V2X Delivers Solid Fourth Quarter and Full-Year 2023 Results

March 05, 2024

Fourth Quarter 2023 Summary

  • Reported record revenue of $1.04 billion, up +6.4% y/y
  • Achieved y/y revenue growth of 31% in the Pacific and 18% in the Middle East
  • Operating income of $38.5 million; adjusted operating income1 of $76.2 million
  • Net income (loss) of ($0.5) million, up $10.1 million y/y
  • Adjusted EBITDA1 of $82.1 million with a margin1 of 7.9%
  • Diluted EPS of ($0.02); Adjusted diluted EPS1 of $1.22
  • Strong year-to-date cash flow from operations of $188.0 million; Achieved net debt reduction of $137.1 million
  • Awarded first substantial foreign military sales program valued at $400 million over 5 years

2024 Guidance:

  • Establishing full-year 2024 guidance with revenue and adjusted EBITDA1 growth of 5% at mid-point

MCLEAN, Va., March 5, 2024 /PRNewswire/ -- V2X, Inc. (NYSE:VVX) announced fourth quarter and full-year 2023 financial results.

"I'm pleased to report a strong finish to 2023, with record revenue and strong operational performance which drove significant cash generation and net debt reduction," said Chuck Prow, President and Chief Executive Officer of V2X. "I'd like to thank our teams that demonstrated agility and excellent performance, delivering 8% pro forma revenue1 growth for the full-year and 6% for the quarter. We made significant progress advancing V2X as a leader in the operational segment of the federal services market while continuing to position the company for long-term growth. The leading indicators for our business remain strong with a backlog of approximately $13 billion, $9 billion of bids submitted currently under evaluation, and a robust pipeline of opportunities valued at $15 billion expected to be submitted over the next twelve months. Our capabilities and position in an expanding market, present opportunities to drive continued growth and value for our shareholders and clients."  

"V2X achieved several milestones during the fourth quarter, which includes our first substantial foreign military sales (FMS) win valued at approximately $400 million over the next five years," said Mr. Prow. "This program is a long-term aviation support and training contract in the Middle East and was a direct result of our multi-year FMS campaign. Importantly, our evolution as a company has been an enabler to participate in this market. With this opportunity, the total value of V2X FMS' portfolio is approximately $700 million with accretive margins. We plan to build on this success and continue pursuing FMS opportunities that leverage our geographic footprint, strong partnerships, and core capabilities."

Mr. Prow continued, "Our ability to provide full life cycle solutions from concept to fielding and sustainment is a significant differentiator that's yielding results. During the quarter, we demonstrated our capabilities through the fielding of a defense platform that modernized existing systems. This program launched as an engineering development and prototyping effort with a new client and today has yielded a brand-new product that's designed, produced, and sustained by V2X. Additionally, our engineering, integration, modernization and sustainment solutions resulted in approximately $70 million of awards to V2X in the fourth quarter."

Mr. Prow concluded, "I'd like to thank our teams for their contributions in 2023 and progress executing our strategic framework: Expand the Base, Capture New Markets, Deliver with Excellence, and Enhance Culture. Looking ahead, V2X continues to transform to deliver enhanced capabilities in an expanding market. We have strong momentum, robust backlog, a highly aligned pipeline, limited recompetes, and high free cash generation that provides an excellent fundamental profile to support value creation." 

Fourth Quarter 2023 Results

"V2X reported revenue of $1.0 billion in the quarter, which represents 6.4% year-over-year growth," said Shawn Mural, Senior Vice President and Chief Financial Officer. "Revenue growth in the quarter was achieved through exceptional team performance delivering milestones ahead of schedule, expansion on existing programs, and new business. This solid execution resulted in year-over-year revenue growth of 31% in the Pacific and 18% in the Middle East." 

"For the quarter, the Company reported operating income of $38.5 million and adjusted operating income1 of $76.2 million. Adjusted EBITDA1 was $82.1 million with a margin of 7.9%. Fourth quarter GAAP diluted EPS was ($0.02), due primarily to merger and integration related costs, amortization of acquired intangible assets, and interest expense. Adjusted diluted EPS1 for the quarter was $1.22."

