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): February 6, 2007
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 Mercury’s business on Tuesday, February 6, 2007 at the Cowen and Company 28th annual aerospace/defense 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 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, as well as the use of non-GAAP financial measures included therein.
Item 9.01. Financial Statements and Exhibits.
| (d) | Exhibits. |
| Exhibit No. | Description | |
| 99.1 | Presentation materials dated February 6, 2007. |
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 hereunto duly authorized.
| MERCURY COMPUTER SYSTEMS, INC. | ||||
| (Registrant) | ||||
| Date: February 6, 2007 | By: | /s/ Alex N. Braverman | ||
| Alex N. Braverman | ||||
| Vice President, Controller and | ||||
| Chief Accounting Officer | ||||
EXHIBIT INDEX
| Exhibit No. | Description | |
| 99.1 | Presentation materials dated February 6, 2007. |
 © 2005 Mercury Computer Systems, Inc. Jay Bertelli, President, Chief Executive Officer & Chairman Bob Hult, SVP, Chief Financial Officer Cowen and Company 28th Annual Aerospace/Defense Conference February 6, 2007 |
 © 2005 Mercury Computer Systems, Inc. 2 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 2007 business performance and beyond. 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 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, continued funding of defense programs, the timing of such funding, changes in the U.S.
Government's interpretation of federal procurement rules and regulations,
market acceptance of the Company's products, shortages in components, production delays due to performance quality issues with outsourced components, the
inability to fully realize the expected benefits from acquisitions or delays
in realizing such benefits, challenges in integrating acquired businesses and achieving anticipated synergies, and difficulties in retaining key customers. 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 Annual Report on Form 10-K for the year ended
June 30, 2006. 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 non-GAAP financial
measures adjusted to exclude certain specified charges, which the Company believes are useful to help investors better understand its past financial performance and prospects for the future. However, the presentation of non-GAAP financial measures is not meant to be
considered in isolation or as a substitute for financial information
provided in accordance with GAAP. Management believes these non-GAAP 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 their 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. A reconciliation of GAAP to non-GAAP financial measures discussed
in this presentation is contained in the company’s Second Quarter Fiscal Year 2007 earnings release, which can be found on our website at www.mc.com/mediacenter/pr/. |
 © 2005 Mercury Computer Systems, Inc. 3 Mercury at a Glance • HQ in Chelmsford, MA Sales, support, and R&D centers in U.S., Europe, and Japan 823 employees worldwide • Founded in 1983 Seven acquisitions since 2004 • FY06 revenues: $236M 56/44% defense/commercial • Industry focus areas: Aerospace & Defense Life Sciences Semiconductor Equipment Geosciences Communications • Nasdaq: MRCY |
   © 2005 Mercury Computer Systems, Inc. 4 What We Do Architect specialized computing solutions Mercury software, systems engineering, and domain expertise Cell BE, FPGA, GPU, Multicore, Pentium DSP Aerospace & Defense Life Sciences Communications Video Semiconductor Geosciences Processor Platforms Compute-intensive applications |
 © 2005 Mercury Computer Systems, Inc. 5 Diverse Base of Customers and Targets Commercial Defense |
 © 2005 Mercury Computer Systems, Inc. 6 Investment Highlights • Data explosion across multiple markets demands skills in Mercury’s technology sweet spot • Well-positioned for rebound in defense market • Large opportunity in 3D medical imaging • Leveraging investments into adjacent and new markets • Cost reductions create operating leverage opportunity when revenue growth resumes |
