Mercury Systems Inc · NASDAQ:MRCY

Mercury Systems — Q2 FY2019 Earnings Presentation

19 slides from Mercury Systems's earnings presentation, Jan 29, 2019

  1. Slide 1: 2nd Quarter Fiscal Year 2019 Financial Results & GECO Avionics, LLC Acquisition Overview

    2nd Quarter Fiscal Year 2019 Financial Results & GECO Avionics, LLC Acquisition Overview Mark Aslett President and CEO Conference call: Dial (877) 303-6977 in the USA and Canada, Michael Ruppert (760) 298-5079 in all other countries Executive Vice President and CFO Webcast login at www.mrcy.com/inve

  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 the acquisition described herein and to fiscal 2019 business performance and beyond and th

  3. Slide 3: Financial highlights

    Financial highlights Q2 Q2FY19 Q2FY18 FY19 vs. Q2 FY18 LTM LTMQ2 Q2FY19 LTMQ2 FY19 vs. LTM Q2FY18 FY18 • Bookings up 29% • Bookings up 40% • Record revenue up 35% • Revenue up 28% • Organic revenue(1) up 11% • Organic revenue(1) up 9% • GAAP net income up 36% • GAAP net income down 22%(2) • Adjusted

  4. Slide 4: Executing well on our strategy to become a leading provider of secure and safety-critical processing subsystems

    Executing well on our strategy to become a leading… • In a period of significant new design win activity and new program starts • Well-aligned with DoD budget priorities and need for modernization • Sensor and effector mission systems (SEMS) revenue up 5% YoY, C4I up 249% • Capitalizing on favorable

  5. Slide 5: Q2 FY19 strategic achievements

    Q2 FY19 strategic achievements • Significant IRAD investment in secure hardware and software technologies • Received 6 product awards in Mil-Aero Electronics Innovators Awards Program • Completed trusted digital SMT manufacturing facility buildout • Substantially complete on manufacturing insourcing

  6. Slide 6: Business outlook remains strong

    Business outlook remains strong • Defense spending accelerating in GFY19 • Expect 9% - 10% FY19 organic revenue growth, up 2 - 3 pts from FY18 • Supplementing organic growth with M&A and strong opportunity pipeline • Deployed ~$655M+ for 8 acquisitions over last 3 years • Acquisitions expanding addr

  7. Slide 7: Acquisition of GECO Avionics, LLC

    Acquisition of GECO Avionics, LLC • Two C4I M&A themes: Secure rackmount servers and avionics processing • GECO leading designer and manufacturer of safety-critical avionics subsystems • $36.5M purchase price(1); funded with existing revolver – ~10.5x purchase multiple of LTM adj. EBITDA net of expe

  8. Slide 8: Summary

    Summary • On track for continued strong performance in FY19 • Business expected to grow faster than industry overall • Realizing manufacturing and M&A integration synergies • Expect double-digit revenue and adj. EBITDA growth, strong cash flow • Expect to achieve high-end of adj. EBITDA target over

  9. Slide 9: Q2 FY19 vs. Q2 FY18

    Q2 FY19 vs. Q2 FY18 In $ millions, except percentage and per share data Q2 FY18 Q2 FY19 Change Bookings $134.2 $173.2 29% Book-to-Bill 1.14 1.09 Backlog $376.4 $522.0 39% 12-Month Backlog 310.4 389.1 Revenue $117.9 $159.1 35% (1) Organic Revenue Growth 12% 11% Gross Margin 45.9% 44.6% (1.3 pts) Oper

  10. Slide 10: Balance Sheet

    Balance Sheet As of (In $ millions)(1) 12/31/17 3/31/18 6/30/18 9/30/18 12/31/18 ASSETS Cash & cash equivalents $32.0 $44.2 $66.5 $72.9 $93.9 Accounts receivable, net 123.0 141.6 143.8 153.9 168.3 Inventory, net 105.9 117.1 108.6 121.2 126.4 PP&E, net 51.6 51.3 51.0 50.8 53.1 Goodwill and intangible

