Slide 1: Mercury
= MERCURY
Slide 2: Forward-Looking Safe Harbor Statement
© 2012 Mercury Computer Systems, Inc. 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 fiscal 2012 business performance and beyond and the
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Slide 6: Mercury investment highlights
Pure-play C4ISR, EW and defense electronics company entrenched on a diverse mix of programs aligned with DoD priorities Best-of-breed provider of specialized sensor processing subsystems to large defense Primes targeting platform upgrades Increased ISR usage, shift to onboard processing and exploita
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Slide 8: We are the leader in high-performance embedded computing
We are the leader in high-performance embedded computing © 2012 Mercury Computer Systems, Inc. Historically, Mercury focused on one element of sensor chain RACE++ Boards From
Slide 9: Sensor processing chain: acquire, digitize, process, exploit, disseminate
ZEEE ACQUIRE pigmze PROCESS STORE — DISSEMINATE )) By; Sf ee : ACQUIRE DIGITIZE PROCESS: compel EXPLOIT? DISSEMINATES ECM
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Slide 12: We are deployed on 300+ programs with 25+ Primes
© 2012 Mercury Computer Systems, Inc. BAMS Global Hawk SEWIP AEGIS AEGIS Ashore Guardrail Patriot Predator Reaper Gorgon Stare F-16 JCREW 3.3 ADAS Shadow Global Hawk F-35 F-35 F-16 We are deployed on 300+ programs with 25+ Primes RADAR EW EO/IR – C4I BAMS Global Hawk SEWIP AEGIS AEGIS Ashore Guardra
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Slide 16: Aegis ballistic missile defense: SPY-1 BMD Radar
© 2012 Mercury Computer Systems, Inc. • Countering rogue nations’ ballistic missile threats • Highest performance radar processor Application Ready Subsystem • 19 ship sets booked FY08-11 • $24M booked in FY11, $75M+ booked to date • Additional 35 ship sets scheduled through GFY16 • AMDR pushout lik
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Slide 20: Patriot missile defense: Next generation ground radar
© 2012 Mercury Computer Systems, Inc. Program in production; FMS and US Army upgrade driving growth • Services-led design win – Prime outsourcing example • Sophisticated radar processor Application Ready Subsystem • Production awards received to date: $36M – UAE, Taiwan, Saudi Arabia • Potential fut
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Slide 24: SEWIP Block 2: Countering new emerging peer threats
© 2012 Mercury Computer Systems, Inc. • Naval surface fleet EW upgrade: 100+ ships • Delivered best-of-breed EW Application Ready Subsystem • Moving from EMD phase to LRIP in next 12 months • Production begins GFY15 • Upside opportunities with Block 1 upgrade and Block 3 • Lockheed and Raytheon part
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Slide 32: Gorgon Stare Increment 2
© 2012 Mercury Computer Systems, Inc. • Increment 2 – Total contract potential $31-37M – $22M booked Q3 YTD FY12 – Quick reaction capability; delivery in 18 months – New onboard processor and storage for advanced wide area sensors – Potential upside: flight systems and spares • Future Increments to
Slide 33: Program growth driver update
© 2012 Mercury Computer Systems, Inc. Program growth driver update JCREW 3.3 (I1B1): Counter-IED Program expected to transition from EMD phase to LRIP Patriot: Missile Defense Potential U.S. Army upgrades beginning in GFY13 Aegis: Ballistic Missile Defense Well-defined upgrade provides foundational
Slide 34: Embedded computing consolidation; outsourcing by Primes
© 2012 Mercury Computer Systems, Inc. Embedded computing consolidation Primes reducing in-house engineering while consolidating supply chain for subsystem design & integration Primes retaining platform system design & integration RF component / assembly consolidation • Reduce risk given firm-fixed p
Slide 35: Market opportunity and acquisition target areas
Exploitation and Fusion Tailored feeds directly to field forces or ECM RF acquisition targets: RF transmitters / receivers Power amplifiers Synthesizers DRFM Mission Computing and Embedded Security We view our market opportunity as providing end-to-end, open sensor processing subsystems to the Prime
Slide 36: Positioned for growth in a changing industry
• Focused on the right defense market segments • Well positioned on key programs and platforms • Capabilities help address today’s and tomorrow’s threats • Business model aligned with defense procurement reform • Outsourcing partner to the Primes for sensor subsystems • Strong defense revenue growth
Slide 37: Financial Overview
© 2012 Mercury Computer Systems, Inc. Financial Overview
Slide 38: Defense revenue growth accelerating
Defense: 13% CAGR FY07-11 © 2012 Mercury Computer Systems, Inc. Defense revenue growth accelerating Notes: • FY07-10 figures adjusted for discontinued operations.