 © 2005 Mercury Computer Systems, Inc. 7 New Data-Hungry Applications in Multiple Markets • Improving sensors • Large data sets • Growing need for intensive computing • Enhanced image accuracy • Real-time 3D Multi-slice CT (32/64) 4 Gbytes typical OIV/VolumeViz large data set module 100 Gbytes typical |
 © 2005 Mercury Computer Systems, Inc. 8 Our Unique Competitive Advantages • Unique skill set and software for processing and visualizing data • Mercury’s heterogeneous architectures enable systems to perform optimally in demanding applications • Libraries and tools for multi-core, multi- processor computing to economically solve the most challenging compute problems • Domain expertise in niche markets Helping our Customers to Compete |
 © 2005 Mercury Computer Systems, Inc. 9 Defense: Well-Positioned for Rebound • Strong customer base 20 years of experience COTS model • Technology leadership Strong position in large, complex radar systems and Signals Intelligence • Broadened product portfolio Radio Frequency, Data Acquisition, Battlefield Computing • Strengthened pipeline 2x increase in business opportunities in 8 months |
 © 2005 Mercury Computer Systems, Inc. 10 Defense Embedded Computing Market Potential 90-95% Primes 5-10% COTS Opportunity for Collaborative COTS ® Source: The Embedded Computing Market 2006, Electronic Trend Publications Inc & Internal
Estimates. Defense Weapons & C3 Boards and Systems A $14.2 Billion Available Market |
 © 2005 Mercury Computer Systems, Inc. 11 Defense 2006 Design Wins $77 - $94 Million 29 Total $30 - $35 Million 13 Other $7 - $9 Million 3 Signals Intelligence $40 - $50 Million 13 Radar Revenue potential 3 – 5 Years: |
     © 2005 Mercury Computer Systems, Inc. 12 The Challenges of Today’s Warfare Network Centric Operations Combat ID Precision Targeting Information Superiority Multi-Mission Data Fusion Data Explosion Leveraging COTS Embedded Solutions |
 © 2005 Mercury Computer Systems, Inc. 13 Radar Leadership Positions Us for New Programs • Airborne surveillance: MP-RTIP Global Hawk (15 platforms) JSTARS and AWACS upgrade potential • Tactical fighters: F-35, F-22, F-16 • Shipboard missile defense: Aegis • UAV: Predator LYNX SAR • Land-based/mobile radar Aegis (BMD) JSF (F-35) |
 © 2005 Mercury Computer Systems, Inc. 14 Medical Imaging: Large Opportunity Mercury Segments DMI – Diagnostic Medical Imaging modalities Market growth of 3% to 10% PACS – Picture Archiving and Communications System Market growth of 12+% and higher growth in 3D Microscopy & Biotech Visualization High market growth of 20+% * Source: Medical Imaging. BBC Research. July 2005. Estimated $10.4 Billion U.S. Market by 2009* |
 © 2005 Mercury Computer Systems, Inc. 15 Trends Driving Strong Medical Imaging Growth • Aging population More diagnostic imaging • Better acquisition sensors More data More compute intensive tasks • Interventional radiology a reality with more cost-effective compute power enabling real time visualization • PET, CT and Ultrasound high growth, MRI and XR flat • PACS growing worldwide |
 © 2005 Mercury Computer Systems, Inc. 16 Revolutionary 3D Transformation • The market requires a more productive means of visualization throughout the medical imaging workflow Acquisition Reconstruction Visualization Distribution Advanced Research Professional Services & Support |
 © 2005 Mercury Computer Systems, Inc. 17 Unique Strengths in Life Sciences • Medical Imaging 19 years of experience Unique skill set for emerging 3D market • Successful introduction of software applications and full systems for end users • Expanding product portfolio PACS 3D visualization server MRI data acquisition • End-to-end medical image management |