"V2X's ability to generate strong cash flow with low capital expenditures is an important attribute of our business and one that we are extremely focused on as a primary avenue to enhance value for shareholders. I'm pleased to announce that during the quarter, our teams demonstrated outstanding performance in all aspects of cash conversion, driving significant collections, a record low DSO, and operating cash flow that exceeded our guidance. Net cash provided by operating activities was $188.0 million year to date. Adjusted net cash provided by operating activities1 year to date was $159.5 million, adding back $26.9 million of M&A and integration costs with $13.4 million of CARES act payments, and removing the contribution of the master accounts receivable purchase or MARPA facility of $68.8 million."

"Solid cash generation enabled net debt reduction of $137.1 million for the year.  At the end of the quarter, net debt for V2X was $1,083.6 million.  Net consolidated indebtedness to EBITDA1 (net leverage ratio) was 3.3x, improved from 3.7x at the end of 2022.  Additionally, we believe our strong fundamentals will allow V2X to achieve a net leverage ratio at or under 3.0x by the end of 2024."  

"Total backlog as of December 31, 2023, was $12.8 billion. Funded backlog was $2.8 billion. Bookings in the quarter were $0.6 billion, resulting in a trailing twelve-month book-to-bill of 1.1x. It's important to note that backlog and bookings do not include the full performance period of the $400 million FMS program as the contract is being definitized and the $458 million F-5 Adversary aircraft award, discussed last quarter, as it remains in protest," said Mr. Mural.

Full-Year 2023 Results

Full-year revenue was $3.963 billion, up 8% pro forma year-on-year. The Company reported full-year operating income of $124.4 million and adjusted operating income1 of $271.4 million. Full-year EBITDA1 was $293.9 million with a margin of 7.4%. Full-year GAAP diluted EPS was ($0.73), due primarily to merger and integration related costs, amortization of acquired intangible assets, and interest expense. Adjusted diluted EPS1 for 2023 was $3.74.

2024 Guidance

Mr. Mural concluded, "Based on the positive trends in our business we are setting the mid-point of our guidance for revenue and Adjusted EBITDA1 at $4.150 billion and $308 million, respectively, representing approximately 5% year-over-year growth. We expect revenue and adjusted EBITDA to be weighted more heavily in the second half of the year. Importantly, guidance at the mid-point assumes approximately 90% of revenue from existing contracts and less than 5% from recompetes."

Guidance for 2024 is as follows:       

$ millions, except for per share amounts

2024 Guidance

2024 Mid-Point

Revenue

$4,100


$4,200

$4,150

Adjusted EBITDA1

$300


$315

$308

Adjusted Diluted Earnings Per Share1

$3.85


$4.20

$4.03

Adjusted Net Cash Provided by Operating Activities1

$145


$165

$155

The Company is not providing a quantitative reconciliation with respect to this forward-looking non-GAAP measure in reliance on the "unreasonable efforts" exception set forth in SEC rules because certain financial information, the probable significance of which cannot be determined, is not available and cannot be reasonably estimated. For example, unusual, one-time, non-ordinary, or non-recurring costs, which relate to M&A, integration and related activities cannot be reasonably estimated. Forward-looking statements are based upon current expectations and are subject to factors that could cause actual results to differ materially from those suggested here, including those factors set forth in the Safe Harbor Statement below. 

Fourth Quarter and Full-Year 2023 Conference Call

Management will conduct a conference call with analysts and investors at 8:00 a.m. ET on Tuesday, March 5, 2024. U.S.-based participants may dial in to the conference call at 877-407-3982, while international participants may dial 201-493-6780. A live webcast of the conference call as well as an accompanying slide presentation will be available here: https://app.webinar.net/WrwGVYwl6dA

A replay of the conference call will be posted on the V2X website shortly after completion of the call and will be available for one year. A telephonic replay will also be available through March 19, 2024, at 844-512-2921 (domestic) or 412-317-6671 (international) with passcode 13743860 .

Presentation slides that will be used in conjunction with the conference call will also be made available online in advance on the "investors" section of the company's website at https://gov2x.com/. V2X recognizes its website as a key channel of distribution to reach public investors and as a means of disclosing material non-public information to comply with its obligations under the U.S. Securities and Exchange Commission ("SEC") Regulation FD.

