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FORM 8-K

 

 

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): August 9, 2011

 

 

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.)

201 Riverneck Road, Chelmsford, Massachusetts 01824

(Address of Principal Executive Offices) (Zip Code)

Registrant’s telephone number, including area code: (978) 256-1300

Not Applicable

(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 August 9, 2011 at the Morgan Keegan Security & Defense Conference to be held on August 9, 2011 in New York, New York. 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 August 9, 2011.

 

2

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.

 

Dated: August 9, 2011     MERCURY COMPUTER SYSTEMS, INC.
    By:   /s/    ROBERT E. HULT        
      Robert E. Hult
     

Senior Vice President, Chief Financial

Officer, and Treasurer

 

3

Exhibit Index

 

Exhibit No.

   

Description

99.1

    Presentation materials dated August 9, 2011.

 

4

PRESENTATION
©
2011 Mercury Computer Systems, Inc.
Investor Show
Mark Aslett
President & CEO
Bob Hult
SVP & CFO
Exhibit 99.1

©
2011 Mercury Computer Systems, Inc.
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
fiscal
2011
business
performance
and
beyond
and
the
Company’s
plans
for
growth
and
improvement
in
profitability
and
cash
flow.
You
can
identify
these
statements
by
the
use
of
the
words
“may,”
“will,”
“could,”
“should,”
“plans,”
“expects,”
“anticipates,”
“continue,”
“estimate,”
“project,”
“intend,”
“likely,”
“probable,”
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,
inability
to
fully
realize
the
expected
benefits
from
acquisitions
and
divestitures
or
delays
in
realizing
such
benefits,
challenges
in
integrating
acquired
businesses
and
achieving
anticipated
synergies,
changes
to
export
regulations,
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,
2010.
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;
free
cash
flow;
and
adjusted
working
capital,
which
are
non-GAAP
financial
measures.
Adjusted
EBITDA
excludes
certain
non-cash
and
other
specified
charges.
Free
cash
flow
is
defined
as
cash
flow
from
operating
activities
less
capital
expenditures.
Adjusted
working
capital
is
defined
as
accounts
receivable,
net
of
allowance
for
doubtful
accounts
and
inventory
less
accounts
payable
and
accrued
expenses.
The
Company
believes
these
non-GAAP
financial
measures
are
useful
to
help
investors
more
completely
understand
its
past
financial
performance
and
prospects
for
the
future.
However,
the
presentation
of
adjusted
EBITDA;
free
cash
flow;
and
adjusted
working
capital
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;
free
cash
flow;
and
adjusted
working
capital
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.
Forward-Looking Safe Harbor Statement
2

©
2011 Mercury Computer Systems, Inc.
©
2011 Mercury Computer Systems, Inc.
•
MRCY on NASDAQ
•
Real-time digital image, signal
and sensor processing solutions
•
Focused on DoD high priorities:
-
C4ISR;
Electronic
Warfare;    
Missile Defense
•
Deployed on ~300 programs with
25+ Primes 
•
$229M FY11 revenues; 18% Adj.
EBITDA margin; 602 employees
•
Defense revenue ~80% and      
61% growth FY07 to FY11
Best-of-breed provider of open, commercially developed,
application-ready and multi-INT subsystems for the ISR market
Introducing Mercury Computer Systems
3

©
2011 Mercury Computer Systems, Inc.
We have successfully transformed the business and poised
Mercury for growth
4

©
2011 Mercury Computer Systems, Inc.
Mercury investment highlights
Pure-play C4ISR and defense electronics company entrenched on a
diverse mix of programs aligned with DoD priorities
Pure-play C4ISR and defense electronics company entrenched on a
diverse mix of programs aligned with DoD priorities
Best-of-breed provider of specialized computing subsystems  
targeting the well funded and growing C4ISR market
Best-of-breed provider of specialized computing subsystems  
targeting the well funded and growing C4ISR market
Increased demand for ISR and a rapidly evolving threat environment
driving greater demand for our products, solutions and capabilities
Increased demand for ISR and a rapidly evolving threat environment
driving greater demand for our products, solutions and capabilities
Well positioned to benefit from DoD procurement reform requiring
more affordable and rapidly developed upgrades leading to increased
outsourcing by the large Defense Primes
Well positioned to benefit from DoD procurement reform requiring
more affordable and rapidly developed upgrades leading to increased
outsourcing by the large Defense Primes
Well-defined strategy with a demonstrated track record
Well-defined strategy with a demonstrated track record
Successful transformation has positioned the business for strong
organic growth augmented through strategic acquisitions
Successful transformation has positioned the business for strong
organic growth augmented through strategic acquisitions
5

