Mercury Systems Inc · NASDAQ:MRCY
Mercury Systems — Mercury Computer Systems — Noble Financial Equity Conference (June 2009)
31 slides from Mercury Systems's conference presentation, Jun 9, 2009
Slide 1: Noble Financial Equity Conference
Noble Financial Equity Conference Mark Aslett – President & CEO Bob Hult – SVP, CFO June 9, 2009 Mercury Computer Systems, Inc. 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 2009 business performance and beyond. You can identify these statements
Slide 3: Introduction: trusted partner for next-generation ISR signal processing
Become the government’s trusted partner for next-generation ISR signal processing and computing solutions Introduction • New strategy and management team well established • Improved FY08 financials – restored profitability Q3FY09 • Strong core defense business – stabilizing commercial • Defense prov
Slide 4: Significant company dynamics
Significant company dynamics (# ’ s GAAP FY08) • Revenue and profitability strength in ACS business • Non-core businesses eroding operating profits Notes: 1) FY08 Operating Profit Total excludes stock-based compensation expense Includes $7.3M amortization expense, $5.2M restructuring, $18M goodwill
Slide 5: Major ACS business dynamics
Major ACS business dynamics • Focus on strengthening and growing the defense business
Slide 6: Key business growth drivers
5 key business growth drivers -Product Portfolio Refresh -Application Expansion -Platform Penetration -Customer Expansion -Expand Total Addressable Market to $3.5B -Increased System Content -Platform Penetration -Application Expansion -Expand Total Addressable Market to $30B Defense Electronics Mark
Slide 7: Strength in ACS defense markets
Strength in ACS defense markets • 17% revenue growth and 33% bookings growth in FY08 • Strong revenue growth in Radar, C4I and EW • Focused on the C4ISR market going forward “C4ISR”
Slide 8: Growing and evolving our COTS defense core
Growing and evolving our COTS defense core • Highly penetrated across many programs and platforms – presents good upgrade opportunities and lower risk • Design win-led – refresh product portfolio • Tactically penetrate more programs on new and existing platforms on land, air, and sea • Expand presen
Slide 9: Partial list of well-known programs relying on Mercury technology
Partial list of well-known programs relying on Mercury technology Global Hawk Predator Rivet Joint JSTARS F-35 JSF BAMS MESA F-16 MP-RTIP Guardrail JCREW PAR-2000 Commander LRR HML SIGINT Ground System Aegis SQQ-89 Sampson Empar International Combat System Naval SIGINT Platform Design wins driving g
Slide 10: ACS 5-year design win value increased 63% YTD
ACS 5-year design win value increased 63% YTD Defense Highlights • Aegis – Naval BMD, C4I • Missile Defense – Ground Radar • Argon – Naval SIGINT • Predator – Airborne Radar • JCREW – Ground SIGINT • Rivet Joint – Airborne SIGINT • WAAS – Airborne ISR • NASP – Airborne Sonar • Guardrail – Airborne S
Slide 11: The Federal market: continuously evolving
DoD 1993 2008 2013e The Federal market: continuously evolving Budget ($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 ISR systems, systems integr
Slide 12: Today's ISR architecture is fundamentally flawed
"Today's" ISR architecture is fundamentally flawed • 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 arch
Slide 13: Airborne ISR R&D costs
Airborne ISR R&D costs Signal Processing / Systems Integration Platform Sensor Datalink Ground Station 10% 40% 30% 5% 15% 45% 10% 15% 10% 10% 5% 5% Datalink Platform Sensor Ground Station Application Acceleration/ Systems Integration Warfighter Terminals Warfighter Terminals Broadcast Provision Broa
Slide 14: Mercury's new Converged Sensor Network Architecture
Mercury's new Converged Sensor Network TM (CSN TM ) Architecture for ISR persistent surveillance A revolutionary open architecture that combines Information Dissemination Global Information Grid SAN Signal Processing Image Processing Signal Processing Radar Video SIGINT Multi-Sensor Signal Processin
Slide 15: Defense procurement reform leads to transition
Defense procurement reform leads to transition Today’s Model • Government frustrated with current prime model • Platform-centric approach • Proprietary closed systems architectures – little incentives to reuse • Significant cost overruns – pay multiple times for similar capabilities • Significant sc
Slide 16: 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
Slide 17: 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 application segments • Market focus on Persistent ISR • Evolve beyond COTS boards to complementary Services and Sys
Slide 18: Mercury Computer Systems
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Slide 19: FY07 vs FY08: Improved Performance
FY07 vs FY08: Improved Performance Notes: 1)All historical income statement figures are as reported in the Company’s earnings press release at the end of the applicable fiscal year and have not been restated for operations that have been discontinued subsequent to that time.