Footnotes:

1 See "Key Performance Indicators and Non-GAAP Financial Measures" for descriptions and reconciliations.

About V2X

V2X builds smart solutions designed to integrate physical and digital infrastructure – by aligning people, actions, and outputs. Formed by the merger of Vectrus and Vertex, we bring a combined 120 years of successful mission support. Our lifecycle solutions improve security, streamline logistics, and enhance readiness.

The Company delivers a comprehensive suite of integrated solutions across the operations and logistics, aerospace, training, and technology markets to national security, defense, civilian and international clients. Our global team of approximately 16,000 employees brings innovation to every point in the mission lifecycle, from preparation to operations, to sustainment, as it tackles the most complex challenges with agility, grit, and dedication.

Contact Information

Investor Contact

Media Contact

Mike Smith, CFA

Angelica Spanos Deoudes

IR@goV2X.com

Communications@goV2X.com

719-637-5773

571-338-5195

Safe Harbor Statement

Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995 (the "Act"): Certain material presented herein includes forward-looking statements intended to qualify for the safe harbor from liability established by the Act. These forward-looking statements include, but are not limited to, all the statements and items listed under "2024 Guidance" above and other assumptions contained therein for purposes of such guidance, other statements about our 2024 performance outlook, revenue, contract opportunities, and any discussion of future operating or financial performance.

Forward-looking statements generally can be identified by the use of forward-looking terminology such as "may," "will," "expect," "intend," "estimate," "anticipate," "believe," "could," "potential," "continue" or similar terminology. These statements are based on the beliefs and assumptions of the management of the Company based on information currently available to management.

These forward-looking statements are not guarantees of future performance, conditions, or results, and involve a number of known and unknown risks, uncertainties, assumptions, and other important factors, many of which are outside our management's control, which could cause actual results to differ materially from the results discussed in the forward-looking statements.  In addition, forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from the Company's historical experience and our present expectations or projections. For a discussion of some of the risks and uncertainties that could cause actual results to differ from such forward-looking statements, see the risks and other factors detailed from time to time our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, and other filings with the SEC.

We undertake no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

 

V2X, INC.

CONSOLIDATED STATEMENTS OF (LOSS) INCOME




Year Ended December 31,

(In thousands, except per share data)


2023


2022


2021

Revenue


$   3,963,126


$   2,890,860


$   1,783,665

Cost of revenue


3,628,271


2,595,848


1,623,245

Selling, general and administrative expenses


210,439


239,241


98,400

Operating income


124,416


55,771


62,020

Loss on extinguishment of debt


(22,298)



Interest expense, net


(122,442)


(61,879)


(7,985)

Other expense, net


(4,194)



(Loss) income from operations before income taxes


(24,518)


(6,108)


54,035

Income tax (benefit) expense


(1,945)


8,222


8,307

Net (loss) income


$      (22,573)


$       (14,330)


$        45,728








(Loss) earnings per share







Basic


$          (0.73)


$          (0.68)


$            3.91

Diluted


$          (0.73)


$          (0.68)


$            3.86

Weighted average common shares outstanding – basic


31,084


20,996


11,705

Weighted average common shares outstanding – diluted


31,084


20,996


11,836

 

 

V2X, INC.

CONSOLIDATED BALANCE SHEETS




December 31,

(In thousands, except shares and per share data)


2023


2022

Assets





Current assets





  Cash, cash equivalents and restricted cash


$           72,651


$         116,067

  Receivables


705,995


728,582

  Inventory, net


46,981


44,974

  Prepaid expenses and other current assets


49,242


42,309

  Total current assets


874,869


931,932

  Property, plant, and equipment, net


85,429


78,715

  Goodwill


1,656,926


1,653,822

  Intangible assets, net


407,530


497,951

  Right-of-use assets


41,215


52,825

  Other non-current assets


15,931


17,858

  Total non-current assets


2,207,031


2,301,171

Total Assets


$      3,081,900


$      3,233,103

Liabilities and Shareholders' Equity





Current liabilities





  Accounts payable


$         453,052


$         406,706

  Compensation and other employee benefits


158,088


168,038

  Short-term debt


15,361


11,850

  Other accrued liabilities


213,700


196,538

Total current liabilities


840,201


783,132

  Long-term debt, net


1,100,269


1,262,811

  Deferred tax liabilities


11,763


15,813

  Operating lease liabilities


34,691


41,083

  Other non-current liabilities


104,176


133,185

 Total non-current liabilities


1,250,899


1,452,892

Total liabilities


2,091,100


2,236,024

Commitments and contingencies (Note 15)