 © 2005 Mercury Computer Systems, Inc. 18 World’s First Thin Client/Server • Visage ™ CS Thin Client/Server The world’s first fully scalable thin client/server Instant interactive viewing for 2D, 3D and 4D studies Optimal use of existing PCs throughout the enterprise Tight integration with PACS and modalities • NEW! Visage ™ Cardiac Analysis* Thin client access to cardiac analysis functionality Comprehensive package including LV and coronaries * PRELIMINARY - work in progress 2D/3D Anytime, Anywhere |
 © 2005 Mercury Computer Systems, Inc. 19 Life Sciences 2006 Design Wins 14 Total 1 Pre-Clinical Drug 1 Microscopy 1 Surgical Navigation 5 Diagnostic Medical Imaging 6 PACS Revenue potential: $10 - $15 Million / Year |
 © 2005 Mercury Computer Systems, Inc. 20 CIV Transition in Revenues FY05 – FY07 0 10 20 30 40 50 60 FY05 FY06 FY07 Fcst New Legacy Legacy New 83% 17% 59% 41% 34% 66% |
 © 2005 Mercury Computer Systems, Inc. 21 Leveraging Technology into New Markets • Increasing multi-market leverage of R&D investments Includes both organically developed and acquired technology Significant trend reversal Market Investments Leveraged Investments Cell Solutions 3D Imaging Software A/D & D/A hardware Algorithm Libraries GPU Acceleration FPGA Solutions Radar SIGINT SDR Semi Life Sciences Biotech Comms Seismic NavSim GPP Solutions • Major competitive advantage Competitors in any one segment must overcome the leverage advantage • Required to enter market niches Most market segments are too small to support standalone investment |
 © 2005 Mercury Computer Systems, Inc. 22 Leverage Example: Cell BE-based Solutions Cell Solutions Medical/ Biotech Radar Video Gaming Semi Creation Oil & Gas Intelligence National Labs • 5-100x faster than conventional microprocessors • A strong match to Mercury’s unique capabilities Architected to solve problems in the same way Mercury has been solving problems for many years • Creating value in every major Mercury market segment Driving next generation engagements with existing customers Bridging us back to past customers • Leading to new market opportunities Over 2,000 leads • Established significant relationship with IBM |
 © 2005 Mercury Computer Systems, Inc. 23 Semiconductor Creation Market • Supplying application- enabling solutions to leading OEMs • Growth driven by production design wins Mask generation Wafer inspection Reticle inspection • Positioned for the next wave Mercury Cell BE-based solutions uniquely meet market needs Emerging new applications for Mercury solutions Strong Organic Growth 47% CAGR FY 2002-2006 Mercury Semiconductor Segment Revenue FY 2002 – FY 2006 $7 M FY 2002 $33 M FY 2006 |
 © 2005 Mercury Computer Systems, Inc. 24 Growth Opportunity: EDA Mask Synthesis • Compute-intensive processing required to prepare designs for mask creation Resolution Enhancement Technology (RET) Design For Manufacturing (DFM) • Mercury Cell BE-based solutions to provide over 10 Teraflops to speed application by 10x to 100x • Partnership with Mentor Graphics to deploy first Cell BE- based platform for EDA market |
 © 2005 Mercury Computer Systems, Inc. 25 New Growth Opportunity: Oil & Gas • Competitive advantages in computing and visualization Performance/watt/cubic inch Extremely large data sets • Computing platforms Seismic acquisition and processing • Visualization Seismic QC and interpretation Horizons, faults, well bores, etc. Core analysis Drilling planning Reservoir models |
 © 2005 Mercury Computer Systems, Inc. 26 New Growth Opportunity: Asset Protection • Forest fire detection and monitoring • Precision agriculture • Border surveillance • Oil and gas pipeline monitoring • Power line monitoring • Surveillance and reconnaissance • Commercial and military avionics Synthetic Vision and Sensor Data Fusion |
 © 2005 Mercury Computer Systems, Inc. 27 New Growth Opportunity: Communications • Communications market potential System development platforms for wireless infrastructure applications • Growth Opportunity AdvancedTCA DSP and FPGA compute solutions • Example: Satellite ground stations for Ancillary Terrestrial Component (ATC) |
