Mercury Systems Inc · NASDAQ:MRCY
Mercury Systems — William Blair & Co 42nd Annual Growth Stock Conference (June 2022)
28 slides from Mercury Systems's conference presentation, Jun 7, 2022
Slide 1: William Blair & Co 42nd Annual Growth Stock Conference
© Mercury Systems, Inc. WILLIAM BLAIR & CO 42ND ANNUAL GROWTH STOCK CONFERENCE Mike Ruppert Executive Vice President & CFO June 7, 2022
Slide 2: Forward-looking safe harbor statement
© Mercury Systems, Inc. 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 products and services described herein and to fiscal 2022 busi
Slide 3: Mercury Systems at-a-glance
© Mercury Systems, Inc. Mercury Systems at-a-glance Innovation That Matters. By and For People Who Matter. Transformational business model at the intersection of high tech and defense Deployed on 300+ programs – serving defense Primes and critical infrastructure providers Making commercial technolog
Slide 4: Mercury Systems by the numbers
© Mercury Systems, Inc. Mercury Systems by the numbers ~2,300 Number of team members globally, many hold DoD security clearances 37% CAGR FY14-FY21 $202M FY21 Adj. EBITDA 22% margin 40 Years of tech leadership in the A&D industry 24% CAGR FY14-FY21 $924M FY21 Revenue 15 Number of M&A transactions co
Slide 5: Mercury solutions deployed on 300+ programs with 25+ primes
© Mercury Systems, Inc. Mercury solutions deployed on 300+ programs with 25+ primes 5 C 4 I Se n so r & E ff ec to r M is si o n S ys te m s JLTV BLACKHAWK A330 MRTTSubsurface Fleet C-130 MALD-J SM2/3/6PavewayStormbreaker PGK Triton AegisLTAMDSF-16 Reaper/Gorgon Stare Global Hawk SEWIPBadger/Buzzard
Slide 6: We have executed on a disciplined and focused M&A strategy
© Mercury Systems, Inc. We have executed on a disciplined and focused M&A strategy Notes: *Tier 2 includes embedded computing and subsystems with RF content. Includes US Government and Global Defense & Commercial Aerospace Markets Sources: RSAdvisors research & analysis, September 2021. Numbers are
Slide 7: Mercury continues to deliver strong financial results
© Mercury Systems, Inc. Mercury continues to deliver strong financial results Notes: CAGR figures for the period FY16-FY21. YoY figures for the period FY20 vs. FY21. Numbers are rounded. Per share data is presented on a fully diluted basis. As of Q1 FY19, the Company has revised its definition of ad
Slide 8: Notes on peer and market participant data
© Mercury Systems, Inc. Notes: • Fiscal year figures for Mercury are based on the trailing four fiscal quarters using information reported in Mercury’s Form 10- Ks, Form 10-Qs and/or most recent earnings release. All other data per FactSet as of July 15, 2021. 5-year CAGR for market participants cal
Slide 9: Investment highlights
© Mercury Systems, Inc. Investment highlights Innovative growth company at intersection of high tech and defense Focused on large, growing, well-funded addressable markets Proven transformational business model investing 4-5x defense industry average in R&D Benefiting from outsourcing, supply chain
Slide 10: Mercury strategy: A plan to meet market needs at speed
© Mercury Systems, Inc. 1/ Invest to grow organically 2/ Expand capabilities, market access and penetration through M&A 4/ Continuously improve operational capability and scalability 3/ Invest in trusted, secure Innovation That Matters® 5/ Attract and retain the right talent Mercury strategy: A plan
Slide 11: Six major trends shaping the defense industry
© Mercury Systems, Inc. Six major trends shaping the defense industry 1/ Defense spending tailwinds Russia-Ukraine conflict has solidified political commitment to defense investment likely leading to increased domestic and international defense spending over the next 5+ years 2/ Challenging global s
Slide 12: Conversation on defense spending has changed dramatically
© Mercury Systems, Inc. Conversation on defense spending has changed dramatically Budget outlook has shifted from modest to significant growth, potentially surpassing $900B by FY27 $606 $671 $688 $723 $704 $715 $731 $747 $764 $781 $757 $773 $801 $809 $823 $828 $550 $650 $750 $850 $950 GFY17 A GFY18
Slide 13: European defense spending could expand by nearly $1T over next decade
© Mercury Systems, Inc.13 $250 $300 $350 $400 $450 $500 $550 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 Pre-Ukraine Forecast 2% of GDP Scenario European defense spending could expand by nearly $1T over next decade Led by Germany, European defense spending could grow significantly over th
Slide 14: Future system value is shifting to electronics systems
