Mercury Systems Inc · NASDAQ:MRCY
Mercury Systems — Mercury Computer Systems — Cowen and Company 32nd Annual Aerospace & Defense Conference (February 2012)
31 slides from Mercury Systems's conference presentation, Feb 7, 2012
Slide 1: Cowen & Company Annual Aerospace & Defense Conference
© 2012 Mercury Computer Systems, Inc. Cowen & Company rd Annual Aerospace & Defense Conference February 7, 2012 Mark Aslett President & CEO Kevin Bisson 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 fiscal 2012 business performance and beyond and the Company’s plans for growth and improve
Slide 3: Introducing Mercury Computer Systems
• MRCY on NASDAQ • Real-time digital image, signal and sensor processing • Commercial-item company unique business model • Focused on DoD priorities • Deployed on ~300 programs with 25+ Primes • $229M FY11 revenues; 18% Adj. EBITDA margin; 730+ employees • LTM Defense revenue ~87%; 61% growth (13% C
Slide 4: Defense industry turning the page on a decade of war
• FY12 Defense budget approved - $525B base spending • FY13 Defense budget request announced – $523B base spending • Budget Control Act reduced FYDP spend growth vs 2012 request • Budget Control Act Jan 2013 sequester on hold for now • New roles and missions will likely be manifested in FY13 budget
Slide 5: Industry entering an 18 month transition period
• New DoD roles and missions announced • Smaller force structure to protect readiness • Increased investment in key areas e.g. ISR, EW • Build capacity and capability of international partners • Defense procurement reform also underway • 2012 election year 5 … where there will be clear winners and l
Slide 6: Pure-play C4ISR, EW and defense electronics company
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 Historically, Mercury focused on one element of sensor chain RACE++ Boards From
Slide 9: Growing capabilities along the sensor chain
We are systematically growing our capabilities, services and offerings along the sensor chain organically and by acquisition We now view our market opportunity as providing end-to-end open sensor processing subsystems – a much larger opportunity Services and Systems Integration To RACE++ Boards From
Slide 10: Traditional market narrowly defined as airborne radar processing
... limiting our growth potential within the C4ISR market IMINT RADAR Mercury’s traditional market was narrowly defined as airborne radar processing … C4ISR C4I EW EO/IR $9,695M 25%
Slide 11: Sensor, Program and Platform Agnostic
Sensor, Program and Platform Agnostic … by investing in new products and capabilities EW RADAR EO/IR C4I C4ISR $9,695M 25% $6,755M 17% $7,801M 20% $10,737M 28% Since then, we have systematically broadened our addressable market within C4ISR …
Slide 12: Deployed on 300+ programs with 25+ Primes
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 © 2012 Mercury Computer Systems, Inc. RADAR EW EO/IR – C4I BAMS Global Hawk SEWIP AEGIS AEGIS Ashore Guardrail Patriot Predator Reaper Gorgon Stare F-16 JCRE
Slide 13: FY13 program growth driver update
FY13 program growth driver update JCREW: Counter-IED LRIP up to 1,350 systems beginning GFY13 Patriot: Missile Defense Potential U.S. Army upgrades beginning in GFY13 Aegis: Ballistic Missile Defense Well-defined upgrade provides foundational revenue SEWIP: Naval Electronic Warfare LRIP begins GFY13
Slide 14: Outsourcing could substantially increase our market opportunity
Primes reducing in-house engineering while consolidating supply chain for subsystem design & integration RF component / assembly consolidation • Reduce risk given firm-fixed price contracts • Address high-fixed cost operating model • Increase success rate on new programs and production recompetes •
Slide 15: ACS and MFS Acquisition Target Areas
