Slide 1: First Quarter Fiscal Year 2024 Financial Results
FIRST QUARTER FISCAL YEAR 2024 FINANCIAL RESULTS Bill Ballhaus President and CEO David Farnsworth Executive Vice President and CFO November 7, 2023, 5:00 pm ET Webcast login at www.mrcy.com/investor Webcast replay available by 7:00 p.m. ET November 7, 2023 © Mercury Systems, Inc.
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 Company's focus on enhanced execution of the Company's strategic plan under a refreshe
Slide 3: Today's Call
Today’s Call Opening remarks on Business and Results Priorities and Focus Areas FY24 Outlook and Longer-Term Expectations Q1 FY24 Financial Results and Guidance Q&A 3 © Mercury Systems, Inc. Does not contain Technical Data. //Mercury Proprietary/No Tech Data//
Slide 4: Business and Results
Business and Results Deepened understanding of underlying business opportunities and challenges Confident in strategic positioning, business model, and outlook Near term, we are addressing two transitory dynamics: • Transitioning high development program mix to predictable production programs
Slide 5: Transitioning high development program mix to production
Transitioning high development program mix to production Increased development program mix impacting near term P&L Margin pressure from 1000bp lower development program gross margins on average Cost growth impact on subset of development programs pressuring margins further Working capital bu
Slide 6: Working capital to significant free cash flow
Working capital to significant free cash flow Increased unbilled receivables on large, long-standing contracts driving higher working capital Addressing working capital buildup with shift to hardware delivery, improved material timing • Hardware completion will consume operational capacity, near
Slide 7: Our Four Focus Areas
Our Four Focus Areas Enhancing execution to deliver predictable performance Building a thriving organic growth engine Addressing our cost structure to improve margin expansion Driving free cash flow release and improved conversion 7 © Mercury Systems, Inc. Does not contain Technical Data. //
Slide 8: We Have Confidence in Our Business Model
We Have Confidence in Our Business Model (In $ millions, except percentage data1) Focus on enhanced execution Clear path to restore core profitability on current revenue base Mid- 20% 2% 22% +++ 6% (2% ) 2% $19 $210 $56 ($22) $24 Execution improvement 14% IRAD efficiency $132 Operating leverag
Slide 9: Transitioning to a more cash-efficient operational posture
Transitioning to a more cash-efficient operational posture Point in Time vs. Overtime Revenue Focused on delivering hardware and (In $ millions)(1) transitioning to a more cash- efficient approach to reduce $227.6 working capital $181.0 This approach will reduce unbilled $143.3 receivables but r
Slide 10: Expectations for FY24 and Beyond
Expectations for FY24 and Beyond Reiterate FY24 guidance based on current view on bookings, product delivery timing, and factory capacity allocation Confident in our strategic positioning, business model and ability to deliver growth with expanding margins and attractive free cash flow Expect
Slide 11: Q1 FY24 vs. Q1 FY23
Q1 FY24 vs. Q1 FY23 Notes In $ millions, except percentage and per share data Q1 FY24(3) Q1 FY23(3) CHANGE (1) Organic revenue represents total company revenue excluding net revenue from acquisitions for the first four full Bookings $191.5 $266.9 quarters since the entities’ (28%) acquisition date (
Slide 12: Balance sheet
Balance sheet Notes As of (1) Rounded amounts used. (In $ millions)(1) 9/30/22 12/30/22 3/31/23 6/30/23 9/29/23 ASSETS Cash & cash equivalents $52.0 $76.9 $64.4 $71.6 $89.4 Accounts receivable, net 494.7 479.3 502.3 507.3 480.0 Inventory, net 287.6 312.0 342.8 337.2 363.0 PP&E, net 125.9 122.0 119.5
Slide 13: Cash flow summary
Cash flow summary Notes For the Fiscal Quarters Ended (1) Rounded amounts used. (2) Non-GAAP, see (In $ millions)(1) 9/30/22 12/30/22 3/31/23 6/30/23 9/29/23 reconciliation table. Net (Loss) Income ($14.3) ($10.9) $5.2 ($8.2) ($36.7) Depreciation and amortization 23.7 27.2 23.9 22.5 22.7 Other non-c
Slide 14: FY24 annual guidance
FY24 annual guidance Notes (1) FY23 figures are as reported in the In $ millions, except percentage and per share data FY23 (1) FY24 (2)(5) CHANGE Company’s earnings release dated August 15, 2023. (2) The guidance included herein is from the Company’s earnings release dated November 7, 2023. Revenue
Slide 15: Appendix
mercury APPENDIX 15
Slide 16: Adjusted EPS reconciliation
Adjusted EPS reconciliation (2)(4) FY24 Notes (2) (1) Per share information is presented on (In thousands, except per share data) Q1 FY23 Q1 FY24 LTM Q1 FY23 LTM Q1 FY24 Low High a fully diluted basis. (2) Rounded amounts used. (1) (3) Impact to income taxes is calculated by (Loss) earnings per shar
Slide 17: Adjusted EBITDA reconciliation
Adjusted EBITDA reconciliation (1)(2) FY24 (1)(2) Notes (In thousands) Q1 FY23 Q1 FY24 LTM Q1 FY23 LTM Q1 FY24 Low High 1. Rounded amounts used. 2. All references in this presentation to Net (loss) income $ (14,335) $ (36,708) $ 4,080 $ (50,708) $ (15,900) $ 3,800 the first quarter of fiscal 2024 an
Slide 18: Free cash flow and organic revenue reconciliation
Free cash flow reconciliation (In thousands) Q1 FY23 Q1 FY24 LTM Q1 FY23 LTM Q1 FY24 Cash (used in) provided by operating $ (66,039) $ (39,068) $ (82,902) $ 5,717 Purchases of property and equipment (7,328) (8,015) (29,607) (39,483) Free cash flow $ (73,367) $ (47,083) $ (112,509) $ (33,766) Organic