•
DoD spending projection is $708 billion for
2011
•
Defense procurement reform well underway
•
Our market opportunity is defined by the
growing demand for specialized embedded
defense computing solutions
•
C4ISR (Command, Control, Communications,
Computers, Intelligence, Surveillance and
Reconnaissance) is a $43 billion market
segment and a high priority for the defense
department
Procurement reform increasing opportunity for Mercury
C4ISR, Electronic Warfare and Missile Defense are DoD
priority areas and continue to be well funded
6
©
2011 Mercury Computer Systems, Inc.

•
Provide the war fighting capability  
we need with the dollars we have
•
Restore affordability to Defense 
goods and services procurement
•
Shorten procurement cycles; focus  
on upgrades to address urgent needs
•
Obtain greater efficiency, 
affordability and productivity in
Defense spending
•
Avoid program turbulence and
maintain a vibrant and healthy
Defense industry
©
2011 Mercury Computer Systems, Inc.
As a direct result of procurement reform
Primes are
outsourcing to best-of-breed companies like Mercury
Defense procurement reform: Shifting DoD priorities
favor more affordable upgrades of existing platforms
7
•
Reduce risk given DoD shift to      
firm fixed price contract awards
•
Primes shift from high fixed cost     
to variable cost model
•
Affordably upgrade existing
platforms with new capabilities
•
Compress development and
deployment cycles
•
Differentiate solutions with less
internal R&D dollars
•
Increase success rate on new
programs and re-competes
Government
Primes

©
2011 Mercury Computer Systems, Inc.
•
Some C4ISR focus among broader capabilities set
•
Unwanted exposure to vulnerable portions of the DoD budget
•
Risk associated with government insourcing of services functions
•
Some C4ISR focus among broader capabilities set
•
Unwanted exposure to vulnerable portions of the DoD budget
•
Risk associated with government insourcing of services functions
•
Strong C4ISR focus. Limited exposure to broader DoD budget risk
•
Public asset with scale that provides clear C4ISR investment thesis
•
Business model that anticipated and expects to benefit from
shifting DoD priorities and Defense  procurement reform
•
Well positioned for growth and higher returns in a consolidating
industry
•
Several private C4ISR companies with no near-term IPO plans
•
Several C4ISR companies have recently been acquired
•
Several private C4ISR companies with no near-term IPO plans
•
Several C4ISR companies have recently been acquired
C4ISR landscape –
a scarcity of public investment
opportunities
8
•
C4ISR assets embedded in broader defense capabilities portfolio
•
Focus split between commercial aerospace and defense industries
•
C4ISR assets embedded in broader defense capabilities portfolio
•
Focus split between commercial aerospace and defense industries
•
Engaged across all sectors of the defense industry
•
Limited growth due to exposure to broader DoD budget
•
Engaged across all sectors of the defense industry
•
Limited growth due to exposure to broader DoD budget
Defense
Primes
Defense
Primes
Large Cap
Diversified
Large Cap
Diversified
Semi-
Specialized
Small/Mid Cap
Semi-
Specialized
Small/Mid Cap
Private or
Acquired
Private or
Acquired
Pure-Play 
C4ISR &
Defense
Electronics
Pure-Play 
C4ISR &
Defense
Electronics

©
2011 Mercury Computer Systems, Inc.
9
Deployed on approximately 300 programs with 25+ Primes
We’ve been making customers successful for 30 years
Global Hawk
BAMS
Global Hawk
BAMS
F-35
F-35
SEWIP
SEWIP
AEGIS
AEGIS Ashore
AEGIS
AEGIS Ashore
Guardrail
Guardrail
Sampson
Sampson
Patriot
Patriot
Predator
Predator
Reaper
WAAS
Reaper
WAAS
Ocean Eye
Ocean Eye
P8
P8
THAAD
THAAD
F-16
F-16
JCREW 3.3
JCREW 3.3
SSEE (E)
SSEE (E)

