Mercury Systems Inc · NASDAQ:MRCY

Mercury Systems — Investor Presentation (March 2013)

30 slides from Mercury Systems's investor presentation, Mar 7, 2013

  1. Slide 1: Mercury Systems, Inc. Investor Presentation

    Exhibit 99.1 Mercury Systems, Inc. Investor Presentation Mark Aslett President and CEO Kevin Bisson SVP and CFO March 7, 2013 © 2013 Mercury Systems, Inc.

  2. 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 business performance and the Company’s plans for growth and improvement in profitability a

  3. Slide 3: Introducing Mercury Systems

    Introducing Mercury Systems • MRCY on NASDAQ • Real-time image, signal, Big Data processing subsystems • Commercial Item company; unique business model • Focused on Defense and Intelligence priorities • Deployed on ~300 programs with 25+ Primes • FY12 $245M revenues; 20% Adj. EBITDA margin. 770+ emp

  4. Slide 4: Defense industry environment will remain challenging

    Defense industry environment will remain challenging • Potential for sequestration spending cuts – ‘Soft’ sequestration already underway • Potential for a full year continuing resolution – Existing CR expires March 2013 • New DoD roles and missions announced – Smaller force structure to protect read

  5. Slide 5: Mercury investor highlights

    Mercury investor highlights Leading Market Pure-play C4ISR electronics company embedded on a diverse mix of Position programs and platforms aligned with existing and emerging priorities Differentiated Best-of-breed provider of open sensor and Big Data processing Capabilities subsystems to defense Pr

  6. Slide 6: Growth strategy summary

    Growth strategy summary 1. Expand our capabilities and offerings for sensor and Big Data processing 2. Grow business by sensor modality and within the Intelligence Community 3. Penetrate customers, programs and platforms through new design wins 4. Capitalize on Prime outsourcing and supply chain con

  7. Slide 7: We are the only commercial item company with the end-to-end capabilities and differentiated technology

    We are the only commercial item company with the end-to-end capabilities and differentiated technology … RACE++ Boards From Open Sensor Processing Subsystems Services and Systems Integration To … to build today’s sophisticated sensor processing subsystems targeting new platforms or upgrades © 2013 M

  8. Slide 8: Increased demand for ISR and rapidly evolving threats

    Increased demand for ISR and rapidly evolving threats … • More and better sensors. EW EW Radar Radar Overwhelming data. • EW: new and rapidly evolving threats • Radar: smaller, faster targets. New technologies • EO/IR: leap in resolution, EO/IR EO/IR C4I C4I onboard exploitation and real-time tactic

  9. Slide 9: We are deployed on 300+ programs with 25+ Primes

    We are deployed on 300+ programs with 25+ Primes RADAR EW EO/IR –C4I F-16 F-16 F-15 F-15 F-16 ReaperGorgon ReaperGorgon F-35 AH-64 AH-64 Apache Stare BAMS; NATO NATO AGS AGS Global Hawk Hawk Global Global Hawk F-35 Patriot Patriot Badger/Buzzard P-8 P-8 AEGIS AEGIS AEGIS AEGIS Ashore Ashore SEWIP SE

  10. Slide 10: Key programs in production

    Key programs in production = Design Win TD EMD LRIP FRP FMS 1 Mercury’sperspectiveon phase,timing andpotentialvalue ~ Remaining FY09 FY10 FY11 FY12 FY13 FY14 FY15 Potential Value SEWIP Blk 2 $225-$285M Predator/ $70-$150M Reaper Radar F-15 EW $60-$110M P8-MMA $40-$85M AEGIS SPY-1 $75M Filthy Badger

  11. Slide 11: Aegis ballistic missile defense: SPY-1 BMD Radar

    Aegis ballistic missile defense: SPY-1 BMD Radar Countering rogue nations’ ballistic missile threats • Highest performance radar processor Application Ready Subsystem • $9M booked in FY12, $85M+ booked to date • Additional 27 ship sets expected through GFY16 • AMDR selection in FY13 – SPY-1 replacem

