UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of report (Date of earliest event reported) September 8, 2005
Mercury Computer Systems, Inc.
(Exact Name of Registrant as Specified in 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) |
Registrant’s telephone number, including area code (978) 256-1300
N/A
(Former Name or Former Address, if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
| ¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| ¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
| Item 7.01 | Regulation FD Disclosure. |
The management of Mercury Computer Systems, Inc. (“Mercury”) will present an overview of the Company’s business on Thursday, September 8, 2005 at the Kaufman Bros., L.P. Eighth Annual Investor 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 7.01 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: September 8, 2005 | 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 September 8, 2005 * |
| * | Filed herewith. |
Exhibit 99.1
Kaufman Bros. Eighth Annual Investor Conference
September 8, 2005
Bob Hult, SVP, Operations & Finance, Chief Financial Officer
Mark Skalabrin, VP & GM, Advanced Solutions Business
© 2005 Mercury Computer 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 anticipated fiscal 2006 business performance, market opportunities, and the result of acquisitions. You can identify these 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. Such risks and uncertainties include, but are not limited to, general economic and business conditions, including unforeseen economic weakness in the Company’s markets, effects of continued geo-political unrest and regional conflicts, 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, timing of such funding, market acceptance of the Company’s products, shortages in components, production delays due to performance quality issues with outsourced components, inability to fully realize the expected benefits from acquisitions or delays in realizing such benefits, challenges in integrating acquired businesses and achieving anticipated synergies, difficulties in retaining key employees and customers, and various other factors beyond the Company’s control. These risks and uncertainties also include such additional risk factors as are discussed in the Company’s recent filings with the U.S. Securities and Exchange Commission, including its Quarterly Report on Form 10-Q for the quarter ended March 31, 2005. 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. The Company may, in its discretion, provide information in future public announcements regarding its outlook that may be of interest to the investment community. The format and extent of future outlooks may be different from the format and extent of the information contained in this presentation.
USE OF NON-GAAP INFORMATION
References by the Company to non-GAAP operating income and non-GAAP earnings per share refer to costs and expenses or earnings per share excluding equity-based compensation cost. GAAP requires that this cost be included in costs and expenses and accordingly used to determine operating income and earnings per share. The Company’s management uses non-GAAP operating income, and associated non-GAAP net income (which is the basis for non-GAAP earnings per share) to make operational and investment decisions, and the Company believes that they are among several useful measures for an enhanced understanding of its operating results. Excluding the equity compensation cost from GAAP operating income will enable investors to perform a meaningful comparison of the Company’s operating results to prior periods. In these prior periods, the Company’s GAAP financial results were not required to include expenses associated with stock option compensation, and now these expenses will be included within operating expenses in the GAAP presentation. The Company also believes that providing non-GAAP earnings per share affords investors a view of earnings that may be more easily compared to peer companies. The Company believes these non-GAAP measures will aid investors’ overall understanding of its financial results by providing a higher degree of transparency for certain expenses, particularly those related to equity-based compensation costs, as well as providing a level of disclosure that will help investors understand how the Company plans and measures its own business. However, non-GAAP net income should be construed neither as an alternative to GAAP net income or earnings per share as an indicator of its operating performance, nor as a substitute for cash flow from operations as a measure of liquidity, because the items excluded from the non-GAAP measures often have a material impact on the Company’s results of operations. Therefore, management does, and investors should, use non-GAAP measures in conjunction with the Company’s reported GAAP results.
2 © 2005 Mercury Computer Systems, Inc.
Company Overview
FY05 Revenues: $250 M
60%*
Defense Electronics
20%*
Imaging & Visualization Solutions
20%*
OEM Solutions
June Fiscal Year End
*Approximate FY05 revenue composition
Founded in 1981
Leading provider of innovative, engineered computing solutions for compute-intensive applications Office locations in U.S., UK, France, Germany and Japan; R&D centers in U.S., France, and Germany 876 employees worldwide; 420 engineers Investment in knowledge of customer applications
3 © 2005 Mercury Computer Systems, Inc.
Mercury Technology in Action
Data Acquisition
Sensor data- scanned wafers
J-STARS Aircraft
Mobile C-Arm (Digital X-Ray)
Image and Signal Processing
MERCURY TECHNOLOGY
Visualization
Wafer Inspection
Radar Image Display
3-D Image Reconstruction
4
© 2005 Mercury Computer Systems, Inc.
Defense Business
© 2005 Mercury Computer Systems, Inc.
