Mercury Systems Inc · NASDAQ:MRCY
Mercury Systems — Q1 FY2019 Earnings Presentation
19 slides from Mercury Systems's earnings presentation, Oct 30, 2018
Slide 1: 1st Quarter Fiscal Year 2019 Financial Results
1st Quarter Fiscal Year 2019 Financial Results 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/investor October 30, 2018, 5:00 pm ET Webcast
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 to fiscal 2019 business performance and beyond and the Company’s plans for growth and improvement in p
Slide 3: Financial highlights
Financial highlights Q1 FY19 vs. Q1 FY18 LTM Q1FY19 vs. LTM Q1FY18 • Record bookings up 67% • Record bookings up 40% • Revenue up 36% • Revenue up 24% • Organic revenue(1) up 6% • Organic revenue(1) up 11% • Adjusted EBITDA up 25% • Adjusted EBITDA up 20% • Record backlog up 41% • Record backlog up
Slide 4: We're executing well on our strategy to become leading…
We’re executing well on our strategy to become leading… • USG needs more domestically-produced technology for military platforms • Represents significant opportunity for Mercury given our strategy • DoD will need to leverage high-tech commercial investment and innovation • Issue is globalization of
Slide 5: We're executing well on our vision to become leading…
We’re executing well on our vision to become leading… • Themis and Germane businesses performing well and to plan • No change to customer behaviors, financials and current outlook • Built out best-in-class cyber security infrastructure • Compliant with Defense acquisition cyber security rules • Defe
Slide 6: Q1 FY19 strategic achievements
Q1 FY19 strategic achievements • Amir Allahverdi overseeing manufacturing and supply chain • Achieved highest Glassdoor ratings in Defense industry • Ranked 27th on Fortune Magazine’s 100 Fastest Growing List • Good progress on acquisition integrations • Continuing consolidation of West Coast RF man
Slide 7: Business outlook remains strong
Business outlook remains strong • Improved Defense spending environment • Expect 8% - 9% FY19 organic revenue growth • Target markets growing faster than defense budget overall • Benefiting from modernization in Radar, EW, missiles, EO/IR, C2I • Capitalizing on favorable industry trends – increased
Slide 8: Summary
Summary • On track for continued strong performance in FY19 • Business expected to grow faster than industry overall • Manufacturing and M&A integration synergies • Anticipating double-digit revenue growth and strong cash flow • Expect to achieve high-end of adj. EBITDA target over time by: – Increa
Slide 9: Q1 FY19 vs. Q1 FY18
Q1 FY19 vs. Q1 FY18 In $ millions, except percentage and per share data Q1 FY18 Q1 FY19 Change Bookings $107.2 $178.7 67% Book-to-Bill 1.01 1.24 Backlog $360.7 $507.9 41% 12-Month Backlog 281.7 377.8 Revenue $106.1 $144.1 36% Organic Revenue Growth(1) 7% 6% Gross Margin 47.8% 42.8% (5.0 pts) Operati
Slide 10: Balance Sheet
Balance Sheet As of (In $ millions)(1) 9/30/17 12/31/17 3/31/18 6/30/18 9/30/18 ASSETS Cash & cash equivalents $26.1 $32.0 $44.2 $66.5 $72.9 Accounts receivable, net 121.4 123.0 141.6 143.8 153.9 Inventory, net 93.3 105.9 117.1 108.6 121.2 PP&E, net 51.6 51.6 51.3 51.0 50.8 Goodwill and intangibles,
Slide 11: Cash flow summary
Cash flow summary FY18 FY19 (In $ millions)(1) Q1 Q2 Q3 Q4 Q1 Net Income $18.0 $9.1 $3.7 $10.1 $7.5 Depreciation and amortization 9.3 9.6 11.4 12.0 11.5 Other non-cash items, net 0.8 4.7 3.3 5.1 5.5 Change in Working Capital (7.8) (1.4) (10.6) (2.9) (5.9) Accounts receivable, unbilled receivables, a
Slide 12: Q2 FY19 guidance
Q2 FY19 guidance In $ millions, except percentage and per share data Q2 FY18(1) Q2 FY19(2) Change Revenue $117.9 $151.6 - $156.6 29% - 33% Gross Margin 45.9% 43.9% - 44.5% (2.0) - (1.4) pts Operating Expenses $43.3 $52.2 - $52.6 21% - 22% GAAP Income $9.1 $8.3 - $10.3 (9%) - 13% Effective tax rate(3
Slide 13: FY19 annual guidance
FY19 annual guidance In $ millions, except percentage and per share data FY18(1) FY19(2) Change Revenue $493.2 $607.0 - $625.0 23% - 27% Gross Margin 45.8% 43.7% - 44.4% (2.1) - (1.4) pts Operating Expenses $178.9 $199.2 - $202.6 11% - 13% GAAP Income $40.9 $39.1 - $45.6 (4%) - 11% Effective tax rat
Slide 14: Summary
Summary • Strong Q1 results with record bookings and backlog • Revenue, adjusted EBITDA, and adjusted EPS exceeded guidance • Solid operating and free cash flow • Increased credit facility to $750mm and renewed 5 year term • Conservative capital structure provides financial flexibility for continued
Slide 15: Appendix
Appendix © 2018 Mercury Systems, Inc. 15
Slide 16: Adjusted EPS reconciliation
Adjusted EPS reconciliation Q2 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 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 $ 0.17 $ 0.22 $ 0.82 $
Slide 17: Adjusted EBITDA reconciliation
Adjusted EBITDA reconciliation Q2 FY19 FY19 (In thousands) Q1 FY17 Q2 FY17 Q3 FY17 Q4 FY17 FY17 Q1 FY18 Q2 FY18 Q3 FY18 Q4 FY18 FY18 Q1 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 $ 8,300 $ 10,300 $ 39,100 $ 45,600 Oth
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 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 Capital expenditures (6,050) (7,703) (13,036) (6,055) (
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 Organic Revenue $ 63,339 $ 68,072 $ 75,080 $ 71,208 $ 277,699 $ 93,498 $ 104,957 $ 100,625 $ 134,358 $ 433,438 $ 112,801 Acquired Revenue(1) 24,310 29,942 32,237 44,400 130