Slide 20: Strategic Direction – Sell, fix or grow
Strategic Direction – Sell, fix or grow VSG - Disco Ops AUSG - Sold VI ES/PS - Sold Biotech – Sold VI - Sold Government Defense Commercial Mercury Federal Sell or Shut Down Fix Grow
Slide 21: Q3 FY09 Restored Profitability
Q3 FY09 Restored Profitability Notes: 1)FY 09 income statement figures are adjusted for the discontinued operation of Embedded Systems & Professional Services, SolMap, VI and VSG. 2)FY 08 income statement figures are as reported in the Company’s earnings press release at the end of the applicable fi
Slide 22: Closing gap to current target business model
Closing gap to current target business model Target Business Model Notes: 1)FY09 income statement figures are adjusted for the discontinued operation of Embedded Systems & Professional Services, SolMap, VI and VSG. 2)FY08 income statement figures are as reported in the Company’s earnings press relea
Slide 23: Revenue growth: Driven by Defense
Revenue growth: Driven by Defense Notes: 1)All historical figures adjusted for the discontinued operation of Embedded Systems & Professional Services, SolMap, VI and VSG 2)2009 comprised of Q3 YTD Actuals plus mid-point of Q4 guidance June Fiscal Year End ~ 8% CAGR FY98 – FY08 Revenue ($M) Commercia
Slide 24: 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 approx. $10M since Q3 FY08 • Customer satisfaction DSO below model End-of-quarter shipment skew 6.9 5.4 4.6 4.1 3
Slide 25: FY09 Mercury Cash Balance Analysis
FY09 Mercury Cash Balance Analysis Notes: (1) Repurchased $120M and $5M (face value) of convertible debenture on Feb. 4, 2009, and May 1, 2009, respectively, equal to the principle amount of the Notes, plus accrued interest (2) Includes $33.4M UBS Loan and $45.0M Auction Rate Securities (120) (5) Q2
Slide 26: Guidance Summary (Non-GAAP)
Q108 Q208 Q308 Q408 Q109 Q209 Q309 Guidance Summary (Non-GAAP) Reported Guidance Reported Guidance Reported Guidance Reported Guidance Reported Guidance Reported Guidance Reported Guidance Revenue ($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 50.7 47.0- 49.0 50.6 48.0- 50.
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Slide 28: Mercury Computer Systems
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Slide 29: GAAP to Non-GAAP Reconciliation
GAAP to Non-GAAP Reconciliation Q409 Guidance Reconciliation* * Per Company guidance range, April 28, earnings conference call RANGE Earnings From Continuing Operations Per Share - Diluted Earnings From Continuing Operations Per Share - Diluted GAAP expectation 0.04 $ 0.08 $ Adjustment to exclude st
Slide 30: GAAP to Non-GAAP Reconciliation
GAAP to Non-GAAP Reconciliation Notes: 1) All historical income statement figures are as reported in the Company’s earnings press release at the end of the applicable fiscal period Year Year Three Months Nine Months Ended Ended Ended Ended June 30, 2007 June 30, 2008 March 31, 2009 March 31, 2009 GA
Slide 31: Mercury Computer Systems
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Mercury Computer Systems — Noble Financial Equity Conference (June 2009) on 6ix