Attached files
| file | filename |
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| EX-99.1 - EXHIBIT 99.1 - MERCURY SYSTEMS INC | a20171221mercurysystemst.htm |
| 8-K - 8-K - MERCURY SYSTEMS INC | a8-k2017121517thunderbird15.htm |
© 2017 Mercury Systems, Inc.
Proposed Acquisition of
Themis Computer
December 21, 2017
2 © 2017 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 acquisition described herein. You can identify these statements by the use of the words “may,”
“will,” “could,” “should,” “would,” “plans,” “expects,” “anticipates,” “continue,” “estimate,” “project,” “intend,” “likely,” “forecast,”
“probable,” “potential,” and similar expressions. These forward-looking statements involve risks and uncertainties that could cause
actual results to differ materially from those projected or anticipated. Such risks and uncertainties include, but are not limited to,
continued funding of defense programs, the timing and amounts of such funding, general economic and business conditions, including
unforeseen weakness in the Company’s markets, effects of continued geopolitical unrest and regional conflicts, competition, changes
in technology and methods of marketing, delays in completing engineering and manufacturing programs, changes in customer order
patterns, changes in product mix, continued success in technological advances and delivering technological innovations, changes in, or
in the U.S. Government’s interpretation of, federal export control or procurement rules and regulations, market acceptance of the
Company's products, shortages in components, production delays or unanticipated expenses due to performance quality issues with
outsourced components, inability to fully realize the expected benefits from acquisitions and restructurings, or delays in realizing such
benefits, challenges in integrating acquired businesses and achieving anticipated synergies, increases in interest rates, changes to
cyber-security regulations and requirements, increases in tax rates, changes to generally accepted accounting principles, difficulties in
retaining key employees and customers, unanticipated costs under fixed-price service and system integration engagements, and
various other factors beyond our control. These risks and uncertainties also include such additional risk factors as are discussed in the
Company's filings with the U.S. Securities and Exchange Commission, including its Annual Report on Form 10-K for the fiscal year ended
June 30, 2017. The Company cautions readers 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.
Use of Non-GAAP (Generally Accepted Accounting Principles) Financial Measures
In addition to reporting financial results in accordance with generally accepted accounting principles, or GAAP, the Company provides
adjusted EBITDA, adjusted income from continuing operations, and adjusted EPS which are non-GAAP financial measures. Adjusted
EBITDA, adjusted income from continuing operations, and adjusted EPS exclude certain non-cash and other specified charges. The
Company believes these non-GAAP financial measures are useful to help investors better understand its past financial performance and
prospects for the future. However, the presentation of adjusted EBITDA, adjusted income from continuing operations and adjusted EPS
is not meant to be considered in isolation or as a substitute for financial information provided in accordance with GAAP. Management
believes the adjusted EBITDA, adjusted income from continuing operations, and adjusted EPS financial measures assist in providing a
more complete understanding of the Company’s underlying operational results and trends, and management uses these measures
along with the corresponding GAAP financial measures to manage the Company’s business, to evaluate its performance compared to
prior periods and the marketplace, and to establish operational goals.
3 © 2017 Mercury Systems, Inc. © 2017 Mercury Systems, Inc.
Agenda
• Transaction overview
• Acquisition strategic rationale
• Review of acquired businesses
• Financial summary
4 © 2017 Mercury Systems, Inc.
Transaction overview
Acquiring Themis Computer – a high-growth company specializing in C4I applications
Strong organic growth driven by established positions on well-funded programs
Delivers growth with strong profitability and cash flows
Acquired business ~$57 mm estimated CY2017 revenue, ~23% adjusted EBITDA margin, pre-synergies
Immediately accretive to adjusted EPS; consistent with Mercury’s target financial model
Aligned with Mercury’s target of 22 – 26% adjusted EBITDA
Cost synergies and achievable revenue synergies
~$1 mm expected annual run-rate cost synergies; numerous revenue opportunities
Highly strategic acquisition consistent with Mercury's recent entry into C4I market
Expected close in Q1 calendar 2018; Pro forma leverage of ~1.5x using existing revolver
5 © 2017 Mercury Systems, Inc.
• Creates platform to further penetrate C4I market organically and through
future acquisitions
• Strengthens Mercury’s position in rugged server market as well as small and
custom form factor computers
• Significantly enhances ability to offer tactical cloud solutions, including high
performance rugged computing, storage and security
• Expands Navy and Army program portfolio and customer footprint, with
complementary positions and expansion opportunities using Mercury’s well-
developed channel
• Leverages Mercury’s investment and capabilities in trusted computing
Acquisition strategic rationale
Highly aligned with our existing strategy and business
6 © 2017 Mercury Systems, Inc.
