Mercury Systems Inc · NASDAQ:MRCY
Mercury Systems — Mercury Computer Systems — Kaufman Bros. 11th Annual Investor Conference (September 2008)
28 slides from Mercury Systems's conference presentation, Sep 4, 2008
Slide 1: Kaufman Bros. 11th Annual Investor Conference
Mark Aslett, President & Chief Executive Officer Bob Hult, SVP & Chief Financial Officer Kaufman Bros. 11th Annual Investor Conference September 4, 2008 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: Mercury at a Glance
Oil and Gas Telecommunications Embedded Computing Aerospace and Defense Semi Industry Life Sciences Mercury at a Glance Mercury offers more than 20 years’ experience in designing and delivering high-performance computing systems and software, for a broad range of image- and data-intensive applicatio
Slide 4: Mercury spans the entire signal processing chain
Mercury spans the entire signal processing chain • Modular boards and integrated systems • Scalable multi core architectures • Robust software and tools • Open-standard COTS to custom solutions • Ruggedized systems • Comprehensive services • Visualization software From RF to Visualization
Slide 5: Advanced Computing Solutions
Advanced Computing Solutions ACS focuses on specialized, high-performance computing solutions that leverage Mercury’s capabilities in sensor computing, computational acceleration, and delivery of complex system-level solutions. Example Segments • Aerospace and defense • Semiconductor • Telecommunica
Slide 6: Visage Imaging, Inc.
Visage Imaging, Inc. Mercury’s wholly owned subsidiary focuses on the development and distribution of 3D visualization and PACS (picture archiving and communications system) solutions, and other 3D software solutions in the life sciences segment.
Slide 7: Visualization Sciences Group
Visualization Sciences Group VSG focuses on the development and distribution of software developer toolkits and 3D application software for very- high volume-rendering applications. Example Segments • Geosciences – Oil and Gas • Engineering and manufacturing • Material sciences • Other industrial an
Slide 8: Why customers choose Mercury
Why customers choose Mercury • Significant and pioneering investments in specialized FPGA and multi core computing architectures and software We maintain ongoing relationships with silicon providers that are unique Significant multi computing R&D expenditures The breadth and depth of our product lin
Slide 9: Partial customer and partner list
Partial customer and partner list
Slide 10: Major Company Dynamics (GAAP FY08)
Major Company Dynamics (# ’ s GAAP FY08) • Revenue and profitability strength in ACS business • Other businesses eroding operating profits Notes: Figures represent “un-audited” GAAP results FY08 Operating Profit Total excludes stock-based compensation expense Includes $7.3M amortization expense, $5.
Slide 11: Shift toward defense in ACS business unit
• Shift toward defense in ACS business unit • Defense represents economic core of the business Major ACS Business Dynamics FY07 FY08 • Differentiation and sustainability largely in Defense • Focus on strengthening Defense • Higher margins in Defense • Force R&D leverage back into model • Selective n
Slide 12: Military Electronics Market
Military Electronics Market • COTS $3B of $30B total military electronics market • Increased outsourcing and overall market growth • Move toward collaborative COTS & system integration • Platform upgrades, obsolescence, and new functionality • New platforms with increased electronic content Defense
Slide 13: Strategic Direction – Sell, fix or grow
Strategic Direction – Sell, fix or grow
Slide 14: Strategic Sequence
