Mercury Systems Inc · NASDAQ:MRCY
Mercury Systems — Mercury Computer Systems — AeA Financial Conference 2008
31 slides from Mercury Systems's conference presentation, Nov 3, 2008
Slide 1: AeA Financial Conference
AeA Financial Conference November 4-5, 2008 Mark Aslett – President & CEO Bob Hult – SVP, CFO 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 business performance and beyond. You can identify these statements by o
Slide 3: Introduction
Introduction New strategy and management team well established Improved FY08 financial performance Strong core defense business – stabilizing commercial Defense provides long-term profitable growth potential Need to evolve COTS board business – Converged Sensor Network™ architecture Mercury Federal
Slide 4: Significant company dynamics (GAAP FY08)
Significant company dynamics (# ’ s GAAP FY08) Revenue and profitability strength in ACS business Non-core businesses eroding operating profits Notes: FY08 Operating Profit Total excludes stock-based compensation expense Includes $7.3M amortization expense, $5.2M restructuring, $18M goodwill impairm
Slide 5: Defense
Defense Major ACS business dynamics Focus on strengthening and growing the defense business FY07 FY08 Commercial
Slide 6: ACS commercial segment dynamics
ACS commercial segment dynamics Commercial bookings slower rate of decline in FY08 Current market conditions challenging Significant volatility has added unpredictability to ACS Focused on commercial and defense leverage
Slide 7: Refocusing ACS commercial opportunities
Refocusing ACS commercial opportunities Focus on existing customer accounts and industry segments Selective tactical new pursuits leveraging existing products or planned roadmap Maximize R&D synergies across product lines and defense Converged Sensor Network™ architecture applicable to commercial ma
Slide 8: Strength in ACS defense markets
Strength in ACS defense markets 17% revenue growth and 33% bookings growth in FY08 Strong revenue growth in Radar, C4I and EW Focused on the C4ISR market going forward “C4ISR”
Slide 9: Growing and evolving our COTS defense core
Growing and evolving our COTS defense core Highly penetrated across many programs and platforms presents good upgrade opportunities and lower risk Design win-led – refresh product portfolio Tactically penetrate more programs on new and existing platforms on land, air, and sea Expand presence in addi
Slide 10: Defense Electronics
Defense Electronics Market** COTS Market* $3B $30B Boards ($0.9B) Subsystems ($2.3B) $3B COTS defense market trends COTS comprises $3B (10%) of defense electronics TAM Defense primes driving increased outsourcing Platform upgrades, obsolescence, and new functionality driving end- user growth Challen
Slide 11: Sustain and differentiate COTS business
Sustain and differentiate COTS business Innovate interconnect expertise to unique, low-latency IP networking connectivity Evolve software to provide higher value-add: security, high availability, virtualization, scalability and portabilty Leverage commercial telecom products and experience into defe
Slide 12: Converged Sensor Network vision
Converged Sensor Network™ vision Target real need – money flows Next-generation platform- independent ISR architecture Beyond COTS – expand addressable market 10x Leverages technology strengths, installed base, and recent acquisitions Provides catalyst for growth Become the government’s trusted part
Slide 13: High-level defense market data look promising
DoD 1993 2008 2013e High-level defense market data look promising Budget ($B) Supplemental ($B) None +190 GWOT None planned R&D ($B) Procurement ($B) C4ISR Budget ($B) UAS Platforms (#) 2,100 3,300 Ships/Subs (#) Fed Svcs ($B) Embedded S/W ($B) 0.4 4.2 Growth trend will be in C4ISR systems integrati
Slide 14: 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 critic
Slide 15: Commentary on the election and DoD budget
Commentary on the election and DoD budget History shows defense budget more related to what is happening, not who is in charge – Democrats presided over Vietnam and WWII – DoD budget decline started with Bush-41 and rose under Clinton Budget and funding deemed to be at a bare minimum according to mi
Slide 16: Slide 16
Slide 17: ACS Defense and MFS – a hybrid business model
ACS Defense and MFS – a hybrid business model ACS COTS Defense Total addressable market COTS defense electronics ($3B annually) Be told what board to develop by a prime Board-level design wins Develop everything on our own nickel Long payback period – high risk with Mercury Federal Total addressable
Slide 18: Summary
Summary Rationalize portfolio of non-core businesses by end FY09 Strengthen ACS defense business – stabilize commercial Grow ACS defense business by targeting upgrades, new platforms and applications Evolve beyond COTS board business due to industry size constraints and dynamics – Converged Sensor N
Slide 19: Financial Overview
Financial Overview
Slide 20: FY07 vs FY08: Improved Performance
FY07 vs FY08: Improved Performance Notes: 1) All historical income statement figures adjusted for the discontinued operation of Embedded Systems & Professional Services and SolMap. 2) All numbers are non-GAAP.
