V2X Announces Strong Second Quarter 2023 Results
Second Quarter 2023 Highlights:
- Revenue of
, up$977.9 million 10.2% y/y on a pro forma basis - Awarded significant bookings of
, driving backlog +$2.1 billion 10% sequentially to$13.0 billion - Reported operating income of
; adjusted operating income1 of$34.3 million $70.5 million - Adjusted EBITDA1 of
with a margin1 of$76.4 million 7.8% - Diluted EPS of
; adjusted diluted EPS1 of$0.06 $1.01 - Improved net debt to EBITDA1 leverage ratio ~0.4x to 3.48x
2023 Guidance:
- Increasing mid-point of 2023 revenue, adjusted EBITDA1, and adjusted diluted EPS1 guidance
"V2X reported strong results in the second quarter with revenue increasing
"Revenue growth in the quarter was generated by continued expansion on existing programs, contribution from new awards, as well as success in securing recompete wins late last year and in early 2023," said Mr. Prow. "Our teams continued to further drive momentum by successfully expanding work scope on our core programs. Several notable wins late last year and in the first half of 2023 have also helped to push revenue growth. We continue to experience growth in the Pacific or INDOPACOM, and see significant long-term opportunity to further support increasing mission requirements in the region."
Mr. Prow continued, "We were successful in capturing several key new business pursuits during the quarter. First, we were awarded a
"In addition to new awards, during the second quarter, we were awarded over
Mr. Prow concluded, "We are harnessing the combined solutions of V2X and are seeing momentum that we believe will drive growth and create value. For example, V2X's robust modernization and sustainment capabilities are a significant differentiator and we are making excellent progress leveraging our engineering and manufacturing center of excellence. This includes opportunities such as modernizing and improving the effectiveness of the F-16 Fighting Falcon and further expanding our proprietary Gateway Mission Router 1000 across various platforms to provide cutting edge situational awareness in support of the DoD's Joint All Domain Command and Control (JADC2) effort."
Second Quarter 2023 Results
On July 5, 2022 ("Closing Date"), Vectrus, Inc. ("Vectrus") completed its merger (the "Merger") with Vertex Aerospace Services Holding Corp. ("Vertex"), thereby forming V2X, Inc. Second quarter 2022 "reported results" reflect the contributions of Vectrus from April 1, 2022, through June 30, 2022, unless otherwise noted. Comparisons to historical periods are relative to legacy Vectrus results, unless otherwise noted.
- Revenue of
, up$977.9 million 10.2% y/y on a pro forma basis - Operating income of
, including merger and integration related costs of$34.3 million , and amortization of acquired intangible assets of$13.6 million $22.6 million - Adjusted operating income1 of
$70.5 million - Adjusted EBITDA1 of
with a$76.4 million 7.8% adjusted EBITDA margin1 - Diluted EPS of
$0.06 - Adjusted diluted EPS1 of
$1.01 - Net debt as of June 30, 2023 of
$1,176.6 million - Total backlog as of June 30, 2023 of
$13.0 billion
"Our financial results for the second quarter were impressive across the board," said Susan Lynch, Senior Vice President and Chief Financial Officer. "Pro forma revenue increased
For the quarter, the Company reported operating income of
Ms. Lynch continued, "At the end of the quarter, net debt for V2X was
"Net cash provided by operating activities for the quarter was
Total backlog as of June 30, 2023, was
2023 Guidance
Ms. Lynch concluded, "I am pleased with our results this quarter and for the first half of the year. Our teams continue to work together seamlessly, making notable progress on integration milestones while driving results across the board. As such, the Company is raising the mid-point of its 2023 revenue, adjusted EBITDA1, and adjusted diluted EPS1 guidance." Guidance for 2023 is as follows:
$ millions, except for per share amounts | 2023 Guidance | 2023 Mid-Point | ||
Revenue | ||||
Adjusted EBITDA1 | ||||
Adjusted Diluted Earnings Per Share1 | ||||
Adjusted Net Cash Provided by Operating Activities1 |
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.
Second Quarter 2023 Conference Call
Management will conduct a conference call with analysts and investors at 4:30 p.m. ET on Tuesday, August 8, 2023.
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 August 22, 2023, at 844-512-2921 (domestic) or 412-317-6671 (international) with passcode 10179631.
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
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 – from base to battlefield – 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 15,000 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.