Defense Business
Deployed across all environments
Air, land, and sea platforms Commercial, rugged, and conduction- and spray-cooled configurations
Provide full life-cycle support
From R&D through deployment
Positioned for growth
Driving innovation for the next-generation applications
Representative
6
© 2005 Mercury Computer Systems, Inc.
Markets
Intelligence, surveillance, and reconnaissance (ISR) applications aid in critical decision making
Radar
Signals intelligence
Communications Electronics
Sonar
Smart weapons Data exploitation Imagery
LAND SEA AIR
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© 2005 Mercury Computer Systems, Inc.
Value Proposition
Real-time signal and image processing applications
Transmit Acquire Process Visualize
Sensor Complex signal returns Mathematical Image Display Transformations
Sensor streaming Scalable Real time
Embedded (real estate, environmental, cooling constraints)
8 © 2005 Mercury Computer Systems, Inc.
Difficult Environments
PROBLEM
Temperature Humidity Sand Dust Shock Vibration Corrosive elements
SOLUTION
Conduction-, air- and spray-cooled configurations
9 © 2005 Mercury Computer Systems, Inc.
Growth Drivers
DoD transformation agenda/ISR initiative Expansion to lower echelons Network Centric Warfare $3 Billion Market Opportunity
Available Market $3 B
Smart Weapons Image & Data Exploitation Software Radio In-theater procurement
Served Market $380 M
Today 5 Years
*Fiscal 2005 revenues were $148 M
10 © 2005 Mercury Computer Systems, Inc.
Advanced Solutions Business
Mark Skalabrin, Vice President & General Manager
© 2005 Mercury Computer Systems, Inc.
Markets
Delivering specialized processing solutions for demanding commercial OEM applications
Semiconductor capital equipment market
Wafer and reticle inspection
Systems that process streaming data to find defects
Mask writing
Systems that generate patterns to write to semiconductor and flat-panel masks
Communications computing market
Wireless infrastructure
Next-generation packet and signal processing solutions
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© 2005 Mercury Computer Systems, Inc.
Value Proposition
Accelerating customers’ advanced algorithms to market
Acquire Detect Classify Analyze
Sensor Data-
Image Correction Offline Classification Scanned Wafers & Defect Detection & Analysis or Reticles
Searching for defects on silicon wafers or reticles Scalable compute, streaming I/O, and interconnect bandwidth Enabling customer algorithm performance enhancements Software-programmable solutions
13 © 2005 Mercury Computer Systems, Inc.
Growth Drivers
Semiconductor capital equipment solutions
Processing needs continue to outpace mainstream computing Data rates and algorithm complexity increase New applications on the horizon Subject to market cyclicality
New market opportunities in telecommunications
Industry emerging from downturn
Equipment makers rely more on external innovation New standards will replace proprietary implementations in data and user plane, e.g., RapidIO®
Available Market $1.5 B
Served Market $170 M
Today 3 Years 5 years
*Fiscal 2005 revenues were $48 M
Telecommunications
Semiconductor
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© 2005 Mercury Computer Systems, Inc. $1.5 Billion Market Opportunity
Commercial Imaging and Visualization Business
© 2005 Mercury Computer Systems, Inc.
Value Proposition
Increase data throughput, dramatically accelerating imaging workflow
Acquire Process Visualize Distribute Archive (PACS)
Data Reconstruction Volume Rendering 2D (RADIN) & 3D RADIN Acquisition & 3D Visualization (ExamineRT™ Software Sensor Server/Thin Client) Correction
Image reconstruction, processing, and visualization All steps from scanner output to end user Embedded components and integrated solutions Broad end-to-end medical systems OEM Solution portfolio
16 © 2005 Mercury Computer Systems, Inc.
Market Opportunities
Geosciences (oil & gas) Simulation
17 © 2005 Mercury Computer Systems, Inc.
Growth Drivers
Growing need for intensive computing capabilities
Increased volume of data Enhanced image accuracy Real-time 3D: interventional
Market opportunities
Diagnostic Medical Imaging Biotechnology Geosciences
Picture Archiving and Communications Systems (PACS)
Available Market $1.7 B
Served Market $250 M
Today 3 Years 5 years
*Fiscal 2005 revenues were $49 M
BioTechnology 3D Diagnostic Imaging PACS
3D Visualization Modality
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© 2005 Mercury Computer Systems, Inc. $1.7 Billion Market Opportunity
Financial Overview
Bob Hult, SVP, Operations & Finance Chief Financial Officer
© 2005 Mercury Computer Systems, Inc.
