPS exceeded or met top end of guidance
Last 8 quarter’s revenues and EPS exceeded or met the top end of guidance (Non-GAAP) Q1 Q2 Q3 Q4 Reported Guidance Reported Guidance Reported Guidance Reported Guidance Revenue ($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 28: 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 29: Mercury Computer Systems
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Slide 31: 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