Shareholders' Equity





Preferred stock; $0.01 par value; 10,000,000 shares authorized; No shares issued and outstanding



Common stock; $0.01 par value; 100,000,000 shares authorized; 31,191,628 and 30,470,475 shares issued and outstanding as of December 31, 2023 and 2022, respectively


312


305

Additional paid in capital


762,324


748,877

Retained earnings


230,851


253,424

Accumulated other comprehensive loss


(2,687)


(5,527)

Total shareholders' equity


990,800


997,079

Total Liabilities and Shareholders' Equity


$      3,081,900


$      3,233,103

 

V2X, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS




Year Ended December 31,

(In thousands)


2023


2022


2021

Operating activities







Net (loss) income


$      (22,573)


$      (14,330)


$        45,728

Adjustments to reconcile net (loss) income to net cash provided by operating activities:

  Depreciation expense


22,408


13,472


6,526

  Amortization of intangible assets


90,423


48,643


10,028

  Loss on disposal of property, plant, and equipment


683


59


65

  Stock-based compensation


32,843


32,736


8,331

  Deferred taxes


(7,509)


(15,554)


(7,280)

  Amortization of debt issuance costs


9,067


7,805


912

  Loss on extinguishment of debt


22,298



  Gain on disposition of business


(450)


(2,082)


Changes in assets and liabilities:







  Receivables


19,064


(52,311)


(36,376)

  Inventory, net


(311)


(3,600)


(5,232)

  Other assets


12,076


14,962


(7,613)

  Accounts payable


43,153


71,837


56,985

  Compensation and other employee benefits


(9,901)


42,878


1,133

  Other liabilities


(23,303)


(51,020)


(11,868)

  Net cash provided by operating activities


187,968


93,495


61,339

Investing activities







Purchases of capital assets and intangibles


(25,021)


(12,425)


(9,776)

Proceeds from the disposition of assets


16


9


16

Acquisition of business, net of cash acquired



193,677


262

Disposition of business


1,349


(5,303)


Distributions from (contributions to) joint venture


1,007



(3,145)

  Net cash (used in) provided by investing activities


(22,649)


175,958


(12,643)

Financing activities







Proceeds from issuance of long-term debt


250,000



Repayments of long-term debt


(432,603)


(108,400)


(8,600)

Proceeds from revolver


922,750


392,000


529,000

Repayments of revolver


(922,750)


(472,925)


(594,000)

Proceeds from exercise of stock options


34


408


379

Payment of debt issuance costs


(8,818)


(2,325)


(17)

Prepayment premium on early redemption of debt


(1,600)



Payments of employee withholding taxes on share-based compensation


(18,036)


(1,994)


(2,347)

  Net cash used in financing activities


(211,023)


(193,236)


(75,585)

Exchange rate effect on cash


2,288


1,337


(3,325)

Net change in cash, cash equivalents and restricted cash


(43,416)


77,554


(30,214)

Cash, cash equivalents and restricted cash – beginning of year


116,067


38,513


68,727

Cash, cash equivalents and restricted cash – end of year


$        72,651


$      116,067


$        38,513

Supplemental Disclosure of Cash Flow Information:







Interest paid


$      117,482


$        54,267


$          5,801

Income taxes paid


$          8,356


$        13,416


$          9,703

Non-cash investing activities:







Purchase of capital assets on account


$          3,043


$          2,716


$             277

Common stock issued for business acquisition


$               —


$      630,636


$               —

 

Key Performance Indicators and Non-GAAP Measures

The primary financial performance measures we use to manage our business and monitor results of operations are revenue trends and operating income trends. Management believes that these financial performance measures are the primary drivers for our earnings and net cash from operating activities. Management evaluates its contracts and business performance by focusing on revenue, and operating income. Operating income represents revenue less both cost of revenue and selling, general and administrative (SG&A) expenses. Cost of revenue consists of labor, subcontracting costs, materials, and an allocation of indirect costs, which includes service center transaction costs. SG&A expenses consist of indirect labor costs (including wages and salaries for executives and administrative personnel), bid and proposal expenses and other general and administrative expenses not allocated to cost of revenue.

