UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
June 24, 2004
Date of Report (Date of earliest event reported)
Mercury Computer Systems, Inc.
(Exact name of registrant as specified in its charter)
| Massachusetts | 000-23599 | 04-2741391 | ||
| (State or other jurisdiction of incorporation) |
(Commission File Number) |
(IRS Employer Identification No.) |
| 199 Riverneck Road, Chelmsford, Massachusetts | 01824 | |
| (Address of principal executive offices) | (Zip Code) |
(978) 256-1300
Registrant’s telephone number, including area code
N/A
(Former name or former address, if changed since last report)
| Item 9. | Regulation FD Disclosure. |
On June 24, 2004, management of Mercury Computer Systems, Inc. (“Mercury”) will make a presentation at the William Blair 24th Annual Growth Stock Conference. Attached as Exhibit 99.1 to this Current Report on Form 8-K (the “Report”) is a copy of the slide presentation to be made by Mercury at the conference.
This information is being furnished pursuant to Item 9 of this Report and shall not be deemed to be “filed” for the purposes of Section 18 of the Securities and Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section and will not be incorporated by reference into any registration statement filed by Mercury under the Securities Act of 1933, as amended, unless specifically identified as being incorporated therein by reference. This Report will not be deemed an admission as to the materiality of any information in this Report that is being disclosed pursuant to Regulation FD.
Please refer to page 2 of Exhibit 99.1 for a discussion of certain forward-looking statements included therein and the risks and uncertainties related thereto.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| MERCURY COMPUTER SYSTEMS, INC. | ||||||||
| Date: June 24, 2004 | By: | /s/ Joseph Hartnett | ||||||
| Name: | Joseph M. Hartnett | |||||||
| Title: | Vice President, Controller and Chief Accounting Officer | |||||||
EXHIBIT INDEX
| Exhibit No. |
Description | |
| Exhibit 99.1 | Presentation Materials dated June 24, 2004 * | |
| * | Filed herewith. |
William Blair Growth Conference
June 24, 2004
Jay R. Bertelli
Chairman, President and CEO
Bob Hult
SVP, Chief Financial Officer
Safe Harbor Statement
Certain information (including oral remarks) presented may contain “forward-looking statements” as defined in the Private Securities Litigation Reform Act of 1995. These statements include, among others, those dealing with overall business, segment, and market growth and our business and financial outlook. You can identify forward-looking statements by our use of the words "may," "will," “should," "plans," "expects," "anticipates," "continue," "estimate," "project," "intend," and similar expressions. These forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those projected or anticipated.
Factors that could cause or contribute to such risks and uncertainties include, but are not limited to: general economic and business conditions, competition, changes in technology and methods of marketing, delays in completing various engineering and manufacturing programs, changes in customer order patterns, changes in product mix, continued success in technological advances and delivering technological innovations, continued funding of defense programs and the timing of such funding, shortages in components, production delays due to performance quality issues with outsourced components, the failure to locate favorable acquisition and partnership opportunities and achieve expected results, and various other factors beyond the Company's control.
These risks and uncertainties include such additional factors as are described in the Company's recently filed reports with the U.S. Securities and Exchange Commission, including its periodic reports on Form 10-K and Form 10-Q. The Company cautions the audience not to place undue reliance upon any such forward-looking statements, which speak only as of the date made. The Company undertakes no obligation to update any forward-looking statement to reflect events or circumstances after the date on which such statement is made.
William Blair Growth Conference June 2004
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Company Overview
69%* Defense Electronics
11%* OEM Solutions
20%* Imaging & Visualization Solutions
* 2003 Percentage of total revenue.