  11. Slide 11: Cash flow summary

    Cash flow summary As of (In $ millions)(1) 12/31/17 3/31/18 6/30/18 9/30/18 12/31/18 Net Income $9.1 $3.7 $10.1 $7.5 $12.4 Depreciation and amortization 9.6 11.4 12.0 11.5 11.7 Other non-cash items, net 4.7 3.3 5.1 5.5 4.6 Change in Working Capital Accounts receivable, unbilled receivables, and (1.4

  12. Slide 12: Q3 FY19 guidance

    Q3 FY19 guidance In $ millions, except percentage and per share data Q3 FY18(1) Q3 FY19(2) Change Revenue $116.3 $162.7 - $167.7 40% - 44% Gross Margin 45.4% 43.6% - 44.1% (1.8) - (1.3) pts Operating Expenses $45.9 $52.8 - $53.8 15% - 17% GAAP Net Income $3.7 $10.8 - $12.3 192% - 232% Effective tax

  13. Slide 13: FY19 annual guidance

    FY19 annual guidance In $ millions, except percentage and per share data FY18(1) FY19(2) Change Revenue $493.2 $631.0 - $646.0 28% - 31% Gross Margin 45.8% 43.4% - 43.9% (2.4) - (1.9) pts Operating Expenses $178.9 $203.0 - $207.6 13% - 16% GAAP Net Income $40.9 $42.6 - $46.1 4% - 13% Effective tax r

  14. Slide 14: Summary

    Summary • Strong Q2 results with 1.09 book-to-bill and record backlog • Record revenue increases 35% YoY; 11% organic revenue growth • GAAP net income and adjusted EBITDA exceeded guidance • Significant YoY growth in operating and free cash flow • Completed acquisition of GECO Avionics, 8th acquisit

  15. Slide 15: Appendix

    Appendix © 2019 Mercury Systems, Inc.

  16. Slide 16: Adjusted EPS reconciliation

    Adjusted EPS reconciliation Q3 FY19 FY19 (In thousands, except per share data) Q1 FY17 Q2 FY17 Q3 FY17 Q4 FY17 FY17 Q1 FY18 Q2 FY18 Q3 FY18 Q4 FY18 FY18 Q1 FY19 Q2 FY19 Low High Low High Earnings per share(1) $ 0.10 $ 0.13 $ 0.16 $ 0.19 $ 0.58 $ 0.38 $ 0.19 $ 0.08 $ 0.21 $ 0.86 $ 0.16 $ 0.26 $ 0.23

  17. Slide 17: Adjusted EBITDA reconciliation

    Adjusted EBITDA reconciliation Q3 FY19 FY19 (In thousands) Q1 FY17 Q2 FY17 Q3 FY17 Q4 FY17 FY17 Q1 FY18 Q2 FY18 Q3 FY18 Q4 FY18 FY18 Q1 FY19 Q2 FY19 Low High Low High Net income $ 3,819 $ 5,204 $ 7,048 $ 8,804 $ 24,875 $ 17,953 $ 9,133 $ 3,696 $ 10,101 $ 40,883 $ 7,479 $ 12,383 $ 10,800 $ 12,300 $ 4

  18. Slide 18: Free cash flow reconciliation

    Free cash flow reconciliation (In thousands) Q1 FY17 Q2 FY17 Q3 FY17 Q4 FY17 FY17 Q1 FY18 Q2 FY18 Q3 FY18 Q4 FY18 FY18 Q1 FY19 Q2 FY19 Cash flows from operations $10,283 $14,238 $ 24,889 $ 9,736 $ 59,146 $ 8,028 $ 8,779 $ 873 $ 25,641 $ 43,321 $ 20,029 $ 25,301 Capital expenditures (6,050) (7,703) (

  19. Slide 19: Organic revenue reconciliation

    Organic revenue reconciliation (In thousands) Q1 FY17 Q2 FY17 Q3 FY17 Q4 FY17 FY17 Q1 FY18 Q2 FY18 Q3 FY18 Q4 FY18 FY18 Q1 FY19 Q2 FY19 Organic Revenue $ 63,339 $ 68,072 $ 75,080 $ 71,208 $ 277,699 $ 93,498 $ 104,957 $ 100,625 $ 134,358 $ 433,438 $ 112,801 $ 130,326 Acquired Revenue(1) 24,310 29,942

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