We manage the nature and amount of costs at the program level, which forms the basis for estimating our total costs and profitability. This is consistent with our approach for managing our business, which begins with management's assessing the bidding opportunity for each contract and then managing contract profitability throughout the performance period.

In addition to the key performance measures discussed above, we consider adjusted net income, adjusted diluted earnings per share, adjusted operating income, adjusted EBITDA, adjusted EBITDA margin, adjusted operating cash flow, and pro forma revenue to be useful to management and investors in evaluating our operating performance, and to provide a tool for evaluating our ongoing operations. This information can assist investors in assessing our financial performance and measures our ability to generate capital for deployment among competing strategic alternatives and initiatives. We provide this information to our investors in our earnings releases, presentations, and other disclosures.

Adjusted net income, adjusted diluted earnings per share, adjusted operating income, adjusted EBITDA, adjusted EBITDA margin, adjusted net cash provided by (used in) operating activities, and pro forma revenue, however, are not measures of financial performance under GAAP and should not be considered a substitute for financial measures determined in accordance with GAAP.  Definitions and reconciliations of these items are provided below.

  • Pro forma (PF) revenue is defined as the combined results of our operations as if the Merger had occurred on January 1, 2021.
  • Adjusted operating income is defined as operating income, adjusted to exclude items that may include, but are not limited to, significant charges or credits, and unusual and infrequent non-operating items that impact current results but are not related to our ongoing operations, such as M&A, integration, and related costs.
  • Adjusted EBITDA is defined as operating income, adjusted to exclude depreciation and amortization of intangible assets, and items that may include, but are not limited to, significant charges or credits, and unusual and infrequent non-operating items that impact current results but are not related to our ongoing operations, such as M&A, integration, and related costs.
  • Adjusted EBITDA margin is defined as adjusted EBITDA divided by revenue.
  • Adjusted net income is defined as net income, adjusted to exclude items that may include, but are not limited to, significant charges or credits, and unusual and infrequent non-operating items that impact current results but are not related to our ongoing operations, such as M&A, integration and related costs, amortization of acquired intangible assets, amortization of debt issuance costs, and loss on extinguishment of debt.
  • Adjusted diluted earnings per share is defined as adjusted net income divided by the weighted average diluted common shares outstanding.
  • Cash interest expense, net is defined as interest expense, net adjusted to exclude amortization of debt issuance costs.
  • Adjusted net cash provided by (used in) operating activities or adjusted operating cash flow is defined as net cash provided by (or used in) operating activities adjusted to exclude infrequent non-operating items, such as M&A payments and related costs.
  • Net leverage ratio is defined as net debt (or total debt less unrestricted cash) divided by trailing twelve-month (TTM) bank EBITDA.

In this document, the Company presents certain forward-looking non-GAAP metrics. The Company does not provide outlook on a GAAP basis because the items that the Company excludes from GAAP to calculate the comparable non-GAAP measure can be dependent on future events that are less capable of being controlled or reliably predicted by management and are not part of the Company's routine operating activities. Additionally, management does not forecast many of the excluded items for internal use and therefore cannot create or rely on outlook done on a GAAP basis.  The occurrence, timing, and amount of any of the items excluded from GAAP to calculate non-GAAP could significantly impact the Company's fiscal 2023 GAAP results.