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 "2023 Guidance" above and other assumptions contained therein for purposes of such guidance, other statements about our 2023 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, that 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. | ||||||||
Three Months Ended | Six Months Ended | |||||||
June 30, | July 1, | June 30, | July 1, | |||||
(In thousands, except per share data) | 2023 | 2022 | 2023 | 2022 | ||||
Revenue | $ 977,852 | $ 498,066 | $ 1,921,312 | $ 954,537 | ||||
Cost of revenue | 890,452 | 453,305 | 1,755,082 | 872,581 | ||||
Selling, general, and administrative expenses | 53,130 | 29,740 | 101,381 | 61,699 | ||||
Operating income | 34,270 | 15,021 | 64,849 | 20,257 | ||||
Loss on extinguishment of debt | — | — | (22,052) | — | ||||
Interest expense, net | (31,950) | (1,963) | (63,694) | (3,643) | ||||
Other expense, net | (311) | — | (311) | — | ||||
Income (loss) from operations before income taxes | 2,009 | 13,058 | (21,208) | 16,614 | ||||
Income tax expense (benefit) | 210 | 2,586 | (5,527) | 3,287 | ||||
Net income (loss) | $ 1,799 | $ 10,472 | $ (15,681) | $ 13,327 | ||||
Earnings (loss) per share | ||||||||
Basic | $ 0.06 | $ 0.89 | $ (0.51) | $ 1.13 | ||||
Diluted | $ 0.06 | $ 0.88 | $ (0.51) | $ 1.12 | ||||
Weighted average common shares outstanding - basic | 31,033 | 11,826 | 30,981 | 11,793 | ||||
Weighted average common shares outstanding - diluted | 31,605 | 11,954 | 30,981 | 11,917 |
V2X, INC. | ||||
June 30, | December 31, | |||
(In thousands) | 2023 | 2022 | ||
Assets | ||||
Current assets | ||||
Cash and cash equivalents | $ 70,314 | $ 116,067 | ||
Receivables | 746,562 | 728,582 | ||
Prepaid expenses | 77,724 | 74,234 | ||
Other current assets | 23,906 | 13,049 | ||
Total current assets | 918,506 | 931,932 | ||
Property, plant, and equipment, net | 82,284 | 78,715 | ||
Goodwill | 1,656,965 | 1,653,822 | ||
Intangible assets, net | 452,739 | 497,951 | ||
Right-of-use assets | 46,017 | 52,825 | ||
Other non-current assets | 22,245 | 17,858 | ||
Total non-current assets | 2,260,250 | 2,301,171 | ||
Total Assets | $ 3,178,756 | $ 3,233,103 | ||
Liabilities and Shareholders' Equity | ||||
Current liabilities | ||||
Accounts payable | $ 416,424 | $ 406,706 | ||
Compensation and other employee benefits | 145,000 | 168,038 | ||
Short-term debt | 15,500 | 11,850 | ||
Other accrued liabilities | 255,408 | 196,538 | ||
Total current liabilities | 832,332 | 783,132 | ||
Long-term debt, net | 1,190,023 | 1,262,811 | ||
Deferred tax liabilities | 13,773 | 15,813 | ||
Operating lease liabilities | 35,490 | 41,083 | ||
Other non-current liabilities | 114,420 | 133,185 | ||
Total non-current liabilities | 1,353,706 | 1,452,892 | ||
Total liabilities | 2,186,038 | 2,236,024 | ||
Commitments and contingencies (Note 8) | ||||
Shareholders' Equity | ||||
Preferred stock; | — | — | ||
Common stock; | 311 | 305 | ||
Additional paid in capital | 754,096 | 748,877 | ||
Retained earnings | 237,743 | 253,424 | ||
Accumulated other comprehensive income (loss) | 568 | (5,527) | ||
Total shareholders' equity | 992,718 | 997,079 | ||
Total Liabilities and Shareholders' Equity | $ 3,178,756 | $ 3,233,103 |
V2X, INC. | ||||
Six Months Ended | ||||
June 30, | July 1, | |||
(In thousands) | 2023 | 2022 | ||
Operating activities | ||||
Net (loss) income | $ (15,681) | $ 13,327 | ||
Adjustments to reconcile net (loss) income to net cash provided by operating activities: | ||||
Depreciation expense | 11,326 | 3,238 | ||