©
2011 Mercury Computer Systems, Inc.
•
State-of-the-art, mixed
silicon, real-time embedded
signal processing and multi-
computing solutions
•
Advanced size, weight and
power design and packaging
•
Ruggedized for deployment;
production volume ready
•
Application middleware:
portability, scalability, high-
availability, virtualization
•
Best performance available
using open standards
10
Best-of-breed solutions spanning the entire signal
processing chain
©
2011 Mercury Computer Systems, Inc.
Full range of high-performance
embedded processor and I/O boards
for the most demanding applications
High-performance sub-systems
solutions spanning the entire signal
processing chain
Outsourced engineering and Systems
Integration services accelerate
development and deployment of
affordable customized subsystems for
ISR applications to Defense primes
High value added software and
middleware for signal and image
processing, visualization, analysis,    
and image reconstruction
Boards
Boards
Systems
Systems
Services
Services
Software
Software
We solve problems that can’t be solved with commercial computing

©
2011 Mercury Computer Systems, Inc.
C4I
C4I
EW
EW
Radar
Radar
EO/IR
EO/IR
11
•
More and better sensors
lead to overwhelming data
•
EW:  new and rapidly
evolving threats
•
Radar:  smaller, faster
targets. New technologies
•
EO/IR:  leap in imaging
detail, onboard exploitation
and real-time tactical access
•
C4I:  Net-centric command,
control and collaboration 
•
Time to relevant
information is critical
for the onboard processing products and solutions we provide
Increased demand for ISR and rapidly evolving threats
drive greater demand…

©
2011 Mercury Computer Systems, Inc.
©
2011 Mercury Computer Systems, Inc.
12
•
Countering rogue nations’
ballistic missile threats
•
First systems installed on
Aegis ships
•
$24M booked in FY11
•
43 ship upgrade scheduled
over 5 years
•
Upside opportunities:
–
New data recorder design   
win in FY10
–
Lockheed Martin awarded
Aegis Ashore development
–
FMS sales opportunities
Aegis ballistic missile defense: SPY-1 BMD Radar
Mercury’s largest single program in production to date
Mercury’s largest single program in production to date

©
2011 Mercury Computer Systems, Inc.
©
2011 Mercury Computer Systems, Inc.
©
2011 Mercury Computer Systems, Inc.
13
•
Naval surface fleet EW
upgrade to counter
emerging peer threats
•
Lockheed Martin displaced
incumbent
•
Met compressed schedule
for field trials
•
Leveraged Mercury
application expertise
•
Delivered best-of-breed
application-ready subsystem
•
EW performance-optimized
Strong partnership with Prime driving Mercury content expansion
SEWIP Block 2: Countering new emerging peer threats

©
2011 Mercury Computer Systems, Inc.
©
2011 Mercury Computer Systems, Inc.
©
2011 Mercury Computer Systems, Inc.
14
•
Software defined jammer    
to defeat roadside bombs
–
Signal Processing & RF Tuners
•
Previous generations high
volume ground mobile
–
JCREW 2.1  25,000 systems
–
JCREW 3.2    5,000 systems
•
JCREW 3.3 Presolicitation:
–
Currently EDM phase
–
ITT sole source. LRIP up to
1,350 systems
–
LRIP period FY13 thru FY14
–
Navy intends to compete full
rate production
JCREW 3.3: Joint services CIED program of record
Potentially the largest program Mercury has won to date
Potentially the largest program Mercury has won to date
Note: Mercury not involved in JCREW 2.1 and 3.2

©
2011 Mercury Computer Systems, Inc.
We anticipated shifting DoD priorities and uniquely
positioned our business for growth and higher returns
15
Mercury is a best-of-breed outsourcing partner to the Primes
Advanced Computing Solutions (ACS)
Advanced Computing Solutions (ACS)
Primes
Primes
Primes
Primes
Primes
Primes
Traditional Model       
and Competition
Traditional Model       
and Competition
COTS Boards
“Plug-n-Pray”
36+ months Time to Market
COTS
Prime Application
Middleware
Operating System
COTS
COTS
Classified Platform-Ready            
ISR Subsystem
12 months Time to Market
Unclassified Application-
Ready Subsystem
12 months Time to Market
Commercially Funded
Best-of-breed Products
Open Architecture
Customized Configuration
Services Led Engagement
Annuity Revenue Model
Mercury Federal Systems (MFS)
Mercury Federal Systems (MFS)
Application-Ready
Subsystem
Classified IP
Mercury
Mercury