Company snapshot
Description
• Leader in the design, manufacture and integration of
commercial, SWaP-optimized rugged servers, computers and
storage systems for U.S. and international defense programs
• Products are used in C4I applications for key ground
programs and are deployed on virtually every U.S. Navy
surface ship and submarine
• Locations: Fremont, CA (HQ); Fairfax, VA; Eybens, France
Key Services and Product Offerings
Key Customers Key Programs and Platforms
• Rugged rack-mount servers
primarily for naval C2
applications
• Small form-factor tactical
computers and switches
primarily for ground C2
applications
• Integrated platforms for tactical
cloud-based C2 applications
CPS
JLTV
WIN-T
Aegis
Sub-surface
CG, CVN,
LHD Class
7 © 2017 Mercury Systems, Inc.
Continued market expansion in line with strategy
Aerospace & Defense Platform and Systems Electronics Content
C4I Sensor & Effector Mission Systems
Platform &
Mission Mgmt
C2I Comms EW Radar EO/IR Acoustics Weapons
Avionics /
Vetronics
Command &
Control / Battle
Management
Dedicated
Communications
Electronic
Warfare
Radar
Electro-Optical/
Infrared
Acoustics
Missiles/
Munitions
D
e
fi
n
itio
n
Control &
operation of
platform &
mission systems
Processing &
exploitation of
information
Dissemination of
information
Offensive /
defensive
exploitation of
EM spectrum
Use of RF signal to
detect, track, ID
Thermo-graphic
camera with video
output
Sound pulses to
determine object
location
Seekers, HEL, HPM
Naval Launched
Air Launched
201
8
M
ar
ke
t
($
B
)
$8.1B
5.0%
‘18-22 CAGR
$8.0B
4.4%
‘18-22 CAGR
$3.6B
6.1%
‘18-22 CAGR
$5.6B
4.2%
‘18-22 CAGR
201
8
T
ie
r 2*
M
ar
ke
t
($
B
)
$6.8B
3.5%
‘18-22 CAGR
$6.2B
4.9%
‘18-22 CAGR
$4.7B
4.5%
‘18-22 CAGR
$4.3B
6.1%
‘18-22 CAGR
$4.2B
5.5%
‘18-22 CAGR
$1.1B
7.3%
‘18-22 CAGR
$2.6B
5.3%
‘18-22 CAGR
(1)
(1)
Notes:
*Tier 2 includes embedded computing and subsystems with RF content. Includes US Government and Global Commercial Aerospace Markets
Sources: RSAdvisors research & analysis
(1) Represents carve-out acquisition from Microsemi Corp.
8 © 2017 Mercury Systems, Inc.
Consistent with past M&A transactions
Acquisition
Close Date
Jan 2011 Dec 2011 Aug 2012 Dec 2015 May 2016 Nov 2016 Apr 2017 Jul 2017 Q3 FY18**
Size $31mm $70mm $75mm $10mm $300mm $39mm $40.5mm
Not
Reported
$180mm
Strong Strategic
Rationale
Expand
Addressable
Market
Revenue & Cost
Synergies
Accretive in
Short Term
Seller Founder
Private
Equity
Public Founder
Corporate
Carve-out
Private
Equity
Founder Founder
Private
Equity
Sourcing
Proprietary
Negotiated
Proprietary
Negotiated
Targeted
Auction
Proprietary
Negotiated
Proprietary
Negotiated
Proprietary
Negotiated
Targeted
Auction
Proprietary
Negotiated
Targeted
Auction
Learn Market
Add
Capabilities
Scale Business
Leverage
Channel
Maintain
Conservative
Balance Sheet
Disciplined
Approach to M&A
* Represents carve-out acquisition from Microsemi Corp.
** Projected transaction close
*
~$575mm of capital deployed in ~24 months
9 © 2017 Mercury Systems, Inc.
Financial summary
• $180 million purchase price
• ~13x 12/31/17E pro-forma LTM adjusted EBITDA, pre-synergies
• Estimated ~ 1 million of run-rate cost synergies
Purchase Price
Attractive Financial Profile
• Strong historical and projected revenue growth
• Aligned with Mercury’s existing adjusted EBITDA margin target model
• Expected to be immediately accretive to Adjusted EPS
Financing at Attractive
Rates and Ample Liquidity
• Funded through existing unused revolving credit facility
• ~1.5x PF Net Debt / CY’17E EBITDA
• L+150 interest on revolver borrowings
Expected Rapid Close
• Unanimously approved by each company’s Board of Directors
• Subject to customary regulatory approvals
• Expected to close during Mercury’s fiscal third quarter ending March 31, 2018
10 © 2017 Mercury Systems, Inc.
• Platform acquisition aligned with C4I market penetration strategy
• Access to new customers and programs
• Opportunities for cost and revenue synergies
• Accretive to Adj. EPS and aligned with Adj. EBITDA margin target
• Leverages balance sheet at low cost of capital
• Continued financial flexibility for additional acquisitions
Summary