Mercury Systems Inc · NASDAQ:MRCY
Mercury Systems — Q4 FY2018 Earnings Presentation
19 slides from Mercury Systems's earnings presentation, Jul 31, 2018
Slide 1: 4th Quarter and Full Fiscal Year 2018 Financial Results & Germane Systems Acquisition Overview
4th Quarter and Full Fiscal Year 2018 Financial Results & Germane Systems 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.co
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
Slide 3: Strong financial performance
Strong financial performance Q4 FY18 YoY Results Full FY18 YoY Results • Record bookings up 30% • Record bookings up 27% • Record revenue up 32% • Record revenue up 21% • Organic revenue(1) up 16% • Organic revenue(1) up 7% • GAAP net income up 15% • Record GAAP net income up 64% • Record adj. EBITD
Slide 4: Q4 and fiscal 2018 strategic achievements
Q4 and fiscal 2018 strategic achievements • Integration of prior acquisitions progressing well • Recently acquired businesses performance strong • Added important new capabilities at the USMO • Insourcing ramp continued; delivering substantial savings • New business capture demonstrates benefits of
Slide 5: Acquisition of Germane Systems
Acquisition of Germane Systems Combination with Themis presents compelling value creation opportunity • Leading provider of rugged servers for C2I applications • Will integrate Germane with recently acquired Themis Computer • Complementary market focus; strategic program portfolio • Creates $100M+ C
Slide 6: Business outlook remains strong
Business outlook remains strong • Defense budget has increased; expected continued growth 3%+ • Capitalizing on favorable industry trends – increased outsourcing, flight to quality, supply chain delayering • Grow core C4I, Sensor and Effector Mission Systems markets • High-tech business model workin
Slide 7: Summary
Summary • Continue to grow and expand in strategically aligned core markets • Grow business organically, high single-digit / low double-digit rate • Supplementing high level of organic growth with strategic M&A • Expect to achieve high-end of adj. EBITDA target over time by: – Increased revenue orga
Slide 8: Q4 FY18 vs. Q4 FY17
Q4 FY18 vs. Q4 FY17 In $ millions, except percentage and per share data Q4 FY17 Q4 FY18 Change Bookings $132.3 $171.7 30% Book-to-Bill 1.14 1.12 Backlog $357.0 $447.1 25% 12-Month Backlog $290.8 $328.5 Revenue $115.6 $152.9 32% Organic Revenue Growth(1) 4% 16% Gross Margin 46.6% 44.7% (1.9 pt) Opera
Slide 9: FY18 vs. FY17
FY18 vs. FY17 In $ millions, except percentage and per share data FY17 FY18 Change Bookings $443.8 $563.5 27% Book-to-Bill 1.09 1.14 Backlog $357.0 $447.1 25% 12-Month Backlog $290.8 $328.5 Revenue $408.6 $493.2 21% Organic Revenue Growth(1) 10% 7% Gross Margin 46.9% 45.8% (1.1 pt) Operating Expense
Slide 10: Balance Sheet
Balance Sheet As of As of (In $ millions)(1) 6/30/17 9/30/17 12/31/17 3/31/18 6/30/18 ASSETS Cash & cash equivalents 41.6 26.1 32.0 44.2 66.5 Accounts receivable, net 113.7 121.4 123.0 141.6 143.8 Inventory, net 81.1 93.3 105.9 117.1 108.6 PP&E, net 51.6 51.6 51.6 51.3 51.0 Goodwill and intangibles,
Slide 11: Cash Flow summary
Cash Flow summary FY18 FY18 FY17 (In $ millions)(1) Q1 Q2 Q3 Q4 Total Net Income 24.9 18.0 9.1 3.7 10.1 40.9 Depreciation and amortization 32.3 9.3 9.6 11.4 12.0 42.3 Other non-cash items, net 8.7 0.8 4.7 3.3 5.1 14.0 Change in Working Capital Accounts receivable, unbilled receivables, (14.1) (7.8)
Slide 12: FY19 annual guidance
FY19 annual guidance In $ millions, except percentage and per share data FY18(1) FY19(2) Change Revenue $493.2 $602 - $624 22% - 27% Gross Margin 45.8% 43.7% - 44.4% (2.1) - (1.4)pts Operating Expenses $178.9 $202.2 - $204.3 13% - 14% GAAP Income $40.9 $36.1 - $44.5 (12%) - 9% (3) Effective tax rate
Slide 13: Estimated impact of Germane Systems
Estimated impact of Germane Systems (1) FY19 Germane Est. Mercury w/o Guidance Contribution Germane Revenue ($M) 602 - 624 43 559 - 581 Gross 43.7% - 44.4% 23% 45.3% - 46.0% Margin (%) Adjusted 130.5 - 142.0 5 125.5 - 137.0 EBITDA ($M) Adjusted EBITDA 21.7% - 22.8% 12% 22.5% - 23.6% Margin (%) Syner
Slide 14: Q1 FY19 guidance
Q1 FY19 guidance In $ millions, except percentage and per share data Q1 FY18(1) Q1 FY19(2) Change Revenue $106.1 $135 - $141 27% - 33% Gross Margin 47.8% 43.1% - 43.6% (4.7) - (4.2) pts Operating Expenses $40.3 $48.9 - $49.3 21% - 22% GAAP Income $18.0 $4.9 - $7.0 (73%) - (61%) Effective tax rate(3)
Slide 15: Summary
Summary • Strong Q4 results with record backlog, bookings, revenue, adjusted EBITDA, operating and free cash flow • FY18 results continue to show: – 7% organic growth, 21% total growth and 23.4% adjusted EBITDA margins • Insourcing investments driving strategic and financial benefits • Additional cu
Slide 16: Appendix
Appendix © 2018 Mercury Systems, Inc. 16
Slide 17: Adjusted EPS reconciliation
Adjusted EPS reconciliation Q1FY19 FY2019 (000's) Q1 FY17 Q2 FY17 Q3 FY17 Q4 FY17 FY17 Q1 FY18 Q2 FY18 Q3 FY18 Q4 FY18 FY18 Low High Low High Diluted net earnings (loss) per share⁽¹⁾ $ 0.10 $ 0.13 $ 0.16 $ 0.19 $ 0.58 $ 0.38 $ 0.19 $ 0.08 $ 0.21 $ 0.86 $ 0.10 $ 0.15 $ 0.75 $ 0.93 Income (loss) from
Slide 18: Adjusted EBITDA reconciliation
Adjusted EBITDA reconciliation Q1FY19 FY2019 (000'S) Q1 FY17 Q2 FY17 Q3 FY17 Q4 FY17 FY17 Q1 FY18 Q2 FY18 Q3 FY18 Q4 FY18 FY18 Low High Low High Income (loss) from continuing operations $ 3,819 $ 5,204 $ 7,048 $ 8,804 $ 24,875 $ 17,953 $ 9,133 $ 3,696 $ 10,101 $ 40,883 $ 4,900 $ 7,000 $ 36,100 $ 44,
Slide 19: Free cash flow reconciliation
Free cash flow reconciliation (000's) Q1 FY17 Q2 FY17 Q3 FY17 Q4 FY17 FY17 Q1 FY18 Q2 FY18 Q3 FY18 Q4 FY18 FY18 Cash flows from operations $ 10,283 $ 14,238 $ 24,889 $ 9,736 $ 59,146 $ 8,028 $ 8,779 $ 873 $ 25,641 $ 43,321 Capital expenditures (6,050) (7,703) (13,036) (6,055) $ (32,844) (3,628) (3,9