Amortization of intangible assets | 45,211 | 4,423 | ||
Loss (gain) on disposal of property, plant, and equipment | 522 | (15) | ||
Stock-based compensation | 20,446 | 4,725 | ||
Amortization of debt issuance costs | 4,692 | 388 | ||
Loss on extinguishment of debt | 22,052 | — | ||
Changes in assets and liabilities: | ||||
Receivables | (20,404) | (29,302) | ||
Prepaid expenses | (1,645) | (5,321) | ||
Other assets | 436 | 5,185 | ||
Accounts payable | 7,647 | 32,470 | ||
Deferred taxes | (5,143) | — | ||
Compensation and other employee benefits | (23,150) | 2,507 | ||
Other liabilities | 31,831 | (11,989) | ||
Net cash provided by operating activities | 78,140 | 19,636 | ||
Investing activities | ||||
Purchases of capital assets | (11,543) | (3,492) | ||
Proceeds from the disposition of assets | 5 | 18 | ||
Contribution to joint venture | — | (2,113) | ||
Net cash used in investing activities | (11,538) | (5,587) | ||
Financing activities | ||||
Proceeds from issuance of long-term debt | 250,000 | — | ||
Repayments of long-term debt | (424,888) | (5,200) | ||
Proceeds from revolver | 552,750 | 392,000 | ||
Repayments of revolver | (467,750) | (402,000) | ||
Proceeds from exercise of stock options | 6 | 370 | ||
Payment of debt issuance costs | (7,507) | (458) | ||
Prepayment premium on early redemption of debt | (1,600) | — | ||
Payments of employee withholding taxes on share-based compensation | (14,618) | (1,696) | ||
Net cash used in financing activities | (113,607) | (16,984) | ||
Exchange rate effect on cash | 1,252 | (507) | ||
Net change in cash and cash equivalents | (45,753) | (3,442) | ||
Cash and cash equivalents - beginning of period | 116,067 | 38,513 | ||
Cash and cash equivalents - end of period | $ 70,314 | $ 35,071 | ||
Supplemental disclosure of cash flow information: | ||||
Interest paid | $ 58,300 | $ 3,409 | ||
Income taxes paid | $ 2,707 | $ 6,112 | ||
Purchase of capital assets on account | $ 1,813 | $ 13 |
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, operating income, and operating margin. 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 define operating margin as operating income divided by 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 operating cash flow, 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 revenue is defined as the combined results of our operations for the three months ended June 30, 2023 and July 1, 2022 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, net is defined as interest expense, net adjusted to exclude amortization of debt issuance costs.
- 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.
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 measures could significantly impact the Company's fiscal 2023 GAAP results.
Non-GAAP Tables | |||||||
($K, except per share data) | Three Months Ended | Six Months Ended | |||||
July 1, 2022 | June 30, 2023 | July 1, 2022 | June 30, 2023 | ||||
Revenue | $ 498,066 | $ 977,852 | $ 954,537 | $ 1,921,312 | |||
Operating income | $ 15,021 | $ 34,270 | $ 20,257 | $ 64,849 | |||
Plus: | |||||||
Depreciation expense | 1,647 | 5,914 | 3,238 | 11,326 | |||
Amortization of intangible assets | 2,122 | 22,605 | 4,423 | 45,211 | |||
M&A, integration and related costs | 5,879 | 13,642 | 14,947 | 23,056 | |||
Adjusted EBITDA | $ 24,669 | $ 76,431 | $ 42,865 | $ 144,442 | |||
Adjusted EBITDA margin | 5.0 % | 7.8 % | 4.5 % | 7.5 % | |||
Minus: | |||||||
Cash interest expense, net | 1,779 | 29,771 | 3,255 | 59,002 | |||
Income tax expense, as adjusted | 4,206 | 8,564 | 7,196 | 15,129 | |||