. Founded in 1981
. Leading provider of innovative, engineered computing solutions
. Office locations in U.S., UK, France, Germany and Japan; R&D centers in U.S., France, and Germany
. FY04 estimated revenues: $180-$183 million
. 665 employees worldwide; 265 engineers
. Investment in knowledge of customer applications
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Market Applications
Defense Electronics
• Radar
• Signals intelligence
• Data exploitation, smart weapons, imagery and sonar
Imaging & Visualization Solutions
• Life sciences: medical imaging, biotechnology
• Geosciences: oil and gas exploration
• Simulation
OEM Solutions
• Semiconductor equipment: mask generation, wafer inspection
• High-end baggage scanning
• Telecommunications
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Real-Time Signal and Image Processing
Pulse Compression
Doppler / Clutter Filtering
Azimuth Compression
Adaptive Beam Forming
Multicomputer systems uniquely designed for real-time signal and image processing applications
. Scalable input/output and inter-system communications bandwidth
. Scalable processing power in very dense packaging
. Packaging and cooling expertise
. Intimate understanding of customer applications
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Focus on Customer Success
. Provide architecturally superior products and systems expertise
. Compete on the basis of performance and quality
. Deliver the highest level of service and support
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Defense Electronics Group (DEG)
Defense Electronics Group Overview
Deployed across all environments
. Air, land, and sea
. Commercial, rugged, and conduction- and spray-cooled configurations
Full life-cycle support
. From R&D through deployment
DEG is well positioned
. Driving innovation for the next generation
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DEG Growth Drivers
. Transformation agenda driving increasing need for Intelligence, Surveillance and Reconnaissance
– ISR drives demand for computing capability
. ISR moving to lower echelons
– Smaller systems
– More platforms
. Communications
– Network Centric Warfare
– Software Radio
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ISR Programs
This is a listing of programs in which Mercury is involved as well as programs that represent target applications for Mercury technology.
ACS Aerial Common Sensor
ASIP Airborne Signals Intelligence Payload
BAMS Broad Area Maritime Surveillance
DCGS Distributed Common Ground/Surface Systems
DDX new Navy destroyer
E2C Advanced Hawkeye Navy airborne surveillance and command-and-control platform
EuroHawk Unmanned Air Vehicle
FCS Future Combat Systems
Global Hawk Unmanned Air Vehicle
JCM Joint Common Missile
JSF (F-35) Joint Strike Fighter
JTRS Joint Tactical Radio System
MC2A Multi-Sensor Command and Control Aircraft
MMA Multi-mission Maritime Aircraft
MPA Maritime Patrol Aircraft
Prophet Armored Cavalry Regiment commander's principal signals intelligence & electronic warfare system
STARE Small Tactical Arms Recognition Equipment
J-UCAS Joint Unmanned Combat Air Systems
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DEG Growth Opportunities:
Signal, Image, and Data Exploitation Processing Equipment
$380M
2003 Revenue
$124M
2003 Revenue
25% DT
25% SIGINT
50% Radar
2003
DT = Imagery Exploitation, Sonar, Smart Weapons
Potential Available Markets*
Served 15%-25%
$3B*
*Estimated 2006 Market Size
42% SIGINT
35% Radar
23% DT
2006
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Imaging and VisualizationSolutions Group (IVS)
Open Innovation
Mercury provides more of the total solution to meet customer needs
. Shared commitment to customer success
. Complementary technology and expertise
. Positioned to strengthen market presence in medical diagnostic imaging
. Opens new market opportunities in biotechnology, oil and gas exploration, simulation
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Imaging & Visualization Solutions
Applications
. 2D medical imaging
. 3D imaging
. Image-guided surgery (4D)
. Computer-aided diagnostics
. Simulation – commercial and defense
. Molecular imagery
. Biotechnology
. Oil and gas exploration
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IVS Growth Drivers
. Increased volume of data from sensors is driving the need for increased processing power in all target markets
. Increased image understanding through innovative visualization technology
– Faster, better imaging and less invasive procedures are needed for safer, more accurate diagnoses