©
2011 Mercury Computer Systems, Inc.
©
2011 Mercury Computer Systems, Inc.
©
2011 Mercury Computer Systems, Inc.
Application-ready subsystem and Prime outsourcing success story
Application-ready subsystem and Prime outsourcing success story
16
•
First award $18M
–
Development
–
UAE
–
Entering production
•
Awards received
–
UAE, Taiwan, Saudi
•
Potential future FMS
awards
•
Major potential with US
Army upgrade
Patriot missile defense: Next generation ground radar

©
2011 Mercury Computer Systems, Inc.
17
Platform-ready ISR subsystem and Prime outsourcing success story
©
2011 Mercury Computer Systems, Inc.
©
2011 Mercury Computer Systems, Inc.
MFS major program: Wide Area Airborne Surveillance
•
Quick reaction capability
MFS providing image
processing payload
•
Partnered with Prime and
other leading companies
•
Rapid prototyping and
demonstration of
best-of-breed solution
•
Open plug-n-play sensor  
bus architecture
•
Real-time tailored feeds
directly to the forces
•
Near real-time “TIVO®”
capability

©
2011 Mercury Computer Systems, Inc.
18
Acquisition Case Study: LNX
•
World-class
supplier
of
next
generation RF receivers for
signals intelligence,    
communications
intelligence
and
electronic warfare applications
•
Increased
content
on
JCREW
3.3
by over 40%
•
Acquired
on
January
12,
2011
for
$31 million, plus up to a    
$5 million earn-out
•
LNX
FY10
revenue
$14m,
EBITDA
>15%,
65
employees
•
Expected
to
be
neutral
to
modestly accretive within
12 months
Mercury has the strategy, infrastructure and pipeline to
supplement organic growth with acquisitions
Driving growth through acquisition
•
Expand ACS core business in ISR and EW by  
adding relevant technology or products
•
Add Mercury content and services to existing    
and future defense and intelligence programs
•
Add an ISR platform company to scale MFS
Focus on the following characteristics:
•
Demonstrated profitability and growth
•
Private; Low tens of millions revenue to start
•
Accretive within 12 months or less
•
Seek to execute with assets on hand / available
Proprietary pipeline of targets
•
Attractive destination for target companies

©
2011 Mercury Computer Systems, Inc.
Positioned for growth in a changing industry
•
Focused on the right Defense market segments:
ISR, Electronic Warfare and Missile Defense
•
Positioned well on key programs and platforms
to address today’s and tomorrow’s threats
•
Business model aligned with Defense
procurement reform
•
Outsourcing partner to the Primes for best-of-
breed application-ready and ISR subsystems
•
Delivering strong organic growth in defense with
improving profitability
•
Pursuing complementary acquisitions to
supplement organic growth
©
2011 Mercury Computer Systems, Inc.
Continuing to build a pure-play, best-of-breed ISR subsystems
and technology-enabled software and services company  
19

©
2011 Mercury Computer Systems, Inc.
Financial Overview

©
2011 Mercury Computer Systems, Inc.
21
•
Profitability restored
•
Defense revenue growth accelerating
•
Generating healthy free cash flows
from operations
•
Scalable working capital platform
•
Strong balance sheet/no debt
•
Performing at target business model
17-18% adj. EBITDA margin
Financial highlights

©
2011 Mercury Computer Systems, Inc.
FY07 –
FY11: Restored profitability and growth
Defense 61% growth (13% CAGR) since FY07. 
22
Notes:
•
FY07 –
FY10 figures are as reported in the Company’s fiscal 2010 Form 10K.  FY11 figures are reported in the Company’s earnings release on August 2, 2011.
•
FY10 Earnings per Share were positively influenced by the partial reversal of the valuation allowance against deferred tax assets and an effective FY10 tax rate benefit of approximately 5%.
•
FY11
EPS
includes
theimpact
of
5.6Madditional
shares
from
our
follow-on
publicstock
offering
on
February
16,
2011.

