Mercury Systems Inc · NASDAQ:MRCY
Mercury Systems — Q4 FY2019 Earnings Presentation
21 slides from Mercury Systems's earnings presentation, Jul 30, 2019
Slide 1: 4th Quarter and Full Fiscal Year 2019 Financial Results & American Panel Corporation Acquisition Overview
4th Quarter and Full Fiscal Year 2019 Financial Results & American Panel Corporation 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
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 2020 business performance and beyond and th
Slide 3: Introduction
Introduction • Favorable defense funding and industry growth environment • Strategy and business model are working very well • Growing revenues substantially faster than industry average • Completed 4 acquisitions in FY19: Germane, GECO, Athena, Syntonic • Completed $455M follow-on equity offering –
Slide 4: Financial highlights
Financial highlights Q4 FY19 vs. Q4 FY18 FY19 vs. FY18 • Record bookings up 41% • Record bookings up 39% • Record backlog up 40% • Record backlog up 40% • Record revenue up 16% • Record revenue up 33% • Organic revenue(1) up 4% • Organic revenue(1) up 12% • GAAP net income up 27% • Record GAAP net i
Slide 5: Successful M&A and integration strategy
Successful M&A and integration strategy • Including APC, completed 5 acquisitions in the last 12 months for $228M • Deployed ~$800M for 11 acquisitions over last 5 years(1) • 5-year 26% revenue and 46% adj. EBITDA CAGR FY14-FY19 • Strategy for continued long-term shareholder value creation: – Adj. E
Slide 6: Agreement to acquire American Panel Corporation (APC)
Agreement to acquire American Panel Corporation (APC) • Leader in rugged flat panel display solutions for aerospace and defense • Complements existing safety-certifiable avionics processing capabilities • Deployed on wide range of next-generation platforms, including Apache attack helicopter, M1A2 A
Slide 7: Operational achievements
Operational achievements • Continuing to invest in trusted domestic manufacturing capabilities • Focused on working capital and manufacturing operations efficiencies • Expect to complete West Coast RF manufacturing consolidation H1 FY20 • Completed build-out of Phoenix trusted digital SMT manufactur
Slide 8: Favorable growth environment driving improved results
Favorable growth environment driving improved results • Pleased with 2 year defense budget deal • Defense appropriations, authorizations and outlays trending higher • Estimated LTV of top 30 programs/pursuits grew significantly in last 5 years • Favorable trends – delayering, flight to quality, outs
Slide 9: Business outlook and summary
Business outlook and summary • Expect overall defense spending to increase at low single digit rates • Continue delivering organic revenue growth higher than industry average rate • Supplement high level of organic growth with smart, strategic M&A • Focus on sensor and effector mission systems and C
Slide 10: Q4 FY19 vs. Q4 FY18
Q4 FY19 vs. Q4 FY18 In $ millions, except percentage and per share data Q4 FY18 Q4 FY19 Change Bookings $171.7 $241.3 41% Book-to-Bill 1.12 1.36 Backlog $447.1 $625.4 40% 12-Month Backlog 328.5 451.2 Revenue $152.9 $177.0 16% Organic Revenue Growth(1) 16% 4% Gross Margin 44.7% 45.1% 0.4 pts Operatin
Slide 11: FY19 vs. FY18
FY19 vs. FY18 In $ millions, except percentage and per share data FY18 FY19 Change Bookings $563.5 $782.9 39% Book-to-Bill 1.14 1.20 Backlog $447.1 $625.4 40% 12-Month Backlog 328.5 451.2 Revenue $493.2 $654.7 33% Organic Revenue Growth(1) 7% 12% Gross Margin 45.8% 43.7% (2.1 pts) Operating Expenses
Slide 12: Balance sheet
Balance sheet As of (In $ millions)(1) 6/30/18 9/30/18 12/31/18 3/31/19 6/30/19 ASSETS Cash & cash equivalents $66.5 $72.9 $93.9 $112.5 $257.9 Accounts receivable, net 143.8 153.9 168.3 170.7 176.2 Inventory, net 108.6 121.2 126.4 131.7 137.1 PP&E, net 51.0 50.8 53.1 55.9 60.0 Goodwill and intangibl
Slide 13: Cash flow summary
Cash flow summary For the Fiscal Quarters Ended FY18 FY19 (In $ millions)(1) 9/30/18 12/31/18 3/31/19 6/30/19 Net Income $40.9 $7.5 $12.4 $14.1 $12.8 $46.8 Depreciation and amortization 42.3 11.5 11.7 11.6 11.6 46.4 Termination of interest rate swap - - - - 5.4 5.4 Other non-cash items, net 14.0 5.5
Slide 14: FY20 annual guidance
FY20 annual guidance In $ millions, except percentage and per share data FY19(1) FY20(2)(5) Change Revenue $654.7 $740.0 - $760.0 13% - 16% Gross Margin 43.7% 43.6% - 44.2% (0.1) - 0.5 pts Operating Expenses $209.6 $235.2 - $240.2 12% - 15% GAAP Net Income $46.8 $66.5 - $72.4 42% - 55% Effective tax
Slide 15: Q1 FY20 guidance
Q1 FY20 guidance In $ millions, except percentage and per share data Q1 FY19(1) Q1 FY20(2)(5) Change Revenue $144.1 $160.0 - $170.0 11% - 18% Gross Margin 42.8% 43.5% 0.7 pts Operating Expenses $47.8 $54.5 - $56.8 14% - 19% GAAP Net Income $7.5 $11.5 - $13.0 54% - 74% Effective tax rate(3) 30% 26% G
Slide 16: Summary
Summary • Solid fourth quarter results capping a strong fiscal year performance • Record annual bookings of $783 million with 1.20 book-to-bill • Record fiscal year revenue increases 33% year over year; 12% organic • Record annual operating and free cash flow generation • Completed acquisitions of G
Slide 17: Appendix
Appendix © 2019 Mercury Systems, Inc.
Slide 18: Adjusted EPS reconciliation
Adjusted EPS reconciliation (2)(4) (2)(4) Q1 FY20 FY20 (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 Q3 FY19 Q4 FY19 FY19 Low High Low High (1) Earnings per share $ 0.10 $ 0.13 $ 0.16 $ 0.19 $ 0.58 $ 0.38 $ 0.19 $ 0.08
Slide 19: Adjusted EBITDA reconciliation
Adjusted EBITDA reconciliation Q1 FY20(2)(3) FY20(2)(3) (In thousands) Q1 FY17 Q2 FY17 Q3 FY17 Q4 FY17 FY17 Q1 FY18 Q2 FY18 Q3 FY18 Q4 FY18 FY18 Q1 FY19 Q2 FY19 Q3 FY19 Q4 FY19 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 $ 7,4
Slide 20: 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 Q3 FY19 Q4 FY19 FY19 Cash provided by operating activities $ 10,283 $ 14,238 $ 24,889 $ 9,736 $ 59,146 $ 8,028 $ 8,779 $ 873 $ 25,641 $ 43,321 $ 20,029 $ 25,301 $ 26
Slide 21: 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 Q3 FY19 Q4 FY19 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 $ 139,812 $