 © 2005 Mercury Computer Systems, Inc. 28 Semiconductor and Communications 2006 Design Wins $31 - $63 Million 6 Total $6 - $18 Million 3 Communications: • ATC • NextGen Base Stations $25 - $45 Million 3 Semiconductor: • Reticle Inspection • EDA • Alignment Revenue potential / Year: |
 © 2005 Mercury Computer Systems, Inc. Financial Overview |
 © 2005 Mercury Computer Systems, Inc. 30 Revenue ($M) $86 $107 $141 $181 $150 $180 $186 250 $236 $230* 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007E Revenue Follows Technology Cycles Echotek – A/D-D/A June Fiscal Year End *Per Company guidance, January 25, 2007 earnings conference call PowerPC RACE++ MP-510 Cell BE Processor DSP/GPU / FPGA Processors Northstar Ensemble PowerStream 7000 TGS – 3D Momentum - SBC SoHard – PACS ARC - RF Rapid IO |
 © 2005 Mercury Computer Systems, Inc. 31 GAAP Net Income and EBITDA *Per Company guidance, January 25, 2007 earnings conference call EBITDA excludes the following charges from Net Income: Interest*Expense, Taxes, Depreciation and Amortization:
$(16.2) $(18.1) $30.2 $22.9 $22.7 (30) (20) (10) - 10 20 30 40 50 60 70 2003 2004 2005 2006 2007E EBIDTA Net Income $42.0 $57.0 $4.6 $(3.6) $40.9 $M 2003 2004 2005 2006 2007E Interest 0.9 1.4 4.2 4.1 4.2 Taxes 10.2 9.3 12.9 (0.9) (7.8) D&A 8.2 7.3 9.7 17.6 18.1 * |
 © 2005 Mercury Computer Systems, Inc. 32 Focus on Working Capital • Supply chain transformation Competitive advantage for Mercury and customers • Customer satisfaction DSO target 45 days Inventory Turns 4.9 6.9 5.4 4.6 4.4 8.0 2003 2004 2005 2006 2007E Model Days Sales Outstanding 43 51 53 59 58 45 2003 2004 2005 2006 2007E Model |
 © 2005 Mercury Computer Systems, Inc. 33 Strong Balance Sheet Historically strong balance sheet Net cash positive * Convertible senior notes offering Quarter ended December 31, 2006 Cash and Equivalents $137 Total Current Assets $172 Total Assets $377 Total Debt $125 Total Liabilities $189 Stockholders’ Equity $188 * |
 © 2005 Mercury Computer Systems, Inc. 34 Commitment to Timeless Business Model Non-GAAP FY04 FY05 FY06 Guidance FY07* Timeless Business Model Revenue 100% 100% 100% 100% 100% Gross Margin 67% 66% 62% 56% 60+% SG&A 30% 29% 34% R&D 21% 20% 25% Income from Operations 17% 17% 3% (4%) 16-18% *Per Company guidance, January 25, 2007 earnings conference call
|
 © 2005 Mercury Computer Systems, Inc. 35 Q3 Fiscal Year 2007 Guidance • Impact of equity-based compensation costs related to FAS 123(R) of approximately $2.8M excluded from non- GAAP • Acquisition-related amortization of approximately $1.8 M excluded from non-GAAP Notes: 1) Figures in millions, except percent and per share data which includes adjustment for contingent convertibles, in accordance with GAAP 2) Company guidance, January 25, 2007 earnings conference call Quarter Ending March 31, 2007 Revenues ($M) $55 GAAP Non-GAAP Gross Margin 53% 53% EPS $(0.31) $(0.18) |
 © 2005 Mercury Computer Systems, Inc. 36 Fiscal Year 2007 Guidance Fiscal Year Ending June 30, 2007 Revenues ($M) $230 GAAP Non-GAAP Gross Margin 56% 56% EPS $(0.85) $(0.13) Notes: 1) Figures in millions, except percent and per share data which includes adjustment for contingent convertibles, in accordance with GAAP 2) Company guidance, January 25, 2007 earnings conference call • Impact of equity-based compensation costs related to FAS 123(R) of approximately $10.7M excluded from non- GAAP • Acquisition-related amortization of approximately $7.1M, Q1 in-process R&D charge of $3.1M, and restructuring and impairment charges of $1.1M excluded from non- GAAP |
 © 2005 Mercury Computer Systems, Inc. 37 Investment Highlights • Data explosion across multiple markets demands skills in Mercury’s technology sweet spot • Well-positioned for rebound in defense market • Large opportunity in 3D medical imaging • Leveraging investments into adjacent and new markets • Cost reductions create operating leverage opportunity when revenue growth resumes |
 © 2005 Mercury Computer Systems, Inc. 38 www.mc.com NASDAQ: MRCY |