  12. Slide 12: SEWIP: Countering new emerging peer threats

    SEWIP: Countering new emerging peer threats Delivered best-of-breed RF, microwave and digital receiver subsystems • Naval surface fleet EW upgrade: 100+ ships • Block 2: – Upgrade to AN/SLQ-32 passive detection – Opportunity to expand through LNX & Micronetics – Entering LRIP; production expected GF

  13. Slide 13: Patriot missile defense: Next-generation ground radar

    Patriot missile defense: Next-generation ground radar Services-led designwin – Primeoutsourcingexample • Sophisticated radar processor Application Ready Subsystem • Production awards received to date: $41M – UAE, Taiwan, Saudi Arabia • Potential future FMS awards – Up to 15 countries including Kuwai

  14. Slide 14: Healthy mix of design wins

    Healthy mix of design wins = Design Win TD EMD LRIP FRP FMS 1 Mercury’s perspective on phase, timing and potential value ~ Remaining FY09 FY10 FY11 FY12 FY13 FY14 FY15 Potential Value AMDR** $300-$375M JCREW I1B1 $350M? ADAS DVE ** $45-$185M SEWIP Blk 3** $100-$165M F-16 AESA** Radar Upgrade IRAD $6

  15. Slide 15: Outsourcing by large defense Prime contractors could substantially increase our market opportunity

    Outsourcing by large defense Prime contractors could substantially increase our market opportunity • Reduce risk given firm-fixed price contracts Primes retaining platform system design & integration Primes reducing in-house engineering while • Address high-fixed cost consolidating supply chain for

  16. Slide 16: Through acquisition we have created a unique, scalable microwave, RF and digital solutions platform

    Through acquisition we have created a unique, scalable microwave, RF and digital solutions platform Sensor Processing Chain RF acquisition targets: RF transmitters / receivers Exploitation Tailored feeds Power amplifiers and directly to field Synthesizers Fusion forces or ECM DRFM We view our market

  17. Slide 17: Well positioned for market rebound

    Well positioned for market rebound • Focused on important defense and intelligence priorities • 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 Primes for open s

  18. Slide 18: Financial Overview

    Financial Overview © 2013 Mercury Systems, Inc.

  19. Slide 19: Revenue summary by market

    Revenue summary by market Defense revenue CAGR of 15% FY08-FY12 Revenue ($M) Defense Commercial 250 245 229 15 200 48 200 190 189 42 60 44 150 230 100 181 158 145 130 50 0 FY08 FY09 FY10 FY11 FY12 Notes: • FY08-10 figures adjusted for discontinued operations. © 2013 Mercury Systems, Inc. 19

  20. Slide 20: FY08-FY12: Improved financial performance

    FY08 –FY12: Improved financial performance FY08 FY09 FY10 FY11 FY12 GAAP Actual Actual Actual Actual Actual Bookings ($M) 199 210 206 202 231 Revenue ($M) 190 189 200 229 245 Gross Margin 57.8% 55.8% 56.3% 56.8% 55.6% % Revenue Operating Expenses ($M) 115 98 95 105 106 Amort/Acq. Costs 5 2 2 2 5 Res

  21. Slide 21: Profitability restored and improved through FY12

    Profitability restored and improved through FY12 Operating Income $M Earnings per Share 40 30 30 25 20 17 $1.22 10 8 $0.75 $0.71 $0.35 0 ($0.21) (5) -10 FY08 FY09 FY10 FY11 FY12 Notes: FY08 – FY12 figures are as reported in the Company’s fiscal 2012 Form 10K. FY10 Earnings per Share of $1.22 were po