– Intensive computing capabilities are required for 3D image reconstruction in real time (4D)
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Growth Opportunities: IVS
$150M
Served Markets
$36M
2003 Revenue
2003 Revenue
20% CT
80% PET/MRI/DX
2003
Potential Available Markets*
Served ~15%
$1.2B*
*Estimated 2006 Market Size
20%
. Gas & Oil
. Simulation
40%
Medical Imaging
. 2D (CT, MR, DX, US)
. 3D (PACS, interventional,…)
40%
Biotechnology
. Docking
. Molecular imaging
2006
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OEM Solutions Group(OSG)
OEM Solutions Group
Delivering specialized processing solutions for demanding commercial OEM applications
Semiconductor Capital Equipment
High-End Baggage Scanning
Communications Computing
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OSG Growth Drivers
. Significant growth opportunity in semiconductor capital equipment market
– Unique value proposition
– Design wins moving to production
– Semiconductor equipment market in expansion phase
. Continuing market development in telecommunications
– Positioning for growth as market moves to deploy new solutions
. E.g., Ensemble™, a serial RapidIO Advanced Telecom Computing Architecture (AdvancedTCA®) development system
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OSG Growth Opportunities:
$150M
Served Markets
$20M
2003 Revenue
2003 Revenue
35% Other
65% Semiconductor Imaging
2003
Potential Available Markets*
Served 10%
$1.5B*
*Estimated 2006 Market Size
85% Communications Computing
15% Semiconductor Imaging, Other
2006
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Financial Overview
Strong Financial Performance
Revenue($M)
$150
2002
$180
2003
$180- $183*
2004E
$220- $230*
2005E
Operating Income (% Revenue)
10%
2002
14%
2003
16+%*
2004E
16%*
2005E
EPS
$0.69
2002
$1.03
2003
$1.00- $1.04*
2004E
$1.18- $1.29**
2005E
. Projecting top-line growth in 2005
. Strong operating income performance
* Per Company guidance April 15, 2004 Q3 earnings conference call.
** First Call range as of June 2004.
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Business Model
Guidance Business
FY02 FY03 FY04 Model
Revenue 100% 100% 100% 100%
Gross Margin 65% 66% 66% 64-66%
SG&A 32% 30% 28-30%
R&D 23% 21% 19-21%
Operating expenses 55% 51% 49-50% 47-51%
Income from operations 10% 14% 16+% 15-17%
Non operating income* 5% 4% 0%
PBT 15% 18% 15-17%
Taxes 4% 5% 5%
Net income 11% 13% 12+% 10-12%
* 2003, 2002 net income each include ~$7M non-operating income associated with the sale of SSBU
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Strong Financial Performance
Inventory Turns
5.2
Q203
5.6
Q303
5.6
Q403
6.8
Q104
6.5
Q204
8.1
Q304
8.0*
Q404E
DSOs
31
Q203
39
Q303
47
Q403
43
Q104
42
Q204
56
Q304
low 50s*
Q404E
Operating Cash Flow ($M)
26
FY01
16
FY02
51
FY03
* Per Company guidance, 4/15/04 earnings conference call
Balance Sheet Highlights ($M)
As of Q3 FY04
Prior to April 23 debt offering $125M
(Quarter ended March 31, 2004)
Cash and equivalents $ 128.8
Total Current Assets $ 139.3
Total Assets $ 210.5
Total Debt $11.8
Total Liabilities $40.4
Stockholders’ Equity $ 170.1
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Market Growth Drivers
DoD Investment Accounts Budget ($B)
$127
2003
$182 Projected
2009
. FY04 defense budget real increases in top line.
. Investment accounts (RDT&E plus Procurement) shift toward RDT&E
. FY05 RDT&E budget projected to be the largest in 50 years—in absolute terms
. Transformation initiatives gaining momentum
RDT&E Budget Share
FY2004-09: 15.5%
FY1980-03 11.7%
FY1954-03 10.1%
Source: DFI International, 11/03
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Programs Driving ISR
Multi-Platform Radar Technology Insertion Program (MP-RTIP)
– Modular, active electronically scanned array radar systems scaled for integration on manned and unmanned airborne platforms
– Planned for deployment on: Global Hawk (Unmanned Air Vehicle) and Multi-Sensor Command and Control Aircraft (MC2A)
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Summary
. Positioned for top-line growth
. Strong competitive position in attractive and growing markets
. Diversified revenue base
. Straightforward operating model and financial structure
. Strong balance sheet, cash and operating cash flow and significant financing flexibility
. Open innovation strategy through partnerships and acquisitions to enhance capability to deliver solutions across target markets
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Computer Systems, Inc.
Mercury