Slide 21: Revenue growth follows investment cycles
Revenue growth follows investment cycles: Driven by Defense Notes: 1)Represents total Company revenues; VI, VSG and Emerging businesses’ revenue treated as Commercial 2)All historical figures adjusted for the discontinued operation of Embedded Systems & Professional Services and SolMap June Fiscal Y
Slide 22: Segment Operating Profit (GAAP)
Segment Operating Profit (# ’ s GAAP) Profitability strength in ACS; non-core businesses eliminating operating profits Notes: 1) FY08 Segment Operating Profit Total excludes stock - based compensation expense. 2) Includes $7.3M amortization expense, $5.2M restructuring, $18M g oodwill impairment, $3
Slide 23: Strategic Direction – Sell, fix or grow
Strategic Direction – Sell, fix or grow VSG AUSG - Sold VI ES/PS - Sold Biotech - Sold Government Defense Commercial Mercury Federal Sell or Shutdown Fix Grow VI
Slide 24: Strong Balance Sheet
Strong Balance Sheet $125M convertible debenture (May 2009 Put) Net cash positive: $42M $50M ARS’s – UBS payback @ par in June – Access to $35M zero cost margin loan at UBS Quarter ended September 30, 2008 Cash and Equivalents $167 Total Current Assets $175 Total Assets $323 Total Debt $125 Total Li
Slide 25: 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 – Inventory reduced $7.1M Customer satisfaction – DSO’s at model – End-of-quarter shipment skew
Slide 26: Gap to Target Business Model (non-GAAP)
Gap to Target Business Model (# ’ s non - GAAP) Target Business Model Notes: 1) All historical income statement figures adjusted for the discontinued operation of Embedded Systems & Professional Services and SolMap.
Slide 27: Guidance Summary (Non-GAAP)
Q1 Q2 Q3 Q4 Q109 Guidance Summary (Non-GAAP) Reported Guidance Reported Guidance Reported Guidance Reported Guidance Reported Guidance Revenue ($M) 49.2 48.0 52.6 51.0 56.5 53.0- 55.0 55.2 53.0- 56.0 49.1 47.0- 49.0 EPS ($) 0.09 (0.08) 0.04 (0.05) 0.04 (0.04)- 0.00 0.01 (0.05)- 0.01 0.07 (0.07)- (0.
Slide 28: Quarter Ending December 31, 2008
Quarter Ending December 31, 2008 Q2 Fiscal Year 2009 Guidance Revenues ($M) $47 - $49 GAAP Non-GAAP Gross Margin Approximately 59% Approximately 59% EPS $(0.22) - $(0.14) $(0.05) - $0.00 Impact of equity-based compensation costs related to FAS 123R of approximately $2.4M excluded from non-GAAP Acqui
Slide 29: Thank you!
NASDAQ: MRCY Thank you!
Slide 30: Mercury Computer Systems
oN = MERCURY COMPUTER SYSTEMS 2 Ss
Slide 31: GAAP to non-GAAP reconciliation
GAAP to non-GAAP reconciliation Q209 Guidance Reconciliation* * Per Company guidance range, October 22, 2008 earnings conference call RANGE Income (Loss) Per Share - Diluted Income (Loss) Per Share - Diluted GAAP expectation (0.22) $ (0.14) $ Adjustment to exclude stock-based compensation 0.11 0.10
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