  22. Slide 22: Adjusted EBITDA more than doubled FY08-FY12

    Adjusted EBITDA more than doubled FY08-FY12 Adj. EBITDA ($M, %) EBITDA Margin % 60 49 50 41 40 30 20% 30 23 23 18% 20 15% 10 12% 12% 0 FY08 FY09 FY10 FY11 FY12 Notes: • FY08-FY09 figures are as reported in the Company’s fiscal 2010 Form 10K. FY10-12 figures are as reported in the Company’s fiscal 20

  23. Slide 23: Ended FY12 with healthy free cash flow from operations

    Ended FY12 with healthy free cash flow from operations Free Cash Flow $M Operating cash flow Capital expenditures 40 23 22 30 20 9 8 7 32 32 10 14 15 11 0 (5) (4) (7) (9) (10) -10 -20 -30 FY08 FY09 FY10 FY11 FY12 Note: • Free cash flow is defined as cash provided by operating activities less capital

  24. Slide 24: Healthy balance sheet with sufficient liquidity

    Healthy balance sheet with sufficient liquidity No debt and expanded credit facility Cash and Marketable Securities ($M) 200 23 180 163 160 140 120 116 (70) 100 (11) 80 60 40 31 3 34 20 (74) 0 FY11 Ending Free Cash KOR Acq FY12 Ending Free Cash MicroneticsQ1'13 Ending Free Cash Q2'13 Ending Flow & O

  25. Slide 25: Achieved historic target business model in FY12

    Achieved historic target business model in FY12 Target GAAP FY08 FY09 FY10 FY11 FY12 Business Model Revenue 100% 100% 100% 100% 100% 100% Gross Margin 58% 56% 56% 57% 56% 54+% SG&A and (1) 37% 29% 27% 26% 25% Low-mid 20’s other OPEX R&D 24% 22% 21% 19% 19% High Teens Operating Income (3%) 4% 9% 11%

  26. Slide 26: Guidance: Strong performance track record

    Guidance: Strong performance track record Q1 Q2 Q3 Q4 Reported Guidance Reported Guidance Reported Guidance Reported Guidance Revenue ($M) 49.2 48.0 52.6 51.0 56.5 53.0-55.0 55.2 53.0-56.0 2008 EPS ($) 0.09 (0.08) 0.04 (0.05) 0.04 (0.04)-0.00 0.01 (0.05)-0.01 Revenue ($M) 49.1 47.0-49.0 50.7 47.0-49

  27. Slide 27: Defense industry conditions are currently challenging

    Defense industry conditions are currently challenging • Adversely impacting financial results • Restructuring lead to $25M of recurring annualized savings • Forecasting more conservatively • Focused on managing controllable items to preserve liquidity • Solid balance sheet with improved financial fl

  28. Slide 28: Q3 FY13 guidance (as of January 29, 2013)

    Q3 FY13 guidance (as of January 29, 2013) (1) Q2 FY13 Quarter Ending March 31, 2013 Actual Low High Revenue $50 $44 $50 GAAP EPS (Continuing) ($0.16) ($0.08) ($0.02) Adj EBITDA $1.0 ($2.5) $1.0 Note -Adj EBITDA Adjustments: Net income (Continuing) (4.8) (2.3) (0.5) Interest (income) expense, net 0.0

  29. Slide 29: Updated business model raises Adjusted EBITDA target

    Updated business model raises Adjusted EBITDA target In a more normalized industry environment Historic Current Target GAAP FY12 Target Business Business Model Model Revenue 100% 100% 100% Gross Margin 56% 54+% 45-50% SG&A and (1) 25% Low-mid 20’s Low 20’s other OPEX R&D 19% High Teens 11-13% (2) Am

  30. Slide 30: Financial summary

    Financial summary • 15% Defense revenue CAGR FY08-FY12 • Profitability restored and improved through FY12 • Converted earnings growth to healthy free cash flows through FY12 • Healthy balance sheet; zero debt; $200M revolving credit facility • Exceeded historic target model in FY12; new targets esta

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