©
2011 Mercury Computer Systems, Inc.
23
•
Engineering and supply
chain transformation
–
Engineering methods
–
Investments in DFM
–
Operational efficiencies
–
Reduced lead times
–
Improved cost of quality
–
Outsourced manufacturing
•
Customer satisfaction
–
Blue chip customers
–
Terms net 30
Efficient working capital platform to support growth
Note:
•
Net cash provided by operating activities % of revenue is  fiscal year ended June 30, 2010 and 2011, respectively.
•
Adjusted working capital % of revenue is fiscal year ended June 30, 2010 and 2011, respectively.

©
2011 Mercury Computer Systems, Inc.
24
•
Organic growth only 
•
ACS : MFS revenue split 
90% : 10% respectively
•
High mix, low volume
•
R&D delivering significant
added value and returns
•
Increased engineering
services and systems
integration
•
Services-led design wins
lead to long-term
production subsystem
annuity revenues
Performing at target business model
GAAP
FY08
FY09
FY10
FY11
Target
Business
Model
Revenue
100%
100%
100%
100%
100%
Gross
Margin
58%
56%
56%
57%
54+%
SG&A and
Other OPEX
37%
29%
27%
26%
Low-mid 20’s
R&D
24%
22%
21%
19%
High Teens
Operating
Income
(3%)
4%
9%
11%
12-13%
Adj.
EBITDA
12%
12%
15%
18%
17-18%
(1)
(1)
Other OPEX includes: Amortization of Acquired Intangible Assets,
Impairment of Goodwill and Long Lived Assets,
Restructuring, Gain on Sale of Long Lived Assets, and Acquisition Costs and Other Related Expenses.

©
2011 Mercury Computer Systems, Inc.
Mercury’s balance sheet poised for investment
Acquisition financing available
25
Generating positive free cash flow from operations; zero debt
($M)
Q4’10 Cash and marketable securities
74
LNX
Acquisition
(net
of
cash
acquired)
(30)
Net
Proceeds
from
Stock
Offering
94
Free
cash
flow
23
Other
activity
2
Q4’11 Cash and marketable securities
163
Other financing sources:
•
Operating line of credit
35

©
2011 Mercury Computer Systems, Inc.
Q1 FY12 guidance
26
Consensus
Q1 FY11
Actual
Quarter Ending September  30, 2011
Low
High
Revenue
$56
$52
$54
$56
GAAP EPS (Continuing)
$0.11
$0.16
$0.10
$0.12
Adj EBITDA
$9.2
$8.8
$9.0
$10.0
Note -
Adj EBITDA Adjustments:
Net income (Continuing)
3.7
2.9
3.6
Interest (income) expense, net
0.0
(0.0)
(0.0)
Income tax (benefit) expense
2.1
1.4
1.8
Depreciation
1.4
1.9
1.9
Amortization of acquired intangible assets
0.3
0.8
0.8
Fair value adjustments from purchase accounting
0.0
(0.1)
(0.1)
Stock-based compensation cost
1.3
2.0
2.0
Adj EBITDA
8.8
9.0
10.0
Notes:
•
For
the
whole
of
fiscal
2012
we
currentlyexpecta
roughly
highsingle-digit,low
double-digit
overall
organic
revenue
growth
rate,
year-over-year.
We
currently
expect
our
fiscal
2012
operating
margin
to
be
roughly
in
line
with
thelowend
of
our
current
target
business
model
range
of
12%
to13%
and
our
adjusted
EBITDA
asa
percentage
of
revenue
to
comein
roughly
in
line
with
the
model’s
highend
of
18%.
Due
to
theimpact
of
the
newshares
issued
in
fiscal
2011,
we
currentlyexpect
EPS
for
fiscal
2012
to
be
approximately flat, year-over-year.
•
Fiscal 2011 EPS includes the impact of 5.6M additional shares from our follow-on public stock offering on February 16, 2011.
•
Adjusted EBITDA excludes reconciling items which have no impact.

