Mercury Systems Inc · NASDAQ:MRCY
Mercury Systems — Mercury Computer Systems — Sidoti & Company Thirteenth Annual NY Emerging Growth Institutional Investor Forum (March 2009)
25 slides from Mercury Systems's conference presentation, Mar 24, 2009
Slide 1: Sidoti Thirteenth Annual NY Emerging Growth Institutional Investor Forum
Sidoti & Company, LLC Thirteenth Annual NY Emerging Growth Institutional Investor Forum March 24, 2009 Mark Aslett – President & CEO Bob Hult – SVP, CFO 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
Introduction • New strategy and management team well established • Improved FY08 financial performance • Strong core defense business – stabilizing commercial • Defense provides long-term profitable growth potential • Need to evolve COTS board business – Converged Sensor Network™ architecture • Merc
Slide 4: Significant company dynamics (GAAP FY08)
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, $18M goodwill
Slide 5: Defense
Defense Major ACS business dynamics • Focus on strengthening and growing the defense business FY07 FY08 Commercial
Slide 6: Strength in ACS defense markets
Strength in ACS defense markets • 17% revenue growth and 33% bookings growth in FY08 • Strong revenue growth in Radar, C4I and EW • Focused on the C4ISR market going forward “C4ISR”
Slide 7: Growing and evolving our COTS defense core
Growing and evolving our COTS defense core • Highly penetrated across many programs and platforms presents good upgrade opportunities and lower risk • Design win-led – refresh product portfolio • Tactically penetrate more programs on new and existing platforms on land, air, and sea • Expand presence
Slide 8: Partial list of well-known programs relying on Mercury technology
Partial list of well-known programs relying on Mercury technology Global Hawk Predator Rivet Joint JSTARS F-35 JSF BAMS MESA F-16 MP-RTIP Guardrail JCREW PAR-2000 Commander LRR HML SIGINT Ground System Aegis SQQ-89 Sampson Empar International Combat System Naval SIGINT Platform Design wins driving g
Slide 9: Defense Highlights
Defense Highlights • Aegis – Naval BMD, C4I • Argon – Naval SigInt • Predator – Airborne Radar • JCREW – Ground SigInt • Rivetjoint – Airborne Sigint • WAAS – Airborne ISR • NASP – Airborne SONAR • Guardrail – Airborne SigInt Commercial Highlights • KLA Tencor – Semi Conductor • Hughes – Satellite C
Slide 10: The Federal market: continuously evolving
DoD 1993 2008 2013e The Federal market: continuously evolving Budget ($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 Source: DoD Budget Request FY93 and FY2008 Growth t
Slide 11: Today's ISR architecture is fundamentally flawed
"Today's" ISR architecture is fundmentally 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 archi
Slide 12: 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 13: Mercury's new Converged Sensor Network architecture
TM TM Global Information Grid Mercury's new Converged Sensor Network architecture (CSN ) for ISR Persistent surveilance A revolutionary open architecture that combines Video Radar SIGINT SAN Signal Processing Signal Processing Image Processing Information Dissemination Data Exploitation Information
Slide 14: Transitioning Mercury's business model
Transitioning Mercury's business model Today’s Model • Government frustrated with current prime model • Platform-centric approach • Proprietary stovepipe processing architectures • Pay multiple times for similar capabilities • Slow time to deployment • Maybe not best in class Emerging Model • Platfo
Slide 15: 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 ($3B annually) • Be told what board to develop by a prime • Board-level design wins • Develop everything on our own nickel • Long payback period – high risk with Mercury Federal • Total
Slide 16: Summary
Summary • Rationalize portfolio of non-core businesses by end FY09 • Strengthen ACS defense business – stabilize commercial • Grow ACS defense business by targeting upgrades, new platforms and applications • Evolve beyond COTS board business due to industry size constraints and dynamics – Converged
Slide 17: Mercury Computer Systems
= MERCURY COMPUTER SYSTEMS 2 Ss
Slide 18: FY07 vs FY08: Improved Performance
FY07 vs FY08: Improved Performance Notes: 1) All historical income statement figures adjusted for the discontinued operation of Embedded Systems & Professional Services and SolMap. 2) All numbers are non-GAAP.
Slide 19: Revenue growth: Driven by Defense
Revenue growth: Driven by Defense Notes: 1)Represents total Company revenues; VI, VSG and Emerging businesses’ revenue treated as Commercial 2)All historical figures adjusted for the discontinued operation of Embedded Systems & Professional Services and SolMap June Fiscal Year End ~ 10% CAGR FY98 –
Slide 20: Strategic Direction – Sell, fix or grow
Strategic Direction – Sell, fix or grow VSG AUSG - Sold VI ES/PS - Sold Biotech – Sold VI - Sold Government Defense Commercial Mercury Federal Sell or Shutdown Fix Grow
Slide 21: FY09 Mercury Cash Balance Analysis
($M) FY09 Mercury Cash Balance Analysis Notes: (1) Repurchased $119,688,000 (face value) of convertible debenture on Feb. 4, 2009, equal to the principle amount of the Notes, plus accrued interest. (2) Includes $31.5 UBS Loan and $42.0M Auction Rate Securities. (1) (2) (4) (125) Q1FY09 ARS Write- do
Slide 22: 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 $7.3M • Customer satisfaction DSO’s below model End-of-quarter shipment skew Inventory Turns 4.9 6.9 5.4 4.6 4.1
Slide 23: Gap to Target Business Model
Gap to Target Business Model (# ’ s non - GAAP) Target Business Model Notes: 1) All historical income statement figures adjusted for the discontinued operation of Embedded Systems & Professional Services and SolMap.
Slide 24: Guidance Summary (Non-GAAP)
Q108 Q208 Q308 Q408 Q109 Q209 Guidance Summary (Non-GAAP) Reported Guidance Reported Guidance Reported Guidance Reported Guidance Reported Guidance Reported Guidance Revenue ($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 EPS ($) 0.09 (0.08) 0.04 (0.05) 0.04
Slide 25: NASDAQ: MRCY
NASDAQ: MRCY