Mercury Systems Inc · NASDAQ:MRCY
Mercury Systems — Mercury Computer Systems — William Blair & Company conference, San Francisco, May 17-18, 2010
37 slides from Mercury Systems's conference presentation, May 17, 2010
Slide 1: William Blair & Company, San Francisco
William Blair & Company San Francisco Mark Aslett – President & CEO Bob Hult – SVP, CFO May 17 - 18, 2010 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 2010 business performance and beyond. You can identify these statements
Slide 3: Mercury is a platform-independent, best-of-breed ISR systems and services company
Mercury is a platform-independent, best-of-breed ISR systems and services company Note: $189M Total Revenue includes $2M interco eliminations • Founded in 1981 • HQ in Massachusetts; R&D in MA, VA, AL • 513 employees • Leading provider of commercial high-performance signal, image and sensor processi
Slide 4: Phases of Mercury's transformation
Phases of Mercury's transformation Overlapping Phases – Parallel Execution
Slide 5: 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 Electro
Slide 6: Success in semiconductor equipment – position controller for lithography
Success in semiconductor equipment – position controller for lithography Application Requirement: • Low-latency, deterministic processing for precision control in Stepper/Scanners Initial Deal: • $10M pre-production orders booked and partially shipped • Starting to receive production orders • Integr
Slide 7: ACS 5-year design win value increased 22% overall in FY09
ACS 5-year design win value increased 22% overall in FY09 with 51% growth in defense Defense Highlights • Aegis – Naval BMD, C4I • Missile Defense – Ground Radar • Argon – Naval SIGINT • Predator – Airborne Radar • JCREW – Ground SIGINT • Rivet Joint – Airborne SIGINT • Gorgon Stare – Airborne ISR •
Slide 8: AEGIS BMD radar processing
2011 2012 2013 2014 2015 Total AEGIS BMD radar processing • Selected for BMD Radar – Most powerful deployed embedded computer for digital beam-forming – Extend to Radar Control System • Addressable market 60 ships out of 92 – Plan of Record for ship upgrade: 6-8 6-8 30-34 • Additional 8 ships to be
Slide 9: Services and Systems Integration drove significant revenue growth
Services and Systems Integration drove significant revenue growth in its first full year of operation • Expand ACS total addressable market • From startup in FY08, FY09 bookings growth +106%, revenue growth +157% • FY09 proved the business model and potential • Enables substitute and rd party techno
Slide 10: Success in Services & System Integration – Radar Digital Processor
Success in Services & System Integration – Radar Digital Processor Project Requirement: • Phased Array Radar for Ground Missile Defense (FMS) Initial Deal: • $12M engineering services and system integration • $6M production order (1 country) Advanced processing technology: • OpenVPX™ embedded comput
Slide 11: Mercury Federal Systems delivered significant first year bookings and revenue
• Strong revenue ($5.7M) and bookings ($11.9M) in FY09 • Concurrently, generating new opportunities for ACS • 8 active engagements; 3 direct prime contracts • Recognized by the DoD as advanced processing architects for next-gen airborne ISR systems Mercury Federal Systems (MFS) delivered significant
Slide 12: MFS success story – Wide Area Airborne Surveillance
MFS success story – Wide Area Airborne Surveillance Project Requirement: • Concurrent near real-time situational awareness for MQ-9 Reaper UAV (Gorgon Stare) Initial Deal: • $7M bookings • 1/2 hardware / software • 1/2 engineering services Advanced processing technology: • Embedded GPUs w/IO Note: P
Slide 13: Strength in ACS defense markets
Strength in ACS defense markets • Radar (32% CAGR FY07-09) and EW (9% CAGR) driving growth
Slide 14: Key defense platforms and programs driving growth
Airborne ISR Counter IED Electronic Warfare (EW) Key defense platforms and programs driving growth Global Hawk Predator/Reaper Rivet Joint Gorgon Stare F-16 F-35 JSF BAMS MESA P8-MMA MP-RTIP Aegis RDP - Ground Missile Defense Radar THAAD JCREW Software Defined Jammer Guardrail SSEE(F) CADF Deepwater
Slide 15: Military electronics is a market sweet spot
Military electronics is a market sweet spot • Retrofit and upgrades remain strong for legacy programs • Increased need for EW; intelligence, surveillance, reconnaissance assets • Networked nodal platforms, time to information • Next-gen onboard processing, exploitation and dissemination architecture
Slide 16: To the warfighter, time to information is critical
? To the warfighter, time to information is critical to address the growing gap between: What’s collected? 100TB per mission Force Protection Mission Critical Real-time Forensics Last 18 hours Recent minutes For decision makers who need timely, actionable, and relevant information What’s actionable?