Depreciation expense | 1,647 | 5,914 | 3,238 | 11,326 | |||
Other expense, net | — | 311 | — | 311 | |||
Adjusted net income | $ 17,037 | $ 31,871 | $ 29,176 | $ 58,674 |
($K, except per share data) | Three Months Ended | Six Months Ended | |||||
July 1, 2022 | June 30, 2023 | July 1, 2022 | June 30, 2023 | ||||
Diluted earnings (loss) per share | $ 0.88 | $ 0.06 | $ 1.12 | $ (0.51) | |||
Plus: | |||||||
M&A, integration and related costs | 0.39 | 0.34 | 1.01 | 0.57 | |||
Amortization of intangible assets | 0.14 | 0.56 | 0.30 | 1.13 | |||
Amortization of debt issuance costs and | 0.01 | 0.05 | 0.03 | 0.67 | |||
Adjusted diluted earnings per share | $ 1.42 | $ 1.01 | $ 2.46 | $ 1.86 | |||
Average shares outstanding | |||||||
Basic, as reported | 11,826 | 31,033 | 11,793 | 30,981 | |||
Diluted, as reported | 11,954 | 31,605 | 11,917 | 30,981 | |||
Adjusted diluted | 11,954 | 31,605 | 11,917 | 31,449 |
Pro Forma Revenue Growth | ||
Three Months Ended | ||
($M) | June 30, 2023 | |
Revenue | $ 977.9 | |
Three Months Ended | ||
($M) | July 1, 2022 | |
Pro forma Revenue | $ 887.4 | |
Pro forma Revenue | $ 90.5 | |
Pro forma Revenue | 10.2 % |
SUPPLEMENTAL INFORMATION | ||||||||||
Revenue by client branch, contract type, contract relationship, and geographic region for the periods presented | ||||||||||
Revenue by Client | Three Months Ended | Six Months Ended | ||||||||
June 30, | July 1, | June 30, | July 1, | |||||||
(In thousands) | 2023 | % | 2022 | % | 2023 | % | 2022 | % | ||
Army | $ 393,499 | 40 % | $ 326,756 | 66 % | $ 784,002 | 41 % | $ 606,869 | 64 % | ||
Navy | 293,198 | 30 % | 64,885 | 13 % | 585,888 | 30 % | 140,102 | 15 % | ||
Air Force | 154,001 | 16 % | 68,457 | 14 % | 283,982 | 15 % | 129,930 | 13 % | ||
Other | 137,154 | 14 % | 37,968 | 7 % | 267,440 | 14 % | 77,636 | 8 % | ||
Total revenue | $ 977,852 | $ 498,066 | $ 1,921,312 | $ 954,537 | ||||||
Revenue by Contract Type | Three Months Ended | Six Months Ended | ||||||||
June 30, | July 1, | June 30, | July 1, | |||||||
(In thousands) | 2023 | % | 2022 | % | 2023 | % | 2022 | % | ||
Cost-plus and cost-reimbursable | $ 507,282 | 52 % | $ 355,559 | 71 % | $ 1,019,217 | 53 % | $ 666,653 | 70 % | ||
Firm-fixed-price | 438,684 | 45 % | 128,348 | 26 % | 834,891 | 44 % | 256,352 | 27 % | ||
Time-and-materials | 31,886 | 3 % | 14,159 | 3 % | 67,204 | 3 % | 31,532 | 3 % | ||
Total revenue | $ 977,852 | $ 498,066 | $ 1,921,312 | $ 954,537 | ||||||
Revenue by Contract Relationship | Three Months Ended | Six Months Ended | ||||||||
June 30, | July 1, | June 30, | July 1, | |||||||
(In thousands) | 2023 | % | 2022 | % | 2023 | % | 2022 | % | ||
Prime contractor | $ 916,060 | 94 % | $ 468,453 | 94 % | $ 1,795,239 | 93 % | $ 895,546 | 94 % | ||
Subcontractor | 61,792 | 6 % | 29,613 | 6 % | 126,073 | 7 % | 58,991 | 6 % | ||
Total revenue | $ 977,852 | $ 498,066 | $ 1,921,312 | $ 954,537 | ||||||
Revenue by Geographic Region | Three Months Ended | Six Months Ended | ||||||||
June 30, | July 1, | June 30, | July 1, | |||||||
(In thousands) | 2023 | % | 2022 | % | 2023 | % | 2022 | % | ||
$ 578,514 | 59 % | $ 158,719 | 32 % | $ 1,127,284 | 59 % | $ 325,454 | 34 % | |||
279,083 | 28 % | 250,222 | 50 % | 560,204 | 29 % | 485,313 | 51 % | |||
65,533 | 7 % | 46,386 | 9 % | 129,850 | 7 % | 62,592 | 7 % | |||
54,722 | 6 % | 42,739 | 9 % | 103,974 | 5 % | 81,178 | 8 % | |||
Total revenue | $ 977,852 | $ 498,066 | $ 1,921,312 | $ 954,537 |
CONTACT:
V2X, Inc.
Mike Smith, CFA
719-637-5773
ir@gov2x.com
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SOURCE V2X, Inc.