We view our market opportunity as providing end-to-end, open sensor processing subsystems to the Primes RF acquisition targets: RF transmitters / receivers Power amplifiers Synthesizers DRFM Mission Computing and Embedded Security Exploitation and Fusion Tailored feeds directly to field forces or EC
Slide 16: 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 17: Financial Overview
© 2012 Mercury Computer Systems, Inc. Financial Overview
Slide 18: Defense revenue growth accelerating
Defense: 13% CAGR FY07-11; 14% growth in FY11 111 130 145 158 179 208 89 60 44 42 50 30 Defense revenue growth accelerating Notes: FY07-10 figures adjusted for discontinued operations. FY07 FY08 FY09 FY10 FY11 LTM Revenue ($M) Defense Commercial
Slide 19: Profitability restored and improving
($1.78) ($0.21) $0.35 $1.22 $0.71 $0.73 Profitability restored and improving 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 per Share o
Slide 20: Adjusted EBITDA at pro forma target
12% 12% 15% 18% 21% Adjusted EBITDA at pro forma target FY08 figures are as reported in the Company’s fiscal 2010 Form 10K. FY09-11 figures are reported in the Company’s fiscal 2011 Form 10K. Adjusted EBITDA excludes interest income and expense, income taxes, depreciation, amortization of acquired i
Slide 21: Generating healthy free cash flow from operations
– Engineering methods – Investments in DFM – Operational efficiencies – Reduced lead times – Improved cost of quality – Outsourced manufacturing © 2012 Mercury Computer Systems, Inc. (10) 14 11 16 31 29 (8) (5) (4) (7) (9) (9) Engineering and supply chain transformation Efficient working capital pla
Slide 22: Balance sheet poised for investment
Balance sheet poised for investment Zero short and long term debt Other financing sources available: $500M Shelf Registration $35M Operating line of credit (no drawdowns) (70) Q4'10 Ending LNX Acq, Net Stock Offering, Net FY11 Free Cash Flow & Other Q4'11 Ending H1'12 Free Cash Flow & Other KOR Acq
Slide 23: Slide 23
Slide 24: H1 FY12 year over year comparison (GAAP)
GAAP H1 FY12 H1 FY11 Delta Revenue ($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) H1 FY12 year over year comparison (GAAP) 9% 60.5% 57.9% 260 bps 14.6% 10.9% 3.
Slide 25: Q3 FY12 guidance
Q3 FY11 Actual Quarter Ending March 31, 2012 Low High $65 $68 $0.09 $0.11 $9.1 $10.1 2.8 3.4 0.0 0.0 1.4 1.8 2.2 2.2 1.3 1.3 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 1.4 1.4 $9.1 $10.1 Q3 FY12 guidance Revenue $60 GAAP EPS (Continuing) $0.20 Adj EBITDA $11.3 Note - Adj EBITDA Adjustments: Net income (Continu
Slide 26: FY12 financial guidance
FY12 financial guidance • Revenue growth of 10% • Gross margin approximating 55% • Adjusted EBITDA of 18% • GAAP EPS of $0.59 to $0.61 per share
Slide 27: Strong performance track record
Q1 Q2 Q3 Q4 2008 Revenue ($M) EPS ($) 2009 Revenue ($M) EPS ($) 2010 Revenue ($M) EPS ($) 2011 Revenue ($M) EPS ($) 2012 Revenue ($M) EPS ($) Non-GAAP GAAP Guidance: Strong performance track record Reported Guidance Reported Guidance Reported Guidance Reported Guidance 49.2 48.0 52.6 51.0 56.5 53.0-
Slide 28: 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 28 © 2012 Me
Slide 29: Appendix
© 2012 Mercury Computer Systems, Inc. Appendix
Slide 30: Adjusted EBITDA reconciliation
Adjusted EBITDA reconciliation Years Ended June 30, (000'S) LTM Income (loss) from continuing operations $ (4,437) $ 7,909 $ 28,069 $ 18,507 $ 21,340 Interest expense (income), net (3,129) (151) Income tax expense (benefit) 3,710 (9,377) 8,060 10,429 Depreciation 7,372 5,640 5,147 6,364 7,144 Amorti
Slide 31: Free cash flow reconciliation
Free cash flow reconciliation Years Ended June LTM Cash flows from operating activities $ (10,313) $ 13,726 $ 11,199 $ 15,708 $ 31,474 $ 29,268 Capital expenditures (8,109) (4,625) (4,126) (7,334) (8,825) (8,798) Free cash flow $ (18,422) $ 9,101 $ 7,073 $ 8,374 $ 22,649 $ 20,470