©
2011 Mercury Computer Systems, Inc.
Last 16 quarter’s revenues and EPS exceeded
or met the top end of guidance
2008
Q1
Q2
Q3
Q4
Reported
Guidance
Reported
Guidance
Reported
Guidance
Reported
Guidance
Revenue ($M)
49.2
48.0
52.6
51.0
56.5
53.0-55.0
55.2
53.0-56.0
EPS ($)
0.09
(0.08)
0.04
(0.05)
0.04
(0.04)-0.00
0.01
(0.05)-0.01
2009
Q1
Q2
Q3
Q4
Revenue ($M)
49.1
47.0-49.0
50.7
47.0-49.0
50.6
48.0-50.0
48.4
46.0-48.0
EPS ($)
0.07
(0.07)-(0.03)
0.03
(0.05)-0.00
0.20
0.05-0.09
0.13
0.05-0.08
2010
Q1
Q2
Q3
Q4
Revenue ($M)
47.4
43.0-45.0
45.2
40.0-42.0
43.6
41.0-43.0
63.6
58.0-60.0
EPS ($)
0.19
0.03-0.08
0.08
(0.08)-(0.04)
0.16
(0.15)-(0.11)
0.77
0.25-0.28
2011
Q1
Q2
Q3
Q4
Revenue ($M)
52.1
48.0-50.0
55.5
54.0-55.0
59.9
58.0-60.0
61.2
57.0-59.0
EPS ($)
0.16
0.03-0.06
0.22
0.10-0.12
0.20
0.16-0.18
0.14
0.11-0.13
Note:
Non-GAAP
GAAP
27

©
2011 Mercury Computer Systems, Inc.
Mercury investment highlights
Pure-play C4ISR and defense electronics company entrenched on a
diverse mix of programs aligned with DoD priorities
Pure-play C4ISR and defense electronics company entrenched on a
diverse mix of programs aligned with DoD priorities
Best-of-breed provider of specialized computing subsystems  
targeting the well funded and growing C4ISR market
Best-of-breed provider of specialized computing subsystems  
targeting the well funded and growing C4ISR market
Increased demand for ISR and a rapidly evolving threat environment
driving greater demand for our products, solutions and capabilities
Increased demand for ISR and a rapidly evolving threat environment
driving greater demand for our products, solutions and capabilities
Well positioned to benefit from DoD procurement reform requiring
more affordable and rapidly developed upgrades leading to increased
outsourcing by the large Defense Primes
Well positioned to benefit from DoD procurement reform requiring
more affordable and rapidly developed upgrades leading to increased
outsourcing by the large Defense Primes
Well-defined strategy with a demonstrated track record
Well-defined strategy with a demonstrated track record
Successful transformation has positioned the business for strong
organic growth augmented through strategic acquisitions
Successful transformation has positioned the business for strong
organic growth augmented through strategic acquisitions
28

©
2011 Mercury Computer Systems, Inc.
©
2011 Mercury Computer Systems, Inc.
Appendix
29

©
2011 Mercury Computer Systems, Inc.
Adjusted EBITDA reconciliation
30
Years Ended June
30,
(000'S)
2008
2009
2010
2011
Income (loss) from continuing operations
$          (4,437)
$             7,909
$          28,069
$          18,507
Interest expense (income), net
(3,129)
492
(151)
45
Income tax expense (benefit)
3,710
109
(9,377)
8,060
Depreciation
7,372
5,640
5,147
6,364
Amortization of acquired intangible assets
5,146
2,414
1,710
1,984
Restructuring
4,454
1,712
231
—
Impairment of long-lived assets
561
—
211
150
Acquisition costs and other related expenses
—
—
—
412
Fair value adjustments from purchase accounting
—
—
—
(219)
Stock-based compensation costs
8,848
4,582
4,016
5,580
Adjusted EBITDA
$          22,525
$          22,858
$          29,856
$          40,883

©
2011 Mercury Computer Systems, Inc.
Adjusted working capital reconciliation
31
As of
June 30,
June 30,
(000's)
2010
2011
Accounts receivable, net of allowance for doubtful accounts
$          36,726
$             44,786
Inventory
17,622
18,540
Accounts payable
(10,533)
(7,972)
Accrued expenses
(5,025)
(5,452)
Adjusted working capital
$          38,790
$             49,902

©
2011 Mercury Computer Systems, Inc.
Free cash flow reconciliation
32
Years Ended                 
June 30,
2010
2011
Cash flows from operations
$    15,708
$    31,474
Capital expenditures for property and equipment
(7,334)
(8,825)
Free cash flow
$       8,374
$    22,649