Strategic Sequence • Short Term: Improve operations and cash flow Enhance leadership team to tackle short, medium, long-term strategy Improve supply chain, manufacturing operations and shipment linearity Cash conversion cycle Simplify operations, cross-functional coordination • Medium Term: Strength
Slide 15: Financial Overview
Financial Overview Note: FY08 figures are un-audited
Slide 16: Mercury Overview
• Founded in 1981 • HQ in Chelmsford, MA • Sales, support and R&D centers in U.S., Europe and Japan • 670 employees worldwide ending Q408 • FY2008 revenues of $210 million • NASDAQ: MRCY FY08 (Ended June) Revenue Mix Mercury Overview
Slide 17: Revenue Growth Follows Investment Cycles
Revenue Growth Follows Investment Cycles June Fiscal Year End ~ 10% CAGR FY98 – FY08E Revenue ($M) Represents total Company revenues; VI, VSG and Emerging businesses’ revenue treated as Commercial All historical figures adjusted for the discontinued operation of Embedded Systems & Professional Servi
Slide 18: FY07 Compared to FY08 (Non-GAAP)
FY07 Compared to FY08 (Non-GAAP) Revenue (3%) Gross Margin % Revenue 56.4% 60.7% 4.3 pts Operating Expenses 9% Improvement Operating Profit % Revenue (16) (7.5%) 0.3% $17M Improvement EPS $(0.37) $0.15 $0.52 Improvement Operating Cash Flow $(10) $14M $24M Improvement YTD Employees 8% reduction FY07
Slide 19: Segment Operating Profit (GAAP)
Segment Operating Profit (# ’ s GAAP) • Profitability strength in ACS; non-core businesses eliminating operating profits Includes $7.3M amortization expense, $5.2M restructuring, $18M goodwill impairment, $3.2M gain for sale of long-lived asset, and $0.8M inventory write down Notes: Figures represen
Slide 20: Strong Balance Sheet
Strong Balance Sheet • Historically strong balance sheet • Net cash positive: $41M • FY08 capex of $5M • $9M positive free cash flow in FY08 Quarter ended June 30, Cash and Equivalents $166 Total Current Assets $186 Total Assets $339 Total Debt $125 Total Liabilities $192 Stockholders’ Equity $147 N
Slide 21: Focus on Working Capital
Focus on Working Capital • Supply chain transformation – Operational efficiencies – Manufacturing lead times – Cost of quality – Competitive advantage for Mercury and customers – Q408: turns of 3.8, $3.9M net inventory decrease • Customer satisfaction – End-of-quarter shipment skew – DSO dropped fro
Slide 22: Gap to Target Business Model (Non-GAAP)
Non-GAAP Actual FY08 Actual ACS FY08 Target Business Model Revenue 100% 100% 100% Gross Margin 61% 59% 58+% SG&A 36% 27% Mid 20% R&D 25% 22% High Teens Income from Operations 0% 10% 15% Gap to Target Business Model (# ’ s Non - GAAP) Declining gross margin Costs Reduced
Slide 23: Fiscal Year 2008 Summary (Non-GAAP)
Fiscal Year 2008 Summary (Non-GAAP) • All quarters’ revenue and EPS exceeded or met the top end of guidance • FY08 book-to-bill 1.04 Note: Q1, Q2, and Q3 historical figures are NOT adjusted for discontinued ops, to reflect appropriate comparison to guidance Q1 Q2 Q3 Q4 Reported Guidance Reported Gui
Slide 24: Q1 Fiscal Year 2009 Guidance
Q1 Fiscal Year 2009 Guidance • Impact of equity-based compensation costs related to FAS 123(R) of approximately $1.6M excluded from non-GAAP • Acquisition-related amortization of approximately $1.4M excluded from non-GAAP • Restructuring charges of approximately $0.2M excluded from non- GAAP Notes:
Slide 25: Strategic Direction – Sell, fix or grow
Strategic Direction – Sell, fix or grow
Slide 26: NASDAQ: MRCY
NASDAQ: MRCY
Slide 27: Challenges Drive Innovation
Challenges Drive Innovation”
Slide 28: GAAP to Non-GAAP Reconciliation
GAAP to Non-GAAP Reconciliation Q109 Guidance Reconciliation* * Per Company guidance range, July 30, 2008 earnings conference call RANGE Income (Loss) Per Share - Diluted Income (Loss) Per Share - Diluted GAAP expectation - $ - $ Adjustment to exclude stock-based compensation 0.07 0.07 Adjustment to
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