Slide 39: Profitability restored and improving
© 2012 Mercury Computer Systems, Inc. Profitability restored and improving Notes: • FY07 figures are as reported in the Company’s fiscal 2007 Form 10K and have not been restated for discontinued operations. • FY08 – FY11 figures are as reported in the Company’s fiscal 2011 Form 10K. • FY10 Earnings
Slide 40: Adjusted EBITDA above pro forma target
© 2012 Mercury Computer Systems, Inc. Adjusted EBITDA above pro forma target Notes: • FY08 figures are as reported in the Company’s fiscal 2010 Form 10K. FY09-11 figures are as reported in the Company’s fiscal 2011 Form 10K. • Adjusted EBITDA excludes interest income and expense, income taxes, depre
Slide 41: Generating healthy free cash flow from operations
© 2012 Mercury Computer Systems, Inc. • Engineering and supply chain transformation – Engineering methods – Investments in DFM – Operational efficiencies – Reduced lead times – Improved cost of quality – Outsourced manufacturing Efficient working capital platform supports growth Generating healthy f
Slide 42: Balance sheet poised for investment
© 2012 Mercury Computer Systems, Inc. Balance sheet poised for investment No short and long term debt Other financing sources available: $500M Shelf Registration • $35M Operating line of credit (no drawdowns)
Slide 43: Performing at target business model
© 2012 Mercury Computer Systems, Inc. • ACS : MFS LTM revenue split 92% : 8% respectively • High mix, low volume • R&D delivering significant added value and returns • Increased lower margin engineering services and systems integration • Services-led design wins lead to long-term production subsyste
Slide 44: Q3 YTD FY12 year over year comparison (GAAP)
GAAP Q3 YTD FY12 Q3 YTD FY11 Delta Total Revenue ($M) Defense Revenue ($M) Gross Margin % Revenue Operating Expenses ($M) Operating Income ($M) % Revenue Adj EBITDA EPS (Continuing Operations) Op Cash Flow ($M) Bookings Total Backlog ($M) 12-mo Backlog($M) © 2012 Mercury Computer Systems, Inc. Q3 YT
Slide 45: Q4 FY12 guidance
Q4 FY11 Actual Quarter Ending June 30, 2012 Low High $60 $66 $0.04 $0.10 $7.0 $9.5 1.3 3.0 0.0 0.0 0.7 1.6 2.3 2.3 1.1 1.1 0.0 0.0 (0.1) (0.1) 1.6 1.6 $7.0 $9.5 © 2012 Mercury Computer Systems, Inc. Q4 FY12 guidance Revenue $61 GAAP EPS (Continuing) $0.14 Adj EBITDA $10.1 Note - Adj EBITDA Adjustmen
Slide 46: FY12 full year financial guidance
© 2012 Mercury Computer Systems, Inc. FY12 full year financial guidance • Total revenue growth of 7% - 9% ($244 - $250 million) • Defense revenue growth of approximately 30% ($230 - $235 million) • Gross margin of approximately 55% • GAAP EPS of $0.60 to $0.66 per share • Adjusted EBITDA above 18% t
Slide 47: Guidance: Strong performance track record
Q1 Q2 Q3 Q4 2008 Revenue ($M) EPS ($) 2009 Revenue ($M) EPS ($) 2010 Revenue ($M) EPS ($) 2011 Revenue ($M) EPS ($) 2012 Revenue ($M) EPS ($) Non-GAAP GAAP © 2012 Mercury Computer Systems, Inc. Guidance: Strong performance track record Reported Guidance Reported Guidance Reported Guidance Reported G
Slide 48: Financial summary
• Strong bookings growth and rebuilding backlog • Defense revenue growth accelerating • Profitability restored and improving • Generating healthy free cash flows from operations • Scalable working capital platform • Strong balance sheet with no debt • Performing at target business model 33 © 2012 Me
Slide 49: Appendix
© 2012 Mercury Computer Systems, Inc. Appendix
Slide 50: Adjusted EBITDA reconciliation
© 2012 Mercury Computer Systems, Inc. Adjusted EBITDA reconciliation Years Ended June 30, (000'S) 2008 2009 2010 2011 LTM Income (loss) from continuing operations $ (4,437) $ 7,909 $ 28,069 $ 18,507 $ 21,207 Interest expense (income), net (3,129) (151) Income tax expense (benefit) 3,710 (9,377) 8,06
Slide 51: Free cash flow reconciliation
© 2012 Mercury Computer Systems, Inc. Free cash flow reconciliation Years Ended June 2007 2008 2009 2010 2011 LTM Cash flows from operating activities $ (10,313) $ 13,726 $ 11,199 $ 15,708 $ 31,474 $ 36,316 Capital expenditures (8,109) (4,625) (4,126) (7,334) (8,825) (9,927) Free cash flow $ (18,422