Release Date: May 07, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- V2X Inc reported a 7% year-over-year revenue increase, with significant growth in the Middle East and Pacific regions.
- The company secured a substantial $400 million aviation support and training contract with the Saudi Arabian Ministry of National Guard.
- V2X Inc was awarded a new $88 million contract with the US Navy for IT operations and maintenance, enhancing its long-standing relationship and presence in critical communications.
- The company's adjusted EBITDA for the quarter was $69.1 million, with a margin of 6.8%, and adjusted EPS increased by 8% year-over-year to $0.9.
- V2X Inc's strategic focus on integrating technology into its operations led to a $75 million award for technology solutions for threat detection and response to chemical, biological, radiological, and nuclear hazards.
Negative Points
- The company experienced a net cash use of $57.2 million in operating activities during the quarter, reflecting a delay in receivables collection.
- Despite revenue growth, the company's net debt stood at $1,173 million, indicating substantial financial obligations.
- V2X Inc's capital expenditures are expected to be heavily weighted towards the first half of 2024, potentially impacting short-term liquidity.
- The company's backlog, although robust at $12.6 billion, includes pending awards and contracts under protest, which introduces uncertainty in future revenue recognition.
- V2X Inc faces challenges in the timely awarding of bids, with a significant portion of its $25 billion pipeline still pending, affecting short-term growth prospects.
Q & A Highlights
Q: Could you walk through some of the pieces of the supplemental and how you view that supporting the top-line opportunity at least through the rest of fiscal '24?
A: (Charles Prow - President, CEO, Director) In the Middle East, the revenue growth represents just the increased up tempo in addition to some new wins. We are processing a request for additional requirements and expect to begin to execute new requirements this quarter. The military is maintaining a balance between what's happening in Europe and the Middle East with the need to continue to enhance capabilities in the Pacific. In Europe, we are working with our clients on a couple of net new requirements that align with some of our newer modernization and sustainment activities as well as logistics enhancements.
Q: With the supplemental, does it give incremental confidence as we think about at least the top-line through the remainder of the year?
A: (Charles Prow - President, CEO, Director) It's earlier in the year, and as these opportunities turn into design task orders, we will begin to think about the guidance. But we feel very comfortable with the guidance that we've previously announced.
Q: Can you comment on the competitive landscape in logistics, aircraft maintenance and sustainment, and training?
A: (Charles Prow - President, CEO, Director) The operational aspects of our business, including overseas base and logistics operations as well as contingency support, will continue to be a tailwind for us. The aerospace O&M business sees clients extending the life cycles of existing platforms and increasing the amount of pressure to keep planes in the air, especially for training pilots. In modernization and sustainment, there's a real opportunity for us to provide quick and agile solutions to integrate disparate platforms and extend the usefulness of existing platforms.
Q: Could you update us on the timeline and milestones for significant protests, particularly the F5 adversary?
A: (Charles Prow - President, CEO, Director) The F5 adversary is a big one and is now back in to GAO. We're hoping to be able to move forward once this is done. Of the protests, that's the most significant one that's outstanding.
Q: How do you see the opportunities on the Air Force Augmentation Program playing out from there?
A: (Charles Prow - President, CEO, Director) Under the last version of AFCAP, we are at about $250 million from '21 to today. The demands around the world are not diminishing, and the existing assets require extension. The consolidation of competitors into fewer entities has netted down the competitive set, which is beneficial for us. It's a nice contract for us, and I look for the team to do a really nice job against the requirements that are going to be issued in the near term.
Q: What's the current variable split in your leverage, and how do you see the interest expense trending?
A: (Shawn Mural - CFO, Senior VP) The variable split is still 70-30. For interest expense for the quarter, we had a little bit of favorability, but we feel fine with the guided about 116 million for the year. There are things that come up, and we just want to make sure that we're covering everything.
Q: Could you talk a little bit more about the SG&A line that took a step down in the quarter?
A: (Shawn Mural - CFO, Senior VP) We continue to work on our back-office operations, and we did a modest amount of realignment and restructuring as we closed out 2023. There's always some seasonality to SG&A, particularly related to bids and proposals and pursuit activities. We feel good about where our cost structure is today, and we have more work to do in putting those tools and processes in place.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