 

 

Non-GAAP Tables


($K, except per share data)

Three Months Ended


Twelve Months Ended


December 31,
2023


December 31,
2022


December 31,
2023


December 31,
2022

Revenue

$      1,040,307


$        978,167


$      3,963,126


$      2,890,860

Net income (loss)

$               (492)


$         (10,619)


$          (22,573)


$          (14,330)

Plus:








Income tax expense (benefit)

8,420


10,675


(1,945)


8,222

Other expense, net

1,859



4,194


Interest expense, net

28,497


30,971


122,442


61,879

Loss on extinguishment of debt

246



22,298


Amortization of intangible assets

22,606


20,046


90,423


48,643

M&A, integration and related costs

15,055


26,379


56,610


87,108

Adjusted operating income

$          76,191


$          77,452


$        271,449


$        191,522

Plus:








Depreciation expense

5,875


4,809


22,408


13,472

Adjusted EBITDA

$          82,066


$          82,261


$        293,857


$        204,994

Adjusted EBITDA margin

7.9 %


8.4 %


7.4 %


7.1 %

Minus:








Cash interest expense, net

26,305


27,069


113,375


54,074

Income tax expense, as adjusted

9,101


19,654


35,430


36,295

Depreciation expense

5,875


4,809


22,408


13,472

Other expense, net

1,859



4,194


Adjusted net income

$          38,926


$          30,729


$        118,450


$        101,153

 

($K, except per share data)

Three Months Ended


Twelve Months Ended


December 31,
2023


December 31,
2022


December 31,
2023


December 31,
2022

Diluted earnings (loss) per share

$               (0.02)


$               (0.35)


$               (0.73)


$               (0.68)

Plus:








M&A, integration and related costs

0.45


0.69


1.42


3.28

Amortization of intangible assets

0.68


0.53


2.26


1.84

Amortization of debt issuance costs and Loss on extinguishment of debt

0.11


0.10


0.79


0.29

Adjusted diluted earnings per share

$                 1.22


$                 0.97


$                 3.74


$                 4.73









Average shares outstanding








Basic, as reported

31,192


30,465


31,084


20,996

Diluted, as reported

31,192


30,465


31,084


20,996

Adjusted diluted

31,822


31,284


31,567


21,346

 

SUPPLEMENTAL INFORMATION

Revenue by client branch, contract type, contract relationship, and geographic region for the periods presented below was as follows: 

Revenue by Client










Year Ended December 31,


(In thousands)


2023

%

2022

%

2021

%

Army


$     1,633,525

41 %

$     1,342,406

46 %

$     1,134,849

64 %

Navy


1,233,463

31 %

713,732

25 %

224,407

13 %

Air Force


538,698

14 %

459,849

16 %

266,291

15 %

Other


557,440

14 %

374,873

13 %

158,118

8 %

Total revenue


$     3,963,126


$     2,890,860


$     1,783,665


 

Revenue by Contract Type










Year Ended December 31,


(In thousands)


2023

%

2022

%

2021

%

Cost-plus and cost-reimbursable


$     2,209,241

56 %

$     1,625,196

56 %

$     1,271,167

71 %

Firm-fixed-price


1,626,262

41 %

1,159,743

40 %

452,112

25 %

Time-and-materials


127,623

3 %

105,921

4 %

60,386

4 %

Total revenue


$     3,963,126


$     2,890,860


$     1,783,665


 

Revenue by Contract Relationship










Year Ended December 31,


(In thousands)


2023

%

2022

%

2021

%

Prime contractor


$     3,726,199

94 %

$     2,695,067

93 %

$     1,663,828

93 %

Subcontractor


236,927

6 %

195,793

7 %

119,837

7 %

Total revenue


$     3,963,126


$     2,890,860


$     1,783,665


 

Revenue by Geographic Region










Year Ended December 31,


(In thousands)


2023

%

2022

%

2021

%

United States


$     2,286,052

58 %

$     1,494,255

52 %

$       578,255

32 %

Middle East


1,193,598

30 %

1,024,674

35 %

1,000,877

56 %

Asia


264,346

7 %

167,629

6 %

61,927

3 %

Europe


219,130

5 %

204,302

7 %

142,606

9 %

Total revenue


$     3,963,126


$     2,890,860


$     1,783,665


 

 

Cision View original content to download multimedia:https://www.prnewswire.com/news-releases/v2x-delivers-solid-fourth-quarter-and-full-year-2023-results-302079309.html

SOURCE V2X, Inc.