© Mercury Systems, Inc.14 Past Present Air F-4 F-35 % Electronics: 25% # of Electronics: ~15 % Electronics: 45% # of Electronics: 30+ Sea Oliver Perry Class Frigate Zumwalt Class Destroyer % Electronics: 20% # of Electronics: ~8 % Electronics: 40% # of Electronics: 30+ Land M-60 M1A2 Abrams % Electr
Slide 15: Aerospace & Defense Platform and Systems Electronics Content
© Mercury Systems, Inc. Aerospace & Defense Platform and Systems Electronics Content C4I ($24.0B)* Sensor & Effector Mission Systems ($18.2B)* MARKET SEGMENT Platform & Mission Mgmt C2I Comms EW Radar EO/IR Acoustics Weapons 7 Avionics/ Vetronics Command & Control/Battle Management Dedicated Communi
Slide 16: Acquisitions and investments driving significant opportunity for growth
© Mercury Systems, Inc. Acquisitions and investments driving significant opportunity for growth, which in turn is driving strong results ▪ Total potential value grew >2.9x to $11B in 6 years ▪ Significant Radar, EW, C4I, weapons and EO/IR opportunity pipeline ▪ Acquisitions bring new programs and ca
Slide 17: Since FY14, we have achieved significant growth and scale
© Mercury Systems, Inc. Since FY14, we have achieved significant growth and scale FINANCIAL METRIC Total Acquisitions 15 Total Headcount 3.6x Facilities 3.1x Subsystem Revenue 7.5x OPERATIONAL METRIC Total Revenue 4.4x IR&D Spend 3.2x Adjusted EBITDA 9.2x Operating Cash Flow 6.9x Note: Metrics are F
Slide 18: 1MPACT: a 4-year effort to achieve full growth and adj. EBITDA potential
© Mercury Systems, Inc.18 Does not contain Technical Data. //No Tech Data// 1MPACT: a 4-year effort to achieve full growth and adj. EBITDA potential ▪ Proactively launched 1MPACT to lay foundation for next phase of value creation at scale ▪ Anticipating $27M net benefit related to actions taken and
Slide 19: Clear path to maintaining differentiated and attractive financial profile
© Mercury Systems, Inc. Clear path to maintaining differentiated and attractive financial profile 19 100% 2% 8% 33% Increase Adj. EBITDA margins Grow organically at high-single / low-double digit Supplement w/strategic M&A ▪ Operating expense leverage ▪ Program production mix ▪ 1MPACT ▪ Full acquisi
Slide 20: Strategy and business model delivering financial performance well above industry average
© Mercury Systems, Inc. Strategy and business model delivering financial performance well above industry average ▪ Track record of strong organic growth, profitability and strategic M&A ▪ Significant investment over last 5 years is competitive differentiator ▪ Poised for continued organic growth and
Slide 21: Thank you
THANK YOU. =o Soh eS = mercury , ¥O9OaOm~ mrcy.com ; a ‘a
Slide 22: Appendix
APPENDIX
Slide 23: Balance sheet
© Mercury Systems, Inc. Balance sheet Notes (1) Rounded amounts used.As of (In $ millions)(1) 4/2/21 7/2/21 10/1/21 12/31/21 4/1/22 ASSETS Cash & cash equivalents $121.9 $113.8 $95.8 $105.2 $91.7 Accounts receivable, net 264.0 291.7 301.2 320.1 367.1 Inventory, net 226.8 221.6 234.4 251.3 259.6 PP&E
Slide 24: Cash flow summary
© Mercury Systems, Inc. Cash flow summary Notes (1) Rounded amounts used. (2) Non-GAAP, see reconciliation table. For the Fiscal Quarters Ended (In $ millions)(1) 4/2/21 7/2/21 10/1/21 12/31/21 4/1/22 Net Income (Loss) $15.6 $17.9 ($7.1) ($2.6) $4.1 Depreciation and amortization 20.0 20.8 21.5 24.1
Slide 25: Adjusted EPS reconciliation
© Mercury Systems, Inc. Adjusted EPS reconciliation Notes (1) Per share information is presented on a fully diluted basis. (2) Rounded amounts used. (3) Impact to income taxes is calculated by recasting income before income taxes to include the add-backs involved in determining adjusted income and r
Slide 26: Adjusted EBITDA reconciliation
© Mercury Systems, Inc. Adjusted EBITDA reconciliation Notes (1) Rounded amounts used. 26 (In thousands)(1) Q3 FY21 Q3 FY22 LTM Q3 FY21 LTM Q3 FY22 Net Income (loss) 15,635$ 4,139$ 71,343$ 12,285$ Other non-operating adjustments, net (775) 938 (3,210) 1,817 Interest expense (income), net 515 1,554 1
Slide 27: Free cash flow reconciliation / Organic revenue reconciliation
© Mercury Systems, Inc. Free cash flow reconciliation Organic revenue reconciliation Notes (1) Organic revenue represents total company revenue excluding net revenue from acquisitions for the first four full quarters since the entities’ acquisition date (which excludes any intercompany transactions)
Slide 28: Glossary
© Mercury Systems, Inc. Glossary API Application Programming Interface BCA Budget Control Act C4I Command, Control, Communications, Computers COTS Commercial off-the Shelf CPU Central Processing Unit EO/IR Electro-optical / Infrared EW Electronic Warfare FPGA Field Programmable Gate Array GPU Graphi
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