Value Creation: Growth
Revenue ($M)
June Fiscal Year End $295-305* $250 $186 $180 $180 $150
2001A 2002A 2003A 2004A 2005A 2006E
*Per Company guidance, July 28, 2005 earnings press release
2005: Record revenues
2006: Projected revenue growth 20%
(at midpoint of guidance range)
DEG ~20%+
IVS ~35%+
OSG ~Flat
FY06 projected growth rates
© 2005 Mercury Computer Systems, Inc.
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Fiscal 2005 Strong Performance
FY Ended June 30
($M) 2005 2004 Revenues $ 250.2 $ 185.6 Gross Margin % 66.5% 66.2% Op. Income 42.5 31.6 Net Income $ 30.2 $ 22.9 EPS (diluted) $ 1.25 $ 1.03
Fiscal 2005 record revenues, 35% YOY growth Fiscal 2005 record operating profit, 32% YOY growth
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© 2005 Mercury Computer Systems, Inc.
Fiscal Year 2006 Guidance
Fiscal Year Ending June 30, 2006
Revenues ($M) $295-305
Gross Margin 66-67%
GAAP Non-GAAP
Operating Income 12% 16%
EPS $0.97-1.02 $1.35-1.40
Impact of equity-based compensation costs related to
FAS 123(R) excluded from Non-GAAP
Acquisition-related amortization of approximately $6 M
included in GAAP and Non-GAAP
Notes:
1) Figures in millions, except percent and per share data which includes adjustment for contingent convertibles, in accordance with GAAP
2) Company guidance, July 28, 2005 Q4 earnings press release
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© 2005 Mercury Computer Systems, Inc.
Q1 Fiscal 2006 Guidance
Quarter Ending September 30, 2005
Revenues ($M) $60-63
GAAP Non-GAAP
Operating Income 6% 10%
EPS $0.11-0.13 $0.18-0.20
Impact of equity-based compensation costs related to FAS 123(R) excluded from NON-GAAP Acquisition-related amortization of approximately $1 M included in GAAP and Non-GAAP
Notes:
1) Figures in millions, except percent and per share data which includes adjustment for contingent convertibles, in accordance with GAAP
2) Company guidance, July 28, 2005 Q4 earnings press release
© 2005 Mercury Computer Systems, Inc.
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Timeless Business Model
Guidance Timeless FY04 FY05 FY06* Business Model
Revenue 100% 100% 100% 100% Gross Margin 67% 66% 66-67% 66-67% SG&A 30% 29% 29-30% R&D 21% 20% 20-21%
Income from Operations 17% 17% 16% 16-18%
Notes:
Acquisition-related amortization of intangibles ~ 1%, ~1%, ~2% FY04, FY05, FY06, resp. FY06 Non-GAAP guidance per July 28, 2005 earnings call. FY06 GAAP Income from operations 12%
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© 2005 Mercury Computer Systems, Inc.
Strong Balance Sheet
Historically strong balance sheet Supports open innovation growth agenda
(Quarter ended June 30, 2005)*
Cash and Equivalents $228 Total Current Assets $242 Total Assets $377
Total Debt $136 Total Liabilities $179
Stockholders’ Equity $198
*Prior to SoHard AG & Echotek Corp. closings
© 2005 Mercury Computer Systems, Inc.
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Growth through Open Innovation
Extend Mercury’s capabilities with partnerships, alliances, and acquisitions
Focused on Intellectual Property (IP), technology “fit” Accretive within first year Consider the size of the deal Integrate into the company
Five recent acquisitions
TGS Group, Advanced Radio Corporation, Momentum Computer, Inc., SoHard AG, Echotek Corp.
Expanding list of alliances/partners
IBM, NVIDIA Corporation, Ziehm Imaging, Massachusetts General Hospital (MGH)
© 2005 Mercury Computer Systems, Inc.
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MRCY Summary
Strong competitive position in attractive and growing markets Diversified revenue base – defense and commercial Straightforward operating model and financial structure Strong balance sheet, operating cash flow with significant financing flexibility Open innovation strategy through partnerships and acquisitions to enhance capability to deliver solutions across target markets
Sustain a 25% or better long-term revenue growth rate
© 2005 Mercury Computer Systems, Inc.
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NASDAQ: MRCY
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© 2005 Mercury Computer Systems, Inc.