Slide 17: Slide 17
Slide 18: Mercury's new Converged Sensor Network vision for persistent ISR
Mercury's new Converged Sensor Network™ (CSN™) vision for persistent ISR A revolutionary open architecture that combines Multi-Sensor Signal Processing Information Management Technologies Transformational Access to Information in the Tactical Edge Radar Video SIGINT Signal Processing Image Processin
Slide 19: Government/DoD frustration leads to defense procurement reform
Government/DoD frustration leads to defense procurement reform Today’s Model • Government frustrated with current model • Platform-centric approach • Proprietary closed system architectures • Significant cost overruns • Significant schedule slips Emerging Model • Best-of-breed model emerging • More
Slide 20: Positioned for growth
Positioned for growth • Focused on growing ISR market segment • Creating a platform-independent, best-of-breed ISR systems and services company • Unique capabilities in commercial high-performance embedded signal, image and sensor processing • Building government amenable business model in line with
Slide 21: Financial Overview
Financial Overview
Slide 22: FY07 – FY10 YTD: Restored profitability
FY07 – FY10 YTD: Restored profitability Note: 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 23: Strong defense revenue
Strong defense revenue Note: All historical figures adjusted for discontinued operations 14% Defense CAGR FY07 – FY09 Revenue ($M) Commercial Defense $23 $26 $29 $33 $27 $31 $35 $37 $33 $34 $38 $40 $41 $35 $34 $21 $25 $23 $21 $16 $16 $15 $13 $11 $11 $13 $8 $7 $10 $9 $43 $51 $52 $54 $43 $47 $51 $50 $
Slide 24: Strong growth in bookings and backlog
Strong growth in bookings and backlog FY07-FY09: • Total Company – 11% Bookings CAGR – 18% Backlog CAGR • Defense – 28% Bookings CAGR – 28% Backlog CAGR Note: Historical figures adjusted for discontinued operations Bookings Total Company $M Ending Backlog FY07 FY08 FY09 Defense $107 Defense $145 Def
Slide 25: Improved working capital efficiencies
Improved working capital efficiencies • Supply chain transformation Operational efficiencies Manufacturing lead times Cost of quality Competitive advantage for Mercury and customers Inventory reduced $8.6M from Q3 FY08 to Q3 FY10 • Customer satisfaction Blue chip customers End-of-quarter shipment sk
Slide 26: Much improved cash conversion cycle
Much improved cash conversion cycle Note: Cash conversion calculation = DSO’s + Inventory Days – A/P Days
Slide 27: Repaid debt and improved cash balance
Repaid debt and improved cash balance Note: ARS settlement at par ($38M) with UBS 6/30/10
Slide 28: Strong and unencumbered balance sheet
Strong and unencumbered balance sheet Q3'10 ($M) Cash and Marketable Securities Total Current Assets Total Assets Debt Total Liabilities Shareholders' Equity • Generated $7M free cash flow in 3Qs’10 • Zero cost ARS loan of $25M • $38M ARS balance repaid at par 6/30/10 • 23.2M diluted weighted averag
Slide 29: Robust target business model
Notes: Target Business Model assumes organic growth. ACS /MFS approx 90%/10% revenue split Adj EBITDA adjusts for Depreciation 2-3% of revenue and Stock Based Comp 2-3% of revenue Robust target business model Target Business Model
Slide 30: 3Q YTD'10 prior year comparison (GAAP)
3Q YTD’10 prior year comparison (GAAP) Notes: 1)All historical income statement figures have been restated for operations that have been discontinued subsequent to that time. 2) Adj EBITDA is earnings before impairment charges, interest, taxes, restructuring, stock compensation, amortization and dep
Slide 31: Last 11 quarters' revenues and EPS exceeded or met the top end of guidance
2008 Q1 Q2 Q3 Q4 Revenue ($M) EPS ($) 2009 Q1 Q2 Q3 Q4 Revenue ($M) EPS ($) 2010 Q1 Q2 Q3 Q4 Revenue ($M) EPS ($) Non-GAAP GAAP Last 11 quarter’s revenues and EPS exceeded or met the top end of guidance Reported Guidance Reported Guidance Reported Guidance Reported Guidance 49.2 48.0 52.6 51.0 56.5
Slide 32: Q4'10 guidance
Q4’10 guidance ($M) Quarter Ending June 30, 2010 Low High Revenues $58 $60 GAAP EPS $0.25 $0.28 Adj EBITDA $9.3 $9.9 Note - Adj EBITDA Adjustments: Net Income 5.9 6.5 Stock compensation 1.2 1.2 Interest Expense 0.1 0.1 Interest Income (0.2) (0.2) Taxes 0.3 0.3 Amortization 0.4 0.4 Depreciation 1.5 1
Slide 33: Financial summary
Financial summary • Returned to profitability • 11% bookings and 18% backlog growth (CAGR) • Improved working capital efficiencies • Healthy cash flows from operations • Strong and unencumbered balance sheet • Robust target business model 17-18% Adj. EBITDA • $100M shelf registration effective
Slide 34: Mercury Computer Systems
= MERCURY COMPUTER SYSTEMS
Slide 35: Appendix
Appendix
Slide 36: GAAP to Non-GAAP Reconciliation ($M)
GAAP to Non-GAAP Reconciliation ($M) Year Ended Year Ended Year Ended June 30, 2007 June 30, 2008 June 30, 2009 GAAP net income (loss) ($37.8) ($35.4) ($1.3) Adjustment to exclude stock-based compensation 10.6 10.4 4.6 Adjustment to exclude inventory write-down 0.0 0.8 0.0 Adjustment to exclude in-p
Slide 37: Adjusted EBITDA Reconciliation ($M)
Adjusted EBITDA Reconciliation ($M) Three Quarters Ended Three Quarters Ended March 31, 2009 March 31, 2010 Income from operations before income taxes $5.2 $8.1 Other expense (income) 0.3 (0.9) Income tax expense (benefit) 0.1 (1.0) Income from continuing operations $4.